Fixing the fiscal imbalance

The Premiers couldn’t agree this week on a unified position on fixing the ‘fiscal imbalance’. There are basically three broad approaches that were put foward (and hybrids of all of them):

The fiscal imbalance is between the ‘rich’ and the ‘poor’ provinces. Ottawa needs to give more to the poor provinces by beefing up the Equalization – adding all 10 provinces in the calculations as well as resource revenue. This position is strongly advocated by New Brunswick and Quebec and although saying little publicly I suspect Manitoba and PEI as well. Daulton and Ralph are strongly opposed and interestingly so are Newfoundland and Nova Scotia because of their ‘resource’ revenues. If these were included, it’s my understanding that NL and NS might see a drop in Equalization payments.

The fiscal imbalance is between the Feds and the Provinces. Ottawa needs to give more to all provinces for health care, education, etc. either through long term transfers or allowing the provinces access directly to the revenue (i.e. reduce Fed tax and increase prov tax). Daulton is pushing hard for this. He claims that beyond Equalization, other provinces get considerably more per capita from the Feds in other areas (education funding is one he talks about alot, [funny he never mentions that Ontario is the largest recipient by far of federal R&D dollars as well as federal government employment – but I digress].

The fiscal imbalance is between government and citizens. This was put forward by Gordon Campbell (no relation) who is pushing for broad federal tax cuts to the citizenry.

Now, in each all provinces would either be winners or losers. Broad-based tax cuts would hurt Lord’s chances of getting more Equalization and Ontario’s chances of getting more general Transfers.

Which thinking will win?

In my opinion, Stephen Harper can’t afford to ignore Lord’s position because it is also Charest’s position – and Quebec is key to a Conservative majority. On the other hand, if Daulton gets screwed – Ontario could be in political jeopardy. The west? I am not sure Harper cares. Alberta is booming. British Columbia is booming – back to ‘have’ status and getting stronger. However, including ‘resources’ revenue in Equalization might be a problem in both AB and BC – they are quite sensitive about such things.

So, back to my prediction on this.

Harper will try and please everyone (with the possibility of NL and NS). He will make Equalization a little more lucrative (for Quebec) and he will increase some transfers (for Ontario). He will leave off the table ‘resources’ revenue. Further, I think it will be positioned as a short term fix until the federal government is in the position to tackle it in a more concrete way (i.e. Majority).

Lord will say he is happy so will Charest. Daulton will complain but lightly. Alberta and BC will do the same.

The wheels will grind on.

PS – guess what ‘option’ our friend Al Hogan was pushing this AM in the T&T?

Gordon Campbell’s national tax cuts. That would certainly put the screws to his buddy Bernard’s plans for more Equalization. Think it through, Al. Lord wants a formula that would guarantee New Brunswick more pogey and you want the Feds to cut their ability to provide that pogey. Check with your masters on the 2nd floor of the Centennial Bldg. next time.

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0 Responses to Fixing the fiscal imbalance

  1. Anonymous says:

    You’re missing a central feature of federal politics here, and that is the ability of the feds to do absolutely nothing until it is needed-over decades, not years.

    So here is my prediction…just like the previous two decades nothing will get agreed upon. Meetings will continue to produce a bunch of talk, then a few days later all will return to normal with various provincial politicians blaming all their woes on the feds.

    The feds will continue to withhold as much of canadians money as they can, but will send money to provinces on a ‘as needed’ basis (like NB in order to get rid of that deficit).

    Small agreements will be made with various provinces if it can be seen that their populations are so pissed off at the feds that it will make a difference in the next election.

    As for Al Hogan, its no surprise he touts the conservative party line (ironically coming from a liberal Premier-but who can tell the difference anymore?). Here he knows he can do that, it actually serves a point-to disprove your point that he is simply a Lord PR man (“see..I don’t always agee with Bernard Lord, therefore I can be trusted to be ‘objective'”)

    He can do that because in areas of federal provincial relations it makes absolutely no difference what he says, because its all academic. When was the last time we saw a federal program that bore any resemblance to what canadians actually want and what the ‘first ministers’ actually discussed?

    In reality, arguing ideology is as bad in politics as it is in economics. All premiers have a point-to a point. So here’s a radical thought, what about an equalization program the is tailored for the specific needs of each of the provinces? Wow! What a radical idea! What if instead of a cookie cutter than satisfies one area and pisses off another, the feds actually recognized that every province is different.

    That goes back to the ancient canadian debate on making government concessions based on NEED, rather than political expediency. If anybody out there is of the opinion that now is the time that its finally going to be addressed, they don’t know canadian politics very well, and don’t know the conservative party at all.

  2. David Campbell says:

    Good points but on the Al Hogan thing you will please note one thing. He never mentions the Premier by name in any sort of rebuke. Never. Shawn Graham has been savaged in the We Say. Poor Moncton City Hall – this is a weekly occurance. But I have never ever seen Al Hogan say anything harsh directed at the Premier.

  3. Anonymous says:

    No, of course he wouldn’t say it, because the fact is as you’ve pretty much proven, he IS a Bernard Lord Public Relations officer.

    But it’s bad press to make that so obvious to everyone. Just think, if you weren’t around, this wouldn’t even be mentioned in the province.

    This is a personal opinion (I say that to keep it from becoming a hugely debated issue), but the conservatives have always made tax reductions to individuals their priority. Of course that benefits the rich more than the poor-the poor want services.

    But of course Bernard Lord has to deal with reality, and the reality is that NB is a ship without a sail, hence the need for more equalization in health care. He does, after all, need to get elected. That means being all things to everybody. So for the folks most dependant on equalization, like families, the poor, and the elderly, we have Lord trying to suck in more federal money.

    For the ever decreasing middle class, we have the conservative party line, which is tax cuts. That’s partly the effect of blogs, because otherwise all we’d have is the Irving media and local trade board spouting how wonderful everything is. Keep in mind that even while Lord is busy begging in Ottawa, he’s also cutting ‘some’ taxes.

    Consistency is about as prevalent in politics as it is in economics. The same thing happens at the federal level, the main prerequisite is an acquescent media that makes sure people don’t put these things together.

    While Lord bends over for Irving you will never hear a harsh word, but there will be some subtle deviations in arguments on policy-without mentioning his name of course (that comes when the election is under full swing) because otherwise people will simply turn away from the Times Transcript altogether. It’s fine to tow the party line, but as an election approaches, they will want to be peoples ‘record of choice’. Hopefully you guys will step up the pace during the election. I’m not in Moncton, but I can print off flyers if some people in Moncton can stick them around town.

    That’s why I’m such a big pusher of podcasting. If a bunch of bloggers got together to do a media site, I can virtually guarantee that nobody with internet access would bother with Irving at all. Even now it is primarily older and middle class folks that bother with it, simply because its the only game in town.

    With ANY kind of competition they’d be ignored. You can already notice at their website how they hardly even feature ANY local news. They’re trying to be the Globe and Mail, which is subjective enough, but Irving makes it look like it is inspired by God.

    But Al will no doubt be deviating in subtle ways from Lord as an election gets closer. I”m not as convinced as some are, it’ll take a good year of spending before people forget the last six years. Keep in mind that Lord really hasn’t done much since last election to make him stand out, and has made some bonehead moves. I went through the numbers and there are over a dozen ridings where they barely squeezed in last election.

    And this time they’ve got Charles Leblanc to deal with!

  4. Anonymous says:

    I think Lord will have to let the gas regulation SNAFU settle down before he can call an election.

    For once luck was not with him, he couldn’t have picked a worse time to meddle with the price of gas.