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Mark Milke

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Here's How You Will End up Paying For Quebec's Lavish Political Promises

Posted: 08/23/2012 5:39 pm

Imagine you're a German asked to pay for the lifestyle of a Greek through ever-more transfers to the European Union or through bailouts for Greek debt. Imagine you, as a German, know the average age for a German retiree is 62 while the average Greek is in his retirement villa at age 60. That knowledge explains why northern Europeans may not wish to indulge Greek lifestyles much longer.

If such demands seem absurd in the case of Greeks and Germans, they are apparently seen as acceptable by politicians in Quebec. There, Quebec's three political parties are falling over themselves to invent an even more lavish welfare state. Too bad for Quebec's already heavily-taxed families. But it's also too bad that Quebec political promises are partly paid for by other Canadians.

Some samples of expensive promises: The Coalition Avenir Québec (CAQ) has promised more doctors. Meanwhile, Parti Quebecois leader Pauline Marois has promised that if her party is elected, she would scrap planned (and modest) tuition hikes. She also wants 15,000 more daycare spaces.

The Quebec Liberal party under Premier Jean Charest says it will create a $1-billion fund so Quebec's governments can make "strategic investments" in business (a.k.a., more corporate welfare). Also, Charest pledges to subsidize wages of Quebec workers older than age 55.

If past history is any guide, those and other promises (if implemented) will be paid for by taking more fur from the hide of Quebec's taxpayers. (Charest's government has increased sales taxes.) But the invoices for election promises will also be forwarded to taxpayers outside of Quebec.

Some perspective: In Canada, taxpayers support governments in other provinces through federal transfer programs, including equalization, which is mentioned in the constitution.

For the record, that equalization provision is weak and unenforceable according to constitutional experts such as Peter Hogg and others.

Still, that has never stopped have-not provinces from demanding ever-more from the federal government. Calls have come for higher equalization payments (from have-nots) and from all premiers for more cash from other federal transfer programs.

From 2005/06 (as far back as publicly available Finance department data goes) up to the present year, Quebec has received $56.7 billion or 54 per cent of the $107.4 billion the federal government spent on equalization.

Astonishingly, Quebec's finance minister and even some journalists and policy analysts maintain that other Canadians are not subsidizing Quebec. They argue that because every Canadian pays federal taxes, including those in Quebec, no net subsidies exist.

This is daft. When 10 people show up at a poker table and throw money down, and six leave with the winnings, there has been a net transfer of wealth from four people to the other six.

It's the same with equalization. Six provinces now receive equalization. That leaves taxpayers in four provinces -- British Columbia, Alberta, Saskatchewan and Newfoundland, as losers. They (or more precisely, their governments) walk away from the equalization game with less cash.

Federal transfer payment programs are admittedly confusing. Here's where it gets even more confusing: When all federal transfers beyond equalization are accounted for, Ontario's taxpayers still inject more into the federal system than that province receives back.

The Commission on the Reform of Ontario's Public Services notes that Ontario taxpayers account for 39 per cent of federal tax revenues but the federal government spends only 34 per cent of its revenues in that province.

Some of that difference makes sense. A province with higher unemployment than Ontario is not likely to contribute as much, proportionally, into federal coffers. But it begs this question: are promises made by Quebec's political class defensible when they also cost other Canadians more money?

Answer: Not likely. Let's compare Quebec with the three main "have" provinces under the equalization formula and do so on two Quebec campaign promises: tuition rates and hiring more doctors. Also, let's add Ontario for reasons just noted, (I'll exclude Newfoundland for reasons of space.)

Quebec's undergraduate tuition rates were just $2,519 this past year. That was: 38 per cent of what an Ontario student paid ($6,640); 44 per cent of the cost to a student in Alberta ($5,662); 45 per cent of what a Saskatchewan student paid ($5,601); and 52 per cent of what a B.C. student shelled out ($4,852).

