Liberals "slew" deficit on the backs of Provinces

[punked]

And I have said that McCallum is wrong. The deficit was eliminated because of reductions of spending everywhere.

While I would like to agree with you that a Liberal's go to guy in finance is wrong, and if it was Martin I would be all over that, he is right they down loaded transfers. Everyone knows this.

[Keepitsimple]

And I have said that McCallum is wrong. The deficit was eliminated because of reductions of spending everywhere.

McCallum never said that cutting transfers was the only way they reduced the deficit. He just said that the severity in which they slashed transfers was a mistake. As I said, one other source was the EI surplus - instead of keeping it separate, they took it into general revenues and used much of it to help offset the deficit. That in itself is not so bad in tough times....but they also increased the premiums for both workers and businesses and kept them higher than they should be. Other than marginally restraining Program growth for a few years, the only sigificant cuts to government spending that I was aware of was the decimation of our Armed Forces.

[jdobbin]

McCallum never said that cutting transfers was the only way they reduced the deficit. He just said that the severity in which they slashed transfers was a mistake. As I said, one other source was the EI surplus - instead of keeping it separate, they took it into general revenues and used much of it to help offset the deficit. That in itself is not so bad in tough times....but they also increased the premiums for both workers and businesses and kept them higher than they should be. Other than marginally restraining Program growth for a few years, the only sigificant cuts to government spending that I was aware of was the decimation of our Armed Forces.

Actually, what he said was the deficit was cut on the back of the provinces. I disagree. There wasn't an area of government that didn't get chopped.

Once again the stats reveal that cuts were not marginal in program spending. I don't know where you got that information since we have talked about in depth here in the past.

You might have disagreed with the process but I certainly didn't think the provinces cutting taxes at the same time transfers were cut meant that only the Feds were the responsible for cuts in service to health. By the way, education is a provincial responsibility. The cuts they made there were the provinces domain.

[Keepitsimple]

Actually, what he said was the deficit was cut on the back of the provinces. I disagree. There wasn't an area of government that didn't get chopped.

Once again the stats reveal that cuts were not marginal in program spending. I don't know where you got that information since we have talked about in depth here in the past.

You might have disagreed with the process but I certainly didn't think the provinces cutting taxes at the same time transfers were cut meant that only the Feds were the responsible for cuts in service to health. By the way, education is a provincial responsibility. The cuts they made there were the provinces domain.

Yes, Education is provincial but transfers include money for that - and they were cut. Cutting taxes is another issue - the fact is that the provinces got far less money from the Feds, thanks to Martin and the Liberals. In Ontarion, Harris had no choice.....companies were fleeing Ontario because the tax rates were so high. When Harris got in, government revenues were at about 45 billion. Through a variety of business incentives centered around tax reductions, revenues rose to 70 billion inside 4 or 5 years. Personal tax cuts put money in peoples' pockets and Ontario boomed. As I've said previously, Harris was a mean son-of-a-B but he made Ontario the place to invest. Dobbin - it was really, really bad after the NDP.....it wasn't ALL their fault because the economy in general went in the dumper, but for tax and spend NDPers, it was the worst time to come to power. It was REALLY bad when harris got in - $8 billion in deficit and only $45 billion in revenue......so don't talk about tax cuts being bad....it really worked. So you're saying the man who would be the Liberal Finance Minister is wrong? Interesting.

[jdobbin]

Yes, Education is provincial but transfers include money for that - and they were cut.

It is only for post secondary education. What was the provincial response in many cases? A tuition freeze and cutting university funding.

Cutting taxes is another issue - the fact is that the provinces got far less money from the Feds, thanks to Martin and the Liberals. In Ontarion, Harris had no choice.....companies were fleeing Ontario because the tax rates were so high. When Harris got in, government revenues were at about 45 billion. Through a variety of business incentives centered around tax reductions, revenues rose to 70 billion inside 4 or 5 years. Personal tax cuts put money in peoples' pockets and Ontario boomed.

And Harris started making massive cuts himself. He offloaded to the municipalities to pay his deficit. Do you blame him for that or do you say he had no choice?

In some people's world view, it is only the Feds that are to blame. There is thought that the huge deficit could have been eliminated from some magical formula.

What do you think that was? Economists have said you have a number of choices: Tax increases, service cuts or very strong economic growth.

As I've said previously, Harris was a mean son-of-a-B but he made Ontario the place to invest. Dobbin - it was really, really bad after the NDP.....it wasn't ALL their fault because the economy in general went in the dumper, but for tax and spend NDPers, it was the worst time to come to power. It was REALLY bad when harris got in - $8 billion in deficit and only $45 billion in revenue......so don't talk about tax cuts being bad....it really worked. So you're saying the man who would be the Liberal Finance Minister is wrong? Interesting.

