Summary:
This article is about the effects of the economic crisis and the use of equalization payments to help provinces in need. For the first time in history, Ontario will be receiving equalization payment; a sum of 347 million dollars, announced finance minister Jim Flaherty. Equalization payment was reserved for the have not provinces. For Ontario to receive it reflects the seriousness of the economic situation. Flaherty state that because of an unstable American dollar and a weak manufacturing industry, Ontario is forced into economic hardship and will be in the equaliztion program for a while. As of 2009, the provinces not receiving equalization payments are B.C., Alberta and Saskatchewan. Alberta is seen to be immune to the economic crisisfor they have oil resources. Yet they are pushing for a co-ordinated assistance plan for the province, investors and manufacturers. With the richest provinces also asking for aid prove the seriousness of the situation.
Connection
I believe the connection of this article to our text is the effects of equalization payments in Canada. Canada follows the federalist system where it is governed at the provincial and federal level. Equalization payments purpose is to ensure provincial governments having sufficient revenues to provide a reasonable level of service to the public. Normally, the equalization payment is reserved for the maritime provinces because their economy is weakened ever since they over exerted their Cod Fishery resources. They have also been receiving stabalization payments to prevent decline of provincial tax revenue. Both programs are gained through progressive tax and is redistributed to the provinces in need. Because of the economic crisis in America, Canada is also affected causing Ontario to join the equalization program for the first time. The unstability of the American dollars has dragged the Canadian economy down.
Reflection
I believe that equalization payment is only a short term solution for the current situation. Hence I agree with the finance minister Jim Flaherty that they must re-stimulate the economy through increasing job opportunities and international trade. Moreover, if Ontario continues to get equalization payments in the years to come, investors will lose faith in the Canadian economy. Hence I think that openly saying that Ontario will be requiring funding for the years to come is a huge mistake because this will cause investors to not trust the Canadian economy. if that happens, it will be hard for the Canadian economy to pick up causing poeverty and job losses. Immediate actions must be taken so that Canada does not recess into a depression.