On physician ratios, in 2010, British Columbia and Alberta had 213 and 211 general physicians respectively per 100,000 people; the numbers for Ontario and Saskatchewan were 189 and 169. Meanwhile, the Quebec ratio was 224 general physicians per 100,000 people.

Canadians, especially in provinces where taxpayers are net contributors to federal coffers, should pay close attention to the Quebec election. After all, they'll be paying for a chunk of any expensive promises eventually delivered to Quebec's voters.

Mark Milke is a Senior Fellow at the Fraser Institute

 
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12:15 PM on 08/24/2012
Filip Palda of the very same Fraser Institute has the exact opposite opinion, and Palda sounds more convincing. Milke is using simplistic rhetoric about daycares and tuition and how much Ontario pays. These are all pieces of a much larger puzzle and being small pieces, they show a distorted view of what the puzzle looks like. So why not start at the top? What is the difference between federal revenue derived from Quebec and federal spending in Quebec? The last figures I could find are from 2009 and the difference was $13 billion. Now, can Quebec make up that difference? There will be gains in efficiency from cutting bureaucratic overhead and some federal spending Quebec might not actually want. What will be the new costs (i.e. postal service, mint, new ministries, etc.). What will be the economic impact of having a separate monetary and trade policy? I don't actually know the answer here, but I'm very suspicious that no one is phrasing the question in those terms and instead focuses on trivial micro details and irrelevant macro stats (e.g. Quebec recieved 54% of equalisation payments since 2005... ok, but the question is not how it looks on the equalisation fund books, we need to know how losing that will look on Quebec's books!). So I would really like to see an actual study on this, not empty rhetoric.
11:48 AM on 08/24/2012
Yet another example of how the existence of a federal government is a burden, not an asset.
11:39 AM on 08/24/2012
I live in Ontario, I'd vote for separation if I could.
10:20 AM on 08/24/2012
Oh the jealousy...

Why is there never any mention of what equalization payments really are and how they are calculated? It's not like if Quebec spends more it receives more payments, the payments are calculated from the revenues the provinces generate to be able to provide similar levels of public service at comparable taxation levels. We all get taxed the same rate from Ottawa, it just redistributes some of the money to equalize the wealth of all provinces. We pay more taxes than anywhere else in Canada(North America even if I'm not mistaken), it's our high taxation rate that gives us are super great social services not the equalization payments.

Don't be jealous ROC, just increase your taxation rate to something comparable to Quebec and you should be able to afford the same kinds of services we enjoy.
07:20 AM on 08/24/2012
While M. Marois is still stuck on sovereignty, she should be more concerned about whether Quebec could survive on its own fiscally or if the "new state" would become North America's first "Greece". As shown here, without federal transfers, Quebec's fiscal position, already the worst in Canada, will become dire:

http://viableopposition.blogspot.ca/2012/05/quebecs-fiscal-situation-necessity-of.html
09:04 AM on 08/24/2012
Thank you for the link.

The bloggers analysis is quite good regarding the state of Quebec's finances. Quebec does have some work to do with regards to keeping their finances in order.

However, here are a few notes regarding the federal transfers, and why it is not the safety net of Quebec but rather the source of the problem:

1. Please notice that the equalization transfers have not gone up in the last two years. Health and social transfers have. 17B in 2012 of federal contribution. 50B+ in taxes paid from Quebec. Where did the money go?

2. The initial agreement between provinces and the federal government was that the feds contribute around 50% of the healthcare programs, since they recieved 50% of taxation revenue. Health transfers were cut and now represent a fraction of what the initial agreement was. Health contributions are going up less than the cost of healthcare is. Same federal taxes, less value.

3. When Paul Martin and Jean Chretien put federal finances in order, they did so at the expense of the provinces and municipalities. The effects are still felt now in Quebec. Municipal structures have long been a systemic problem in Quebec and this takes time to change (10-20 years). The provinces (all of them) must compensate for what the federal government has taken away.

