Something useful for the premiers to talk about: the right’s perpetual myth making about equalization

Posted on July 17, 2017, 1:50 am
10 mins

PHOTOS: Edmonton’s stately old Macdonald Hotel, named for the prime minister of the same name and site of Canada’s premiers’ annual summertime beanfest this week. (Photo: Wikimedia Commons.) Below: Alberta Premier Rachel Notley, Saskatchewan Premier Brad Wall (Photo: Wikimedia Commons, Jake Wright) and B.C. Premier-Designate John Horgan, who will be busy being sworn in tomorrow.

Since it’s meeting in Alberta this week, something the “Council of the Federation” could profitably use its national pulpit to tackle is the constant myth-making and outright lying by cynical right-wing politicians and their echo chambers in media and thinktankery about Canada’s equalization programs.

After all, unchallenged, some of this nonsense constitutes an actual threat to the long-term wellbeing of the federation, so this would thus be useful work for the premiers and their staffs who make up the body formerly known as the annual summertime premiers’ clambake and beanfest.

Won’t happen, of course, if only because at least one of the worst offenders for this kind of thing is a member of the Council, and as is the way of such things, Saskatchewan Premier Brad Wall will inevitably have to be treated with consideration he doesn’t deserve. Goes with the office, don’t you know?

The premiers might while away their hours in Edmonton’s stately old Macdonald Hotel talking about pipelines – which would probably suit both Alberta premier Rachel Notley and the officially unrepresented federal government of Prime Minister Justin Trudeau – but not much useful is likely to be said about that topic since B.C.’s new NDP premier, John Horgan, diplomatically won’t be there.

By accident or design, Mr. Horgan isn’t being sworn in until tomorrow, and will thus be conveniently tied up picking a cabinet for a few days, so no-one from pipe-line skeptical British Columbia is likely to be along, thanks very much.

Instead, we’ll get the usual anodyne platitudes associated with these efforts as the premiers talk, as Ms. Notley recently promised, about Canada’s economic relationship with our unbalanced next-door neighbour while every one crosses their fingers U.S. President Donald Trump won’t be inspired to send out a midnight Tweet on the topic. Sad!

Which leaves us with the right’s persistent fairy tales about equalization – a topic that should be of obvious interest to Canada’s premiers in congress – which have been in the news again lately thanks to the Fraser Institute, the prolific Vancouver-based producer of press releases purporting to show despite vast evidence to the contrary that market fundamentalism is the best way to organize society.

As always with the Fraser Fables the organization (funded in part by far-right U.S. billionaires like the notorious Koch Brothers) sends out, the group’s latest effort, which makes the claim Alberta gets back less in transfer payments than it contributes to Ottawa, has been generating lots of ink and its virtual equivalent here in Alberta.

“Canada loves Alberta’s money,” screams a typical headline in one of Postmedia’s foundering newspapers. “Study shows without our province’s transfer payments, the federal deficit would have been double.”

Actually, that isn’t quite what the Fraser Institute “study” says – but it is, arguably, the impression its authors intended to convey.

Typically, Fraser Institute reports quote reliable statistics accurately enough, but cherry pick which facts and time-frames to use, and then, if all else fails, reach conclusions unsupported by the facts in press releases they send out by reams to credulous and lazy journalists.

So an educated reader who understands at least the general outline of how Canada’s equalization program works, reading the Postmedia headline, might ask, “How can this be? Ontario and Quebec both contribute more to equalization than Alberta.”

This is because the federal government pays for constitutionally enshrined equalization and other transfers out of tax revenues contributed by all Canadians, and those two provinces are more populous. Alberta doesn’t write a cheque to other provinces. Nothing goes to equalization from revenues collected by Alberta. Never has. You can read a simple explanation here by the Parkland Institute’s Ricardo Acuna of how this works.

In this case, if you parse the Fraser’s factoids carefully, you can see what they’re up to: “… Between 2007 and 2015, Albertans contributed $221.4 billion more revenue to federal coffers than they received in federal transfer payments and services,” the report says.

