June 15, 2006

Fiscal Imbalance Part Deux

Funny how some Liberals have a very short memory. In 1995, the provinces saw their transfer payments cut in an effort to reduce the federal deficit.

Transfer payments for health education and welfare were combined into the Canada Social Transfer and drastically slashed.

In terms of post-secondary education, we have yet to restore funding to pre-1995 levels, which would require approximately 4 billion dollars a year to fix.

Either way, the federal government owes the provinces money. Some call it fiscal imbalance. Some call it fiscal pressures. Either way, there is a problem.

Where one must be cautious when acknowledging the problem is that one should demand a dollar figure from the provinces. Yves Seguin, the former Quebec finance minister (federalist) pegged that number at 40 billion over 5 years. Since then, as Charest admitted to me in Chertsey, the Health Accord and Child Care deal and Cities deal have lowered that amount.

Paul Martin was working to restore the funding to pre-cut levels. However, why was he refusing to call a spade a spade? If all Canadian priorities that needed attention were in provincial jurisdiction, didn’t that mean the provinces should get more money to address those problems?

Regaining the confidence of Quebeckers will require us to be honest with the population. We can call it whatever we want but the federal government has a responsibility now that it has gotten its fiscal act together to at least restore funding to pre-1995 levels.

Once we do that, the provinces cannot blame the federal government for not coughing over the cash. THAT is a federalism of respect. It requires honesty both ways. The honesty begins with the federal government saying we cut too much in 1995.

This is not caving into the provinces. Hardly, it is removing the “blame the federal government” card away from them. They use it justly now, but after funding is restored, provinces will only have themselves to blame if they falter.

7 Commentaires:

Blogger calgarygrit a dit...

40 billion over 5 years for Quebec
30 billion over 5 years for Ontario

Those numbers might be higher than what they'll take but presumably the other provinces want cash too. And, if the matter is simply returning money to the provinces, then even Alberta should get a few extra billion a year. Hell, I suspect if Quebec is getting 30 billion and Ontario is getting 20, everyone's gonna need a load of cash or they'll be really pissed.

So let's say a big 15-20 billion a year will keep everyone happy.

Of course, nearly every province is close to being in surplus already and is fully able to raise taxes or cut services to get themselves there. But I'm sure they'll really enjoy getting the cash.

6/15/2006 2:09 a.m.  
Blogger Antonio a dit...

CG, both those numbers are national numbers.

Between those two estimates, the health accord and the Cities and Day Care deals were struck in between.

Restoring 1995 funding and adjusting to inflation would probably be enough

6/15/2006 8:32 a.m.  
Blogger Mark a dit...

When the Quebec government turns around and spends millions and millions of dollars on opening foreign missions abroad (clearly a federal responsibility) it sort of belittles the whole argument, doesn't it?

Of course, the fact that the provinces have equal if not greater access to revenues sources (i.e. tax bases) than the feds do also makes one wonder...

6/15/2006 10:29 a.m.  
Blogger Antonio a dit...

I agree that provinces have the capability to raise taxes, and they definitely can if they need to. That, however, doesnt change what the federal government did in 1995

6/15/2006 11:43 a.m.  
Blogger Vincent Robidas a dit...

Pauvre Antonio,

Tu dis que ce que le Parti libéral du Canada a refusé de reconnaître pendant 10 ans. Il faut dire que le fait d'être dans l'opposition a un effet bénéfique opur le PLC. Certaines vaches sacrées du parti sont remises en cause.

Le hic pour le PLC, c'est qu'il y a de forte chance que ce soit les conservateurs et non le PLC qui règle ce dossier.

Pour ce qui de Mark, les relations internationales ne sont pas une compétence exclusivement internationale. Le gouvernement du Québec entretient des relations internationales parce que, justement, il en a. Le Québec siège à la Francophonies et a des relations étroites avec plusieurs gouvernements et États ailleurs dans le monde.

Et le budget des relations internationales du Québec n'a rien de très mirobolant...tout compte fait, le % du budget du Quéec au MRI reste marginal...le programme des garderies à 7$ coût pas mal plus cher que nos relations internationales...

6/15/2006 3:03 p.m.  
Blogger Liberal Helpings a dit...

Although unintentional, one of Paul Martin's greatest contributions in office was how he dealth with the fiscal imbalance. By throwing millions and millions away at the problem, Martin proved that this issue could not simply be bought off. A complete examination of the equalization formula is necessary now that the way wealth is accumulating has changed.

check this out......

6/15/2006 3:31 p.m.  
Blogger A.K. a dit...

I must say I've always been deeply skeptical of this "fiscal imbalance" business. It's always struck me as just the latest in a long, sad line of fig leaves used by the provinces--in an effort spearheaded, as almost always, by Quebec nationalists--to squeeze more money and, if possible, more powers out of Ottawa.

Recent analyses of the "fiscal imbalance" claims have bolstered my views somewhat. Consider this excerpt from a recent Andrew Coyne editorial:

"But the part of the budget [i.e. the recent Conservative budget] that seemed to cause the most confusion was the section on federal-provincial relations and the infamous "fiscal imbalance." The Globe's Heather Scoffield detected signs that the government "is steering the country in a radically different direction," while her colleague John Ibbitson -- well, someone tie him down before he floats away. "One day, this will be known as the budget where everything changed," he rhapsodized, "the budget that will put an end to decades of relentlessly expanding federal power, of meddling in provincial jurisdictions, of Ottawa's smothering embrace."

Really. I read the same budget -- at least, I think it was the same budget -- and I didn't see anything of the kind. Take the fiscal imbalance. Notwithstanding the Tories' previous advocacy of the provincial cause, the budget seems strangely vague about what they would do about it, or even whether it exists: Throughout, the budget is careful to commit the government only to "address concerns about fiscal imbalance." (Emphasis mine.) And anyone reading the accompanying background paper, "Restoring Fiscal Balance in Canada," would come away convinced the whole thing was a hoax. As, in fact, it is.

So, for example, for all the attention paid to the federal government's larger-than-expected surpluses in recent years, the paper is careful to note that the provinces' aggregate fiscal position has also regularly come in over forecast, and by the same amount: about $5-billion a year. It points out that the provinces "have access to all major tax fields in use today" -- the same as the feds -- and that it has become common "for both orders of government to spend in areas over which they do not exercise legislative jurisdiction." (Emphasis mine, again.) It reports that the federal debt-to-GDP ratio is nearly twice that of the provinces.

It notes that federal transfers to the provinces, at $40-billion and change, are now at or near record levels, both in absolute terms and as a share of all federal spending. It also includes a telling graph showing how the federal and provincial governments' respective shares of total spending and revenues have changed over the years. Federal own-purpose expenditures (i.e. excluding transfers) now stand at just one-third of the total, the lowest ever. Ottawa's share of own-purpose revenues is similarly at a historic low.

Lowest ever, and lowest anywhere: "In Canada, sub-national governments raise the largest share of total government revenues among industrialized federal countries." Moreover, they "are more fiscally autonomous than their counterparts in other countries," being less dependent on cash transfers and having greater freedom to set their own rates and bases. The notion that Canada suffers from Ottawa's smothering embrace, that the provinces are starved for cash while Ottawa dines out, is not just arguable, and not just wrong: It is the diametric opposite of the truth."

6/19/2006 2:12 p.m.  

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