With the economy in the US tanking, the fear is growing as to how hard it will hit the Canadian economy. Ontario is already showing signs that they will be hit the hardest with job loss in the manufacturing sector. TD released a report today predicting that Ontario is on it's way to 'have not' status within the next two years. The policy that the federal government is to make sure funding is available for each province to provide the same level of basic service is enshrined in the constitution. The labels of 'have and have-not' play a huge role in how each province is perceived across the country. Labeling the economic engine of Canada a have not province would be a tremendous embarrassment.
As can be expected the public reaction has been to reinforce previous held stereotypes about government and inter-provincial relations. Different levels of government are being blamed for tanking Ontario, with congratulations for other provinces for shifting the economic power outside the traditional power base.
For the average person who just follows the headlines the most important detail is being overlooked. The equalization payment formula has just been revised. These changes add to the economic strength of provinces like Newfoundland & Alberta without changing their economies. Ontario is not declining in as much as they are not able to benefit from the skyrocketing price of oil as other provinces have.
Ontario is heading into some tough economic times. The Ontario economy needs to be evaluated on standard economic benchmarks such as unemployment. Using the equalization formula that has just changed is irresponsible and misleading. To stimulate the economy real economic factors must be considered. If the public and politicians use the politically negotiated equalization formula as the key indicator, they will make the wrong decisions.