Hollowing out the federal government

This op/ed piece by Deborah Coyne (she ran as a Liberal candidate in the 2006 federal election) is interesting.   Her premise is that the federal government is slowing waning and he would like to see this trend reverse itself.  But here is the soup bone quote of the thing:

Canada is the most decentralized federation in the world. For some time, Ottawa’s share of total revenues has been the smallest of any central government in the developed world. More seriously, however, is the incontrovertible evidence that federal spending as a share of GDP continues its steady decline to its current level below two-thirds the provincial level (from a high of 19.2 per cent before 1991, to a low of 11.2 per cent in 2007). If present trends continue, federal spending could dip below even the municipal government share of GDP within 12 years.

This is a true statement.  I have repeated several times what someone in the industry told me last year.  They said if Iraq had Canada’s model for natural resource revenue distribution it would lead to a bloody civil war.  The provinces have virtually all the jurisdiction (health, education, roads, natural resources, economic development, etc.) and the Feds over the years have imposed themselves in many of these areas because they had more money to spend.  But, as Coyne rightly points out, Ottawa’s share of government revenue has been steadily dropping in the past 20 years or so.

This has profound implications long term for the country but for New Brunswick it is another warning sign that we must get on the road to economic self-sufficiency.  If the federal government is slowing reverting to a minimalist presence, it will be all the more important for us to take control of our economic destiny.

The provincial government needs to take care of the here and now – cut the cheques, fill in the potholes, make sure the lights stay on in the local schools.  But it also needs to understand these big, longer term trends and how they are impacting it.    The net out-migration trend from New Brunswick started the year that former Finance Minister Paul Martin made those dramatic cuts to get the budget balanced back in the early 1990s.  The fact that net out-migration started at that exact point and has run every year since is no coincidence (although given the serious recession in Ontario and the challenges in Alberta I think that NB might actually break this 15 year trend of net out-migration this year.  The provincial government will be quick to take the credit but it will be really a function of the challenges there and not the strength here).

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2 Responses to Hollowing out the federal government

  1. Rob says:

    “If the federal government is slowing reverting to a minimalist presence, it will be all the more important for us to take control of our economic destiny.”

    I think the key is to reclaim federal tax space that Ottawa has (or will have) vacated. Stealing back the 2% of HST that the feds abandoned would certainly do wonders for the fiscal state of NB. It would be terribly unpopular, but may be necessary.

  2. Cod Father says:

    Just wait until the full brunt of the baby-boomer retirements kick in and the feds don’t hire to refill the positions.

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