There is an old axiom, “the rich fat cats gets richer and the poor folks get poorer.” Surely, if you have followed my writing career over the last 20 years you will have seen it. It could be considered a buzz phrase for our free market economy. There is nothing right about it. Shortening that divide should be our greater political and economic goal.

Getting there is the hard part, one fraught with economic and political realities, which get in the way. In Canada is it growing starker. Whether you know it or not just by where you live can determine your chances of getting richer or poorer.

You might think I’m going down that Alberta road again. It’s hard not to. Last week we learned that the Canadian unemployment rate was back at its 30 year lows of 6.4%. However, it was Alberta, which was dragging it down with a provincial rate of 3.9%. That’s almost unheard of in economic literature.

Most economists would say “full employment” is achieved at a rate of 5%. So it’s pretty obvious 3.9% isn’t necessarily a reflection of unemployment in Alberta but more of a reflection of who doesn’t want to work there. That’s a bit of a stretch but it you want a job in this country, it’s simply a matter of catching the first bus ticket to Calgary. It would seem the rich are getting richer out there.

That reality is making it much more challenging for federal finance minister Jim Flaherty. Flaherty, a conservative lightening rod when he was Ontario treasurer knows of what he speaks. Last week he lashed out at previous equalization deals the Liberal government made with Newfoundland and Labrador and Nova Scotia.

Flaherty was specific about the deals the Paul Martin government made with those two provinces to exclude their oil and gas revenues from the equalization calculations the federal government uses to distribute federal tax revenue. Typically in the past this was used to equalize the “have not” provinces with the “haves.” So if you were a Canadian in Newfoundland versus Alberta versus Ontario, things like health care, education and welfare would be distributed on an equitable basis. So a Canadian is a Canadian is a Canadian wherever they come from in this great land.

It worked reasonably well for many years. Yes, there were creaks in the facade many times. How many Toronto tax dollars found themselves in prairie wheat fields? How many Calgary tax dollars found themselves in Newfoundland out ports? I could go on an on.

Pressure to change this has grown over time. It certainly was exasperated when political meddling by both the Mulroney and Chretien administrations skewed the equalization against Ontario and Alberta. With oil and gas becoming increasingly relevant in Newfoundland and Nova Scotia the pressure built on the Paul Martin government to do even more.

It was helped by the 2004 federal election. Add Newfoundland’s Premier Danny William’s taking down of Canadian flags further heated the water. So former Prime Minister Paul Martin capitulated and changed the equalization formula so both Newfoundland and Nova Scotia would not have to count as much of their oil and gas revenues. At the time there was outrage from many in Ontario and Alberta. But Paul Martin had an election to win. Atlantic Canada saved his skin.

So now in March of 2006 we have our new federal finance minister Jim Flaherty saying this.

“There were some agreements entered into by the previous government that have resulted in the equalization situation today, quite frankly, being a mess,”

“It doesn’t make a lot of sense.” (Toronto Star March 10th)

He is right. That’s the sad state of affairs we find ourselves in. You might say, what difference does that make to the average Canadian?

The answer of course is it depends on where you live. At the present time in Alberta and Quebec, governments are engaging private health care delivery to foster better health care in those provinces. One stems from a Quebec supreme court decision, the other from the political reality in Alberta. It may result in a user pay health system for some Canadians in those provinces. The same applies for other joint provincial federal jurisdictions like agricultural stabilization policy.

Equalization of federal tax revenues has been traditionally used to pay for some of these programs. However, with this system being called a mess by our present finance minister it doesn’t work out that way. In fact its pretty evident a Canadian is a Canadian is a Canadian, but if you live in Canada’s “have not” hinterland, reflecting on Flaherty’s statement, you may soon not feel like one. Services across this country may no longer be distributed equitably.

So do the “rich fat cats get richer and the poor folks get poorer?” It’s sure looking that way. Jim Flaherty needs to fix it. It’s up to him and Stephen Harper to fix the federal equalization dam. It’s got so many holes in it, pretty soon it won’t be worth fixing.