Tuesday, May 02, 2006

Does A Fiscal Imbalance Exist?

In the Federal Budget Speech there was some talk about the fiscal imbalance and really, this is a topic I know very little about but will still be blogging on anyways. And really, my question "does a fiscal imbalance exist?" is a legitimate question of mine and depeding on who you speak to, you will get a different answer.

Many Provinces, notably Ontario and Quebec, have taken up the issue. Having personally worked as a political staffer for the BC Provincial Government, I know how difficult paying for education and health care is and it's only going to get worse. I think that our ability to address the problem (or lack thereof) will affect our ratings in the polls especially in these vote-rich provinces.

From what I know off the top of my head, Dion doesn't think an imbalance exists. Neither did Martin. Iggs has committed to fighting it. That's pretty much all I know so far.

The term "fiscal imbalance" is one that describes the situation that exists when teh distribution of revenue resources between the federal and provincial/territorial orders of government is inconsistent with the cost of meeting their respective constitutional spending responsibilities. To be more blunt - the feds are winning big surpluses by cost-cutting the Provinces, leaving Provinces with the difficulty of financing their constitutional responsiblities.

Frustrated and fed-up, the provincial and territorial Ministers of Finance commissioned the Conference Board of Canada to produce 20-year fiscal projections for the federal government and the aggregate of the provinces and territories. The resulting report shows large and growing federal surpluses over the next two decades while the provincial-territorial sector records small deficits. The report asks itself this: "is there an imbalance between the budgetary leeway of the federal government and that of the provincial and territorial governments in Canada?", to which it answers, "Based on a projection of the fiscal and budgetary status quo, the answer is definitely yes."

So I guess this is where I would open it up to the floor. I'm inclined to believe that there is an imbalance, but I'm not quite sold yet. If you have a comment or opinion on the matter, please list your comments, I would love to hear them as I make up my own mind on the issue.


At 1:44 AM, Anonymous Anonymous said...

Helicopters, cataracts, and pot holes; I use these as examples to summarize the Canadian constitution and the relationship to the fiscal imbalance.

The BNA sets out the two levels of government which are each granted specific taxation powers, clear areas of responsibility, and legal limits of authority. In short the constitution sets out a framework within which each level of government may be and must be involved and responsible for. Cities and municipalities are strictly creations of the province and have absolutely no status in the constitution.

Democratic governance is founded on the principles of responsibility ( who did a good or bad job) and accountability (if it is your fault we will vote you out) to the citizens. Hey, this is the short version.

If the helicopters won't fly and the submarines won't submerge I know that defense is the responsibility of the Federal government. If my father can not get cataract surgery and my kids can't get textbooks I know that health care and education is the responsibility of the provincial government. If the pothole in front of my drive way is not filled and my garbage is not picked up I know it is the responsibility of the city. The theory of responsible government seem to be in place in this simple model.

Beginning in the 1950's the Federal government began introducing national social programs which intruded completely into areas of provincial jurisdiction. These were implemented with the cooperation of the provinces based upon cost sharing formulas. Quebec opted out of the Canadian pension plan but that would be the exception rather than the norm. The federal government collected the lion's share of the taxes and distributed it back to the provinces for their contribution to the social programs.

In the 1990's the Federal government unilaterally withdrew a large portion of it's funding from all of the joint social programs to fight the deficit leaving the provinces to raise taxes to maintain these programs. The Federal government did not lower taxes to leave room for the provinces to take up that revenue space. The programs had to be maintained but the provinces did not have the fiscal capacity. This is why health care will soon comprise more than 50% of each provinces' budget.

That is the fiscal imbalance. Solutions may be more illusive.

At 12:06 PM, Blogger Pedro said...

See, that's the stance I've been leaning towards. I am blown away by how much the provinces need to cough up to pay for their consitutional responsiblities. BC is in dept close to $40 Million. Paying that off seems like it would take forever given the little amount of revenue they can generate. But, I'm biased because I used to work for the provincial government.

At 11:52 AM, Anonymous Anonymous said...

The issue is Harper's gameplan to substantially reduce the powers of the central government in Canada by devolving those powers on the provinces. If Harper is successful, Canada will become a balkanized nation of bickering premiers, with no common standards uniting Canadians as a nation, and with the Prime Minister sitting in the booth closest to the kitchen, with his hands tucked under his seat, doing nothing.

Harper and his New Tories aim at a massive transfer of power (legislative, financial) to the provinces, through a deal cut in smoky rooms, and over a policy which has not been tested by being debated vigorously during an election campaign. Harper is aiming at a stealth-change of how Canada functions, agreed to by premiers and him, without the voters of the provinces or the voters of Canada being involved in such a decision. It is akin to a Meech Lake Accord without requiring Canadians to vote on it.

Is this process of Harper's democractic? Not by a long shot.

Have Canadians agreed to these dramatic changes in the federal / provincial structure? Not by a long shot.

Will Harper open his dealings to public debate? Never – he does not agree with his decisions being debated by voter representatives.

Harper is aiming at making Ontario the "bad guy", and getting the other provinces to gang up on Ontario's Premier. He is hoping to stampede Ontario into agreeing to a deal, so that Harper can then go the country for an election, hoping to win more seats in Quebec and gain a majority government.

As Chantal Hebert wrote: "Nothing would do more to accelerate Harper's plan to emerge as the default federalist option in Quebec than a campaign that found the federal Liberals and the Bloc Québécois on the wrong side of a deal with Charest on the fiscal imbalance."

Harper's stampede tactics (similar to those used by Bush in his deceptive entry into the war in Iraq) have been successful so far – he suckered Duceppe and Layton into supporting a vote of no confidence in the Liberal government. If it worked once, why not try again?

What can Ontario's Premier, Dalton McGuinty, do given the by now obvious strategy of Harper?

Simple. He can take a stand on principle: that such decisions should be made by the people. McGuinty can make the whole backroom-dealing process transparent by simply stating right now that he requires two things to take place: (1) that all meetings of Premiers on this subject, and any meeting he has with Harper, be open to the public, and televised; and (2) that he will not agree to any deal unless it has been put to the voters of Ontario through a plebescite.

This will immediately make the whole process of nation-changing more democratic, put pressure on the Premiers of all provinces to consider voters as well and perhaps adopt similar plebescites, and relieve McGuinty of any pressure to rush into a deal "in the interests of Canada" (as John Tory has tried to frame it).

So, Dalton: strike a blow for democracy. Call for transparency in meetings of Premiers on this "backroom Meech Lake Deal", and have Ontario voters decide the issue.

At 3:00 PM, Blogger Pedro said...

Wow. Tell me how you really feel...


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