Visions of centralization, social programs and the fiscal imbalance
I never ask this -- accepting that many people will skip long articles. This may be the most important post I have written all year. Please indulge me in spite of the length and read this.
This post was made necessary by comments from Pondering about visions of centralization.
On the decentralization of NDP and Conservatives vs centralization of Liberals, the fiscal imbalance and social programs.
This is seen differently depending on where you are in the country.
The Liberal centralized Canada vision has been exposed as a naked emperor undressed by successive Liberal cuts to the purchasing of that vision. Areas of provincial jurisdiction have grown in scope and cost. The public expectation is higher than ever while government willingness and enthusiasm is at historic lows.
The Conservatives want to gut the programs and leave the pieces to the provinces. Their decentralized vision when compared to the other parties is a withdrawal, as much as possible, of the federal government from education, health and equalization. The buying power of the Federal government can decline as the Conservatives have little interest in any of those heads of power. The Conservative vision is to decouple Alberta from any responsibility to contributing to the ability of the rest of the country to deliver social programs that Alberta in general and the Conservatives in particular have no interest in.
The NDP accepts that these are priorities but to some degree also accepts a more practical balance between the power and the funding. To that end the NDP would seek to increase the funding to these programs while retaining a federal role while still recognizing the extent of provincial investment and initiative. The NDP does recognize that these social programs are delivered by the provinces and they have grown to be the greatest public priorities. It is this change in the economic values of the provincial and federal jurisdicitons that have made the country less centralized. The problem is the NDP is not fully accounting for the extent of the problem.
The Liberals speak about these issues but have been very careful to show no details lately. Traditionally the Liberals claim a centralized vision with relatively little money on the table. The Liberals want to be able to press for national standards but fail to recognize that the more insignificant the federal portion of the bill, the smaller the authority is to back up those standards. Put differently, the Liberal position on centralization is completely unrealistic as it does not come with a proportional investment.
The premiers just last week pointed out that they deliver twice the programs to Canadians for half the taxation. The transfers from the federal government are not gifts to the provinces, they say. They are also not a significant federal stake in provincial management of these programs. They are simply the federal government handing over some of the fiscal imbalance from collecting substantially more money than the provinces while delivering less. Presently the federal government is not talking to the provinces while handing the money to wealthier businesses and individuals in a clear attempt to impose fiscal conservatism on the provinces.
This in theory allows the wealthier provinces to tax their wealthier people and corporations and deliver better programs for themselves. Of course there are two problems with that idea. First, this involves tax increases that are politically very difficult when the feds are reducing taxes. So far, the wealthier provinces other than Ontario have gone along with social program cuts rather than increasing taxes. Ontario has maintained the programs by running a deficit and has not figured out how to ask its people for more money. Secondly, the less wealthy provinces simply cannot tax more from their smaller economies to make up the difference (that is what equalization is for). Any slack picked up by the provinces leads directly to greaster decentralization and differences between program delivery among provinces. We are already seeing problems with provinces having difficulty with the portability of health services, a key principle of medicare.
Trudeau has not laid out how he will fix this:
- Will he opt for a more decentralized vision to reflect what the Liberals are willing to pay?
- Will he put up the cash to buy the position the Liberals abandoned decades ago and have only been giving lip service to for the last generation and re-establish national standards?
- Will he preside over a radical down-sizing of public investment in social programs in order to keep the federal investment proportionate to the provinces?
- Will he do one of the above while pretending to do another?
It would be good for the country if both the Liberals and the NDP would speak to this directly. Much of their plans can only be understood in light of a serious admission of the problems behind this issue. This speaks to the commitment either party will show to social programs and what kind of relationship we can expect between the provinces and the Federal government. It also is an essential component to any conversation about budgets, taxation and what it means to have a federal government.
Canadians have been lied to for so long on the issues of fiscal imbalance and national standards that they probabaly can't handle the truth.
Do not think that the Liberals can come back in to power and peddle the fiction of a central government without a fair proportion of the money on the table. This one issue is a major explanation for the difficulty the Liberals had with the provinces since Martin’s major cuts of the 1990s. Trudeau will be a one-term wonder if he tries to ignore this. I can't say for certain that Trudeau will just do waht has been done in the past by Liberal governments but I cannot mount any confidence that he will do different when he has so far not spoken with any clarity on this issue.
If you strip away all the bafflegab you have the problem of who is taxing and controlling the money, what services are to be delivered and what national standards are going to exist. The provinces are not reasonable about this either. They all scream together but the real divisions are actually between themselves. The richer provinces do not want to fund national standards that will equalize program delivery in other provinces. If the federal government gives up the tax points there will be no way of having national standards. If they keep the points and reduce what is on the table, the provinces will do the math anyway and calculate what money is leaving the province in a so-called "fiscal imbalance."
The truth is none of the parties is answering this honestly but the least dishonest is the Conservatives.
The Conservatives would impoverish all governments and leave all citizens to their own devices and thus solve the imbalance problem (between governments). While socially regressive it does answer the fiscal imbalance. Put differently, the Conservatives would have the richer provinces provide no more than what the poor provinces are able to, thereby creating a level playing field of social misery across the country.
The NDP and the Liberals want the programs to remain but neither is campaigning directly for the social license within the richer provinces to pay for national standards when that means their taxpayers will pay for other provinces to deliver equal programs. The NDP try to do the best they can without a clear national conversation by increasing the money on the table but they refuse to acknowledge that this cannot continue without public support from the wealthier provinces. The Liberals argue for a fantasy where there is no national conversation, no social license to tax to benefit other provinces and little money on the table to back up so-called federal standards.
Unless both the NDP and the Liberals find a way to come to terms with this they will not be able to claim responsibility with budgets. The longer they wait to have that national conversation, the more difficult it will be. It may well be too late already to find agreement among provinces to pay for national standards.
The elephant in the room is resentment to Quebec for years of threatening separation and perceptions that Quebec and Aboriginal Canadians get more than they actually do, coupled with an unwillingness to allow any province that is a net recipient of support to have any power to provide programs unique to them. The result is a rush to the lowest common social denominator.
This is a very serious issue that no party other than the Conservatives (through universal meanness) have proposed a solution.