So while the Fraserites have (presumably intentionally) given the impression they are comparing equalization transfer payments from Albertans to equalization transfer payments to Albertans in the short period from 2007 to 2015 (presumably the best time frame to get the conclusions they wanted, not because of who was prime minister at the time), they in reality seem to be comparing all federal transfers in with such transfers as contributions to the Canada Pension Plan, taxes on jobs with average higher pay than in some regions, GDP Growth, job creation, and capital formation by business. They’re also not, presumably, calculating more general federal “services,” such as the value to all of us of national defence.

Taken far enough, this would be a little like concluding British Columbia and Prince Edward Island contribute more to Confederation than Alberta because they have nicer ocean views.

In other words, the Fraser Institute appears not just to be comparing apples and oranges, but apples and pomegranates, bananas, gooseberries, nectarines, breadfruit, saskatoons and, for all most of us can tell, frozen Martian dustberries, all of them cherry picked from eight years plucked from the ether.

I say “appears” because I’m not going to waste my time making a serious effort to crunch their numbers. We’re all suffering from Fraser Fatigue with the stream of intentionally misleading drivel this group produces. I’ll leave that work to the real economists, which can be a time-consuming process. As usual with Fraser Facts, though, if you just gently tug the string, the whole sweater immediately starts to unravel.

What the Fraser Institute appears to be up to in this case is making a case to build pipelines from Alberta through other parts of Canada – in particular B.C.

“Having shown how important it is for Canada to have a strong Alberta, we itemize a number of actions that governments across the country can take to help improve Alberta’s prospects for a strong recovery,” the Fraser Factotums write. “These actions include: refusing to obstruct the construction of needed energy infrastructure …” Yadda-yadda. (Emphasis added.)

So chances are good, in this particular case, Ms. Notley’s NDP government didn’t even mind this line of argument – although I would suggest from the NDP to accept the help of the Fraser Institute is a bit like taking a lift from a friendly alligator across a flooded creek.

So if the Councillors of the Federation (viz., the premiers) want to do something truly useful this week, they could think about funding a non-partisan Fraser Fact Check body to publicly verify the claims made by the plethora of so-called think tanks that exist to misdirect and confuse political discourse.

Don’t hold your breath waiting for this to happen.

The premiers meet from today until Wednesday. The hotel is named for the prime minister of the same name.

24 Comments to: Something useful for the premiers to talk about: the right’s perpetual myth making about equalization

  1. Bill Malcolm

    July 17th, 2017

    I get it. The Fraser Institute thinks BC should give Alberta a freebie because they over-donated more to the mythical equalization fund that doesn’t exist in practice than BC did. So BC owes them big time and should approve pipelines.

    One of the hazards of confederation is that some provinces will do better per capita on income than others. Some citizens do better financially than others as well in any given province. Situation normal.

    We already know that the extremely rich resent paying their share of taxes to live in the same society as their less pecunious neighbours, using logic that bears no examination in detail. I have even seen a progressive blogger argue that his municipal taxes should be lower because he owns no cars and bicycles, so why should he pay for road upkeep anyway.

    The argument is a reductio ad absurdum that otherwise intelligent people fall prey to, because the human individual is always on the lookout for a bit of a leg up over others, and can invent on the spot justification about things being “not fair”. Boo hoo. Let’s all go back to living off the land in our own cabins with no nearby neighbours. That way we can be sure the fruits of our labours are ours and ours alone. No pesky people around to take “what’s mine”. No, and no organization, and no services that are only affordable when people collaborate as a group, not as a lone human. Still you can see the argument the Conservatives make, when all critical faculties are turned off and the “rugged individualist” line is promoted. Taken to the limit, digging up the prairie as an individual to plant crops for survival, we can at least surmise old Jason would be chubby no longer. And have nobody nearby to berate into seeing things his way. What a bummer!

    Reply
  2. J.E. Molnar

    July 17th, 2017

    It is jaw-dropping on how purported journalists and editors from Postmedia continually refuse to refute “so-called” research from the Fraser Institute. Their findings are published without verification, while knowing full well that the Fraser Institute is a lobbying group, dressed up as a conservative philanthropic non-profit, used as a means of laundering economic aims that coincide perfectly with the interests of their corporate funders like the Koch brothers’ financial network.

    Conversely, you NEVER see a Postmedia publication print a Broadbent Institute paper or publish a Canadian Centre for Policy Alternatives research finding on say, “The case for raising the minimum wage.” Nor do they allow posters to establish links to these research organizations when trying to refute online Postmedia articles. Not allowed.