Federals transfers are not what keeps Quebec afloat. Government spending (federal, provincial, and municipal) and particularly government waste and inefficiencies are what's causing the problem.
02:17 AM on 08/24/2012
The Fraser Institute trying to divide the country, I guess the Koch bros hate a united Canada.
This comment has been removed.
01:12 AM on 08/24/2012
The constitution should be scrapped, its just a peice of paper! Write a new constitution, reading equallity to all provinces and territories, divide equalization by 13 with a equal amout to each province, because we are all Canadian, and learn how to manage your assets. If someone don't like it they get nothing.......just for putting up a stink! Times have to change, people are getting tired of whinny individuals!
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sgillhoolley
Occupy the discussion.
07:15 AM on 08/24/2012
So PEI, with 100k people should be the equal of Ontario, with nearly 13 million people???
11:09 AM on 08/24/2012
What I mostly mean is equal, so everyone has the same bread and butter instead of one province recieving most handouts, and leaving the rest out of the picture, alot of people work darn hard to even produce the cash. I know I'm still younger yet, with some health issues, and I still work hard to pay my bills, its really not fair if someone sits on their butt, and the rest have to work hard to make a living.
01:45 PM on 08/24/2012
15,000,000,000 Calculated/person would be $434 in 2012/13 and apply it to the cummunities in all of Canada. Ontario= 5.6B, Que=3.4B, Nfdl 221M, Nova Scotia 410M, N.B. 327M, 63M PEI, Man. 542M, Sk 434M, 1.6B Alberta,B.C. 1.9 B, Yukon 15M, NWT 18M, Nunavut 13.5M equal for every cummunity/population
12:25 AM on 08/24/2012
Sigh.

Keep repeating the ROC quebec-bashing 'I am being cheated' drivel long enough and soon that 's all peopls seem to believe anymore. Anybody hear about critical thinking?

Citizens living in Quebec contribute around 50B$+ in federal taxes. They only get a portion of that back in the form of equalization payments. Where does the rest of the money go?

A lot of that money goes to support federal programs and pan-canadian initiatives. Who here thinks that the federal government is a lean mean economic machine? Ever hear of corporate overhead? The average overhead is in a federal department is not pretty.

A lot of federal programs are duplicated and overlap provincial responsibilities. This is waste. Quebec runs a lot of it's own programs independantly. Federal agreements with Quebec account for transferring those responsibilities to the province.

Tuition fees are simplistic. It forms only a fraction of the total cost. One must calculate the Total contribution of the province / trained ressource. Alberta is around 8400$ and Quebec is around 8800$, Same.

There are more physicians in Quebec because an emphasis was put on first line intervention instead of the emergency room . It saves money. What is the TC of healthcare/capita in Ontario vs. Quebec?

I may not have all the answers. However, I do think people should start to read more than just small biased media clips and then sputter out an uninformed opinion while baselessly mis-characterizing an important part of the canadian population.
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rotary
canucklehead
02:48 AM on 08/24/2012
Can you explain to me how tuition fees are simplistic? Quebec takes equalization payments and subsidizes international students from France so they can pay lower tuition than canadian citizens in have-provinces. You call this "simple" and the "same"?
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sgillhoolley
Occupy the discussion.
07:17 AM on 08/24/2012
Who told you that lie?
08:27 AM on 08/24/2012
Tuition fees are simplistic because is only represents a fraction of what it costs for society to put an individual through University.
Part of the revenue comes from tuition fees and part of the revenue comes from the provincial government ( which is paid for by taxes wich are paid for by citizens in Quebec directly). Another part comes from contributions/grants from the private sector. Normally there are strings attached with this however.
It has been proven that the higher tuiition fees are, the less the government contributes overall. The pie does not get bigger, it stays the same. Hence the need to calculate total cost.

