Chapter 4 - Government in Canada

http://www.cbc.ca/canada/toronto/story/2008/11/03/flaherty-ministers.html

Summary:
Ontario is competent for the federal government’s equalization program. The federal Finance Minister Jim Flaherty said that this year the province will receive $324 million in transfer payments. This is the first payment the province obtains from this program where the wealthier provinces give funds to poorer provinces so they can offer basic government services. Ontario is slowly becoming a have-not province due to the struggling industrialized division. This is caused by the diminishing demand in the United States. Flaherty says that the province will be in this state “for some time to come”. Furthermore, Flaherty believes that the government should increase more than just fifteen percent in equalization payments each year. If not, the government might face managing a sidetrack and bankrupting equalization program.

Connections:
The connection between the textbook and this article is equalization payments in Canada. There are a number of provinces in Canada that have a good tax base. British Columbia, Ontario, and Alberta supposedly have high per-capita profits and excellent industrial base. However, over the past years Ontario’s per-capita tax revenue has declined. This makes Ontario a have-not province just like Quebec and the Maritime Provinces whom already receives equalization payments. The reason behind this payment is to ensure that provinces can offer a practical level of public services without increasing tax rates to an extremely high level. Due to the deteriorating American economy it has effected Ontario’s industrial sector causing the province to join this program for the first time.

Reflection:
Ontario was the only province that has not received equalization payments in the past. However, due to the America’s economy it caused Ontario to join this program. This shows us what a big impact the United States have on the Canadian economy. I think that $324 million dollars will not be enough to stimulate Ontario’s financial system. America will not increase their demands anytime soon so, the government will have to find other ways to stimulate the economy and prevent it from declining further. It will be interesting to see what the government does to remove Ontario from the “have-not” group. I also wonder how much longer until the industrial sector of Ontario is strong again.