    CONCLUSION: Anything you read from Postmedia concerning the Fraser Institute should be suitably discarded in the trash heap under, “Useless Information Provided by Tainted Sources.”

    Reply
  3. Farmer B

    July 17th, 2017

    Interestingly enough after a quick googling session while eating breakfast I was unable to find out how much money the federal government collects by province from personal and corporate income tax, only an average for all of Canada which is $5366 per person for 2016-17. Federal transfers including equalization per capita for the same time period for Quebec $2570 per capita and in Alberta $1364 per capita, a difference of just over $1200. Federal Income tax collected by province would change based on average income in that province. Most recent data I could find on that was for 2012 and this was after tax data for the average family of 2 or more. Alberta was $92300 and Quebec was $64000. I am sure that this has changed somewhat since 2012. But realistically Alberta still has the highest labour participation rate in Canada(about 68% I think) and still has the highest average wage I believe so on a per capita basis through our personal and corporate taxes we would be contributing the most money to the pool from which equalization is drawn. My point is that Albertan’s certainly contribute more and recieve less than other regions of Canada. So Dave I respectively totally disagree with your post today and I have to admit I am totally baffled by your outlook on this topic. Enjoy your day:-)

    Reply
    • Sam Gunsch

      July 17th, 2017

      re: ‘I have to admit I am totally baffled by your outlook on this topic.’

      just a wild guess… but maybe your years of reading propaganda from the RW columnists/RW news/rags that is meant to indoctrinate readers…just a wild guess.

      Reply
      • Farmer B

        July 17th, 2017

        Sam I am assuming that you read my whole post. All the information was taken from government websites, nothing from your so called RW news. If you had taken the effort to look up the information you might realize that Alberta’s solid economic performance has helped many areas of the country.

        Reply
      • Topiary

        July 17th, 2017

        Dear Farmer B, why not be more concerned about the wealth transfer right here in Alberta. All those good ‘ oil’ years, when we citizen owners failed to collect our ‘ fair’ share of the province’s collective wealth
        So go ahead & support those who would have you believe otherwise. You have more in common with ordinary citizens across Canada than those who enjoyed record profits @ public expense. How do you stand being indentured to wealthy folks @ corporations who really could care less about you. Oh, and by the way those wealthy people are also those who fund the Fraser Institute of Lower Studies. Just saying…

        Reply
        • Farmer B

          July 18th, 2017

          If the royalties collected by the Alberta Government were so historically low why didn’t the royalty review done by the NDP conclude they should be increased?

          Reply
          • Topiary

            July 19th, 2017

            Probably the current price of oil would mitigate against such action.

        • Val

          July 18th, 2017

          “why not be more concerned about the wealth transfer right here in Alberta. All those good ‘ oil’ years, when we citizen owners failed to collect our ‘ fair’ share of the province’s collective wealth”
          ——————————————————————————————————————
          good question but it brings up another question:
          so, who prohibited the Alberta government during all these past decades to invest and establish own O&G public enterprise and enjoy mentioned by you record profits, beside common royalties and taxation?

          Reply
    • Expat Albertan

      July 17th, 2017

      I’m glad you brought this up, Farmer. When Albertans complain about paying out more than they receive, what’s left out is why this is the case. You are correct that the reason is because Albertans make more income per capita than people in other provinces, but what is left unspoken is why this is the case. Of course, Alberta has oil but that is not the real explanation. The real explanation is that, since 1973, the commodity has been controlled by an oligopoly that restricts output to keep prices high – in other words, Alberta has, until recently, profited from an economic distortion away from free markets to the detriment of all consumers of its product who, it could be argued, have subsidized Alberta’s economy by paying for the effects of the economic distortion through higher prices. One could even argue that the equalization payments are less of a subsidy from Alberta to other provinces than they are a refund for supporting Alberta (albeit indirectly) via distorted high prices. The current price of crude better reflects a non-oligopolistic trade in the commodity… and yet when the markets are freer, Alberta conservatives can’t seem to cope as well and resort to blaming other provinces and their use of equalization.

