Unequalized

There wasn't much doubt that the Cons' efforts to clean up their own fiscal mess were going to result in at least some conflict. But Jim Flaherty may have just chosen the one target area most sure to call his government's competence into question:

Finance Minister Jim Flaherty, facing Canada's first budget deficit in more than a decade, said he will limit the growth of equalization payments to the poorer provinces.

Speaking to reporters after the first meeting of Stephen Harper's new cabinet yesterday, Mr. Flaherty said the equalization program, which redistributed $13.6-billion in the current fiscal year, is growing at an unsustainable pace of about 15 per cent a year.

He said he would discuss the subject at a meeting with his provincial and territorial counterparts in Toronto on Monday. While he might be willing to negotiate how tightly to pull the reins, the federal minister made clear his mind is made up on the need to constrain future equalization payments.

"It's a federal program; we will put a limit on the growth of it," Mr. Flaherty said. "This is not something that is discretionary. We must do this, otherwise the integrity of the program will be under attack."

Now, it's worth keeping in mind a fairly obvious point: if equalization payments are growing at a particular pace under the formula which the Cons approved, then so too is inequality among the provinces by Flaherty's own terms.

Mind you, it's far from surprising that regional inequality would be growing: after all, the Cons' economic policies have been based on a steady combination of handouts to already-profitable industries and regions, and neglect for ones in need of support. But it's noteworthy that having gone out of their way to exacerbate regional differences, the Cons are now using the predictable result as an excuse to complain that it's beyond their capability to try to ensure relatively equal service levels.

So who might stand to lose out if the Cons end up attacking equalization? Well, here's the most recent federal information on the subject - with six provinces already receiving what look to be rather substantial numbers in an effort to equalize their service levels with those available elsewhere. And it may only get more interesting: now that even Ontario is reported to be close to receiving payments, the Cons may effectively be telling a strong majority of the country that it should be willing to settle for a lesser service level than that available in the western provinces.

Needless to say, that doesn't figure to go over well either with the provincial governments who would once again see the federal government trying to balance its books at their expense, or with citizens who rightly recognize the need for services to be available on a reasonably comparable basis across the country. And if the Cons really don't see any less damaging means of improving its fiscal position as ideiologically acceptable, then it wouldn't be surprising if the next few steps are enough to set in motion a wave of anger that eventually results in their removal from office.