Relevant to Ontario being scheduled to receive equalization is Ontario’s favoured economic place in Canadian confederation. Ontario has received a greater benefit from confederation since Macdonald’s National Policy.

Another benefit is a more than proportional share of procurement dollars. That is, when the federal government buys things, it buys them way more in Ontario and Quebec. David Kilgour writes about this in his book Inside Outer Canada.

Ottawa Spending
In advanced industrial democracies, government purchasing policy has long been recognized as an important instrument of economic policy in advanced industrial democracies. In Canada, Ottawa’s regional procurement favouritism generates on-going federal-provincial conflict. Outer Canada governments claim with good reason that federal purchasing policies actively contribute to the growing concentration of industry in Ontario and Quebec, “They are correct . . .” said Donald Savoie, an authority on regional development, during 1986. “About eighty per cent of all federal contracts are placed with firms in Central Canada.” Professor Allan Tupper of the University of Alberta, in his Public Money in the Private Sector: Industrial Assistance Policy and Canadian Federalism, wrote in 1982 that Ottawa’s Department of Supply and Services “seems rather resigned to the continuing pre-eminence of centrally-located firms” and concluded “Ottawa does not appear to have consistently employed purchasing policy as a regional development tool.” There seems little sign of improvement since that time.
– Inside Outer Canada | Chapter 7 Dealer’s Choice David Kilgour

So these federal funds go into the economy of “Inner Canada” which then come to McGuinty’s and Charest’s government coffers as taxes. But these public funds come from taxes on Canadians across the country, probably roughly in proportion to those region’s GDPs. So, essentially the federal government runs an unequal procurement scheme, importing public money to Inner Canada.

I support a united Canada, but also an equal one. Any equalization system needs to account for all funding, not just direct transfers.

• McGuinty, Macdonald on fiscal imbalance 9 Apr 2005