      Reply
      • Farmer B

        July 18th, 2017

        Expat, one hiccup in your theory is that a good portion of Eastern Canada’s oil is imported from the USA and off shore not Alberta. You are certainly correct that the increase in oil production from non OPEC countries has increased price competition and resulted in more supply and more affordable oil. As for equalization, I certainly think that there needs to be some changes to how it is calculated and distributed to make it more equitable.

        Reply
        • political ranger

          July 18th, 2017

          It’s clear FarmerB that you do not understand how the equalization program works.
          So before I or anyone would take you up on ‘making changes’ why not lay it all out for us?
          Explain please, what is the problem this program is designed to solve, how does this program do this, and why or why not the program meets its stated objectives?
          Then let’s talk about your suggested improvements.

          Reply
          • Val

            July 19th, 2017

            at present as it is, equalization program does spoils chronic recipients, has became sort of national political game. instead of looking the way and opportunities to improve local economy, “have not” provinces direct they effort to manipulate on the own available resources to show lowest possible earning. as example take Hydro-Quebec owned by provincial government.
            feds well aware of this but continue to send there truckloads of cash because much greater impact on election outcome than any of western province.

        • Expat Albertan

          July 18th, 2017

          Actually not a hiccup – Alberta benefitted from higher world commodity prices that the rest of the country had to pay, which is why I said that the support for Alberta was indirect. If that’s not enough for you, consider the federal money that went into oil sands R and D during the 1990’s (those dastardly Liberals). As to your point about making equalization more equitable, you give no rationale for why it is even inequitable, or on what basis it needs to be made more equitable. Just saying that it should be is not enough.

          Reply
          • Farmer B

            July 19th, 2017

            To answer your question I will quote Frank Atkins from the Frontier Centre for Public Policy. The article can be found at fccp.org. “Under the current funding arrangements, the equalization formula does not count the market value of hydroelectric power produced in Quebec, but rather the highly subsidized price at which hydroelectric power is sold in local markets. This anomaly creates a perverse set of incentives. Power is sold in Quebec in local markets at a highly subsidized price, and this reduces the amount of revenue that gets counted in the equalization formula, thus artificially increasing the amount of transfer payments recieved by Quebec.”

            “The Frontier Centre for Public Policy estimates that, over the period 2005-2010, if the funding formula were corrected for this anomaly, Quebec’s equalization payments would have decreased from $42.4 billion to $28.1 billion. Given that a large portion of the equalization payments have traditionally come from Alberta, which is a large producer of oil, the conclusion here is that Alberta’s transfer payments to Quebec are actually subsidizing cheap hydroelectric power in Quebec(this is also true of Manitoba’s hydroelectric power).”

            Just a portion of the article “Canada’s equalization formula needs to change. Here’s why.”

          • Expat Albertan

            July 19th, 2017

            You may have a legitimate argument there, Farmer. However, we almost never see that kind of nuance on the anti-equalization side.

            A couple of other things: it is interesting you (the Royal ‘you’) make this all about Québec and not about other provinces that were long time recipients of equalization (your neighbor Saskatchewan for instance). Given, also, that only an estimated 2% of Québec’s budget comes from equalization (and only half of that from Alberta’s share; from a 2012 U of A study…I can find you the reference if you are interested) I wonder if this is something more than just fiscal probity at work.

    • Bob Raynard

      July 18th, 2017

      Hey, Farmer B,

      For me it is the deceit I have trouble with. The way you presented your data is accurate, and if people who read newspaper stories were left with the awareness that Alberta’s net contribution is a result of having more high earners than the rest of Canada I would be fine with it. Instead, however, stories are written to create the impression that the Alberta government is writing a cheque to Ottawa. A few months ago I saw a headline on Rebel Media that said something like “Why Does Alberta Send X Dollars to Ottawa…Ask Joe Ceci” (I don’t remember the exact headline, but it did include the phrase ‘Ask Joe Ceci’. I have certainly met people who did not believe me when I told them the provincial government does not write a cheque to Ottawa.

      I posted this idea a few months ago, but it might be worth repeating: I think it would be fun to circulate a petition demanding that Joe Ceci not write another equalization cheque just to see who would sign it, thereby confirming that they don’t really understand the situation. I also enjoy the mental image of how the Sun etc would respond if Joe Ceci were to announce that he would not be writing any equalization cheques. To criticize Ceci for his lack of knowledge about the situation would require them to first admit they have misled their readers.