Universities in Quebec charge full costs and then some to an individual not residing in Quebec, just as other provinces do. It is around 9,000$ -10,000$ if my memory serves.
Most foreign based students come here to study do not pay this amount out of their pocket because we have agreements with other countries that allow them to cover the costs in part. Or they have an exchange program (1 for 1, such as France) in place, which comes to the same. This is no different than in other Universities across Canada.
It has nothing to do with equalization payments and subsidizing foreigners.
09:54 PM on 08/23/2012
My gawd - the Fraser Institute. HuffPo has sunk to a new low by featuring this overblown, far-right mouthpiece. Trying to stir up trouble and conflict, as usual.
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Richard Bartholomew
My micro-bio isn't empty.
04:43 AM on 08/24/2012
It seems that the HuffPo's editors have been asleep at the switch again. So much the better for the HuffPo.
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sgillhoolley
Occupy the discussion.
07:17 AM on 08/24/2012
What a surprise from a media outlet that originates in the USA.
08:59 PM on 08/23/2012
Really its a form of welfare and it is a lot easier to collect welfare than work, reminds me of my sister, been on welfare for 31 years, really nice apt in downtown Toronto($129 a month), why would she ever work, she is not stupid
08:41 PM on 08/23/2012
The question of what is Quebec's net contribution to the federation is a central issue for the independance movement. The claim is that Quebec contributes 50 billion annually to the federation and doesn't receive as much back. Consequently, the claim is that by repatriating this 50 billion, Quebec would be financially better-off. There are no studies to either proove or disproove this claim. Maybe the Fraser Institute should get on that.
01:15 AM on 08/24/2012
Quebec received over 50 Billion in equalization payments, they didn't contribute!
07:01 AM on 08/24/2012
This is exactly my point on the mis-information in this debate! Where is the equalization money coming from? Answer: taxes and other revenues going to the federal governement. Quebec is the second most populous province (almost 2X the size of BC) and consequently is one of the largest province in terms of taxes sent to Ottawa. The separatist claim that it is $50B annually, which is WAY more than the transfer payments going to Quebec...So how much do you think it is? Or in the absence of all the information, you should reserve your opinion.
07:15 PM on 08/23/2012
Why is Quebec still a have not province? They are Canada's 2nd most populated province. Vast land base equating to a riches in natural resources. Huge hydroelectic infrastructure. (ask Newfoundland about that one). Millions of acres of rich farm land in the Eastern Townships and elsewhere. Access to markets thru the seaway to the U.S. and abroad. A diverse and well educated population. All that should equate to paying in to confederation more than they take out... But no. It's not that simple is it? I forgot to mention politics. The polictics of entitlement, aka The Spoiled Child Syndrome
08:45 PM on 08/23/2012
Quebec is stlll a have not for 1 reason: 30 years debating existentialism! Two lost referendums and it's still central to the debate.
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sgillhoolley
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07:22 AM on 08/24/2012
No, it really is not CENTRAL to the debate. If it were the PQ would have stayed on the topic of separation during the recent debate, yet they did not even mention it once.
08:58 PM on 08/23/2012
Because they wrote the book (Chrentien, Mulroney, Trudeau and Martin) on transfers and know how to milk it and take great delight in the ROC paying.
$75,000 per family from the ROC JUST in transfer payments, pretty good for them, they could likely teach Greece a few lessons.
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sgillhoolley
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07:22 AM on 08/24/2012
What is ROC?
11:06 AM on 08/24/2012
75k x 8million Quebeckers = 600 billion dollars. where did you get the figure from?
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All Seeing Guy
Center of the storm
05:28 PM on 08/23/2012
If I were German I'd feel shame for two world wars, shut up and write the cheque. Although I do agree that Quebec is our Greece.
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sgillhoolley
Occupy the discussion.
07:24 AM on 08/24/2012
No we aren't. Quebec taxes are higher than elsewhere to pay for our benefits. Just because other provinces are willing to become USA lite does not mean we are. And we will separate before accepting that nonsense.
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All Seeing Guy
Center of the storm
01:34 PM on 08/24/2012
Actually no. Your debt is out of control, the feds are hemorrhaging money on the province, and if you separate you'll be responsible for 100+ billion, your share of the national debt. Enjoy!