      PS It took a couple of days but I did respond to your post about blood on hands.

      Reply
  4. David

    July 17th, 2017

    People generally believe they are contributing more than others, so it is not hard for the Fraser Institute to cherry pick certain years to support the ideological argument they want to make. Of course there are some problems with this.

    First, in arguing for a pipeline through BC, the equalization argument is a weak argument as BC has never been a big recipient of equalization. So on that basis, BC doesn’t “owe” Alberta much.

    Second, it is ultimately more a distraction than anything else. It is often brought up by provincial Conservatives when they are asked what happened to all the money from the boom. Translation – “we didn’t p**s ALL of it away, some of it went to other parts of Canada”. Equalization seldom seems to be a big issue when Alberta is doing well. It is only when the economy is struggling that it tends to come up. Strangely equalization works the exact opposite – when times are good in Alberta, we pay more in, when not good we pay less or not at all and perhaps even receive it.

    Third the fairness argument is total BS. Is is “fair” that Alberta has a lot of oil and New Brunswick, Quebec or PEI does not? It’s also not “fair” that you can plant flowers on Vancouver Island in February, but not in Red Deer. A lot of things in this world are not “fair”. Yes, Alberta won the economic lottery. You would think that would make us willing to be more generous, rather than less generous.

    The whining about equalization is always a bit funny, if it were not so sad and self involved. I doubt that most of those in Alberta would willingly want to go live in a poorer part of the country and try to get by on much lower wages, sporadic or seasonal work and in some cases with lower levels of government services. Not every province has roads as well paved as in Alberta. Maybe they feel they’ve got it bad because the economy here is slower now, but they probably haven’t really seen bad.

    Reply
  5. Scotty on Denman

    July 17th, 2017

    There’s a saying about the three kinds of lie: first there’s lies, then there’s damed lies, then there’s statistics.
    That an outfit like the Fraser Institute relies on stats is probably enough said.
    Why do they do it? They’re trying to make us peons feel like “trickle-down” is not simply being peed on.
    How do they do it? Someone said they do it because media journalists are lazy cows. Not sure of the stats on that but, not to insult cows, it’s more likely that journalists are cowed lazy by their employers who have bought and paid for the capacity to shelter statistical abuse from scrutiny. So lazy readers don’t have to be cowed else they question the abuse themselves.

    Years ago I heard Michael Walker, former chair of the FI, explain why air—the stuff we all breath—would be better if it was commodified and sold by the cubic inch. That was enough for me. I still endure outrage from all the teachers, active and retired, in my family whenever the FI school report comes out. But, really, I’ve seen and heard enough. If the Fraser Institutte proclaims anything, I throw it on the bullshit pile with the rest of trick-le-dumb theory.

    Reply
  6. David Climenhaga

    July 18th, 2017

    Message to Pogo: I just couldn’t publish your comment, even though it made me laugh out loud, as did the link, especially the bit about the blooper reel. Sorry, but you just can’t say that to one of my regular correspondents – even when it’s true – when I am trying to set a certain tone around here. I have sent it to the intended recipient, who I am sure will appreciate it. DJC

    Reply
    • anonymous

      July 18th, 2017

      I’ve been reading this blog for years and have always found Pogo’s comments and links to be entertaining. I’m not sure what kind of line he could have crossed to warrant censorship. Maybe you should start an albertapolitics after midnight sight. But I’m just a modern guy 😉

      https://www.youtube.com/watch?v=jQvUBf5l7Vw

      Reply
      • David Climenhaga

        July 18th, 2017

        Actually, Anonymous, I do delete comments or portions of comments from time to time – most often because they are not on topic (both commercial come-ons and general trolling of the “Dippers are all Communists” variety) or because they defame someone in a legal sense. Occasionally I will censor for reasons of taste. We do have standards here. When it happens, I normally don’t say so. I do encourage lively debate, including with people I personally disagree with. Pogo is welcome – nay, encouraged – to continue commenting. DJC

        Reply
    • pogo

      July 19th, 2017

      I appreciate appreciation and I’ve never felt bad being censured, banned or beaten. That’s why I whistle when I snore (according to sources close to our corr-despondent). The anarchists can’t have nice things. But we can can steal them! https://youtu.be/94DNV6oM8HU

      Reply

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