I am saying that blaming the Feds for cuts in programs in provinces ignores the fact that they had their own deficits they were eliminating.

Martin pointed out that he couldn't very well let the provinces pay for overspending in the provinces on the backs of the federal taxpayer.

[Keepitsimple]

I am saying that blaming the Feds for cuts in programs in provinces ignores the fact that they had their own deficits they were eliminating.

Martin pointed out that he couldn't very well let the provinces pay for overspending in the provinces on the backs of the federal taxpayer.

......Back to the original point of this thread......so you're saying that John McCallum, the Liberal Finance Critic and Minister of Finance in waiting, was wrong. He's saying Liberals made a mistake by cutting provincial transfers so deeply. Three questions for you:

1) You're saying McCallum's wrong. So do you believe the Liberals were right to cut the transfers as deeply as they did?

2) If the deficit is as large as Liberals say it is, do you personally believe that they should again cut transfers to the Provinces?

3) Do you believe McCallum when he now says they won't cut transfer payments?

[jdobbin]

......Back to the original point of this thread......so you're saying that John McCallum, the Liberal Finance Critic and Minister of Finance in waiting, was wrong. He's saying Liberals made a mistake by cutting provincial transfers so deeply. Three questions for you:

I am saying he is wrong just as he was wrong on letting banking mergers happen. He did a mea culpa on that.

1) You're saying McCallum's wrong. So do you believe the Liberals were right to cut the transfers as deeply as they did?

Yes.

2) If the deficit is as large as Liberals say it is, do you personally believe that they should again cut transfers to the Provinces?

Yes. Or at the very least freeze them or put them back to what they were before Harper decided there was a fiscal imbalance.

3) Do you believe McCallum when he now says they won't cut transfer payments?

I certainly think he is going to campaign on it but then we will see what we usually see after an election: Examine the books and then claim there is an even larger deficit that was hidden (which there is sometimes merit to) and then say (as you said about Harris) that isn't any choice but to cut.

You won't hear about taxes or transfer cuts in an election. Ignatieff won't give that issue to Harper. However, justification for some choices might follow an election.

Let your outrage out now. My feeling is that Harper will be willing to let deficits climb unless he gets a majority with which to cut... transfer payments.

Edited September 6, 2009 by jdobbin

[Keepitsimple]

I am saying he is wrong just as he was wrong on letting banking mergers happen. He did a mea culpa on that.

Yes.

Yes. Or at the very least freeze them or put them back to what they were before Harper decided there was a fiscal imbalance.

I certainly think he is going to campaign on it but then we will see what we usually see after an election: Examine the books and then claim there is an even larger deficit that was hidden (which there is sometimes merit to) and then say (as you said about Harris) that isn't any choice but to cut.

You won't hear about taxes or transfer cuts in an election. Ignatieff won't give that issue to Harper. However, justification for some choices might follow an election.

Let your outrage out now. My feeling is that Harper will be willing to let deficits climb unless he gets a majority with which to cut... transfer payments.

Mt outrage is out. I agree with everything you said....including MAYBE about Harper - it depends how strong the economy bounces back. I expect there will be a huge pent-up demand for resources, especially oil.

[Shady]

Will the Liberals actually campaign on deep transfer payment cuts to provinces? Or will it be part of their hidden agenda, like last time?

[Smallc]

They have promised no cuts to transfers. It seems that they'll cut federal exclusive programs instead.

[jdobbin]

Mt outrage is out. I agree with everything you said....including MAYBE about Harper - it depends how strong the economy bounces back. I expect there will be a huge pent-up demand for resources, especially oil.

I hope you're right but it was one heck of a bubble that created the corporate receipts to explode. I don't know anyone who is predicting that, do you?

[Keepitsimple]

I hope you're right but it was one heck of a bubble that created the corporate receipts to explode. I don't know anyone who is predicting that, do you?

No....I think everyone is being Conservative if you'll pardon the pun.....but really, when things start to roll, they should roll pretty good.....slowly, but surely and continuously....and with all apologies to the environmentalists, oil, timber and steel will be in demand....more so than before because of the pent-up situation. I also think that the sturdiness of Canada's banking system and our approach to handling this crisis will have a positive impact on foreign investment. So yes, I personally think that Canada has the opportunity to outdo the boom times of 2007/2008. The "bubble" was really in the US - we felt the aftershocks. Call me an optimist.

[jdobbin]

So yes, I personally think that Canada has the opportunity to outdo the boom times of 2007/2008. The "bubble" was really in the US - we felt the aftershocks. Call me an optimist.

The bubble in the U.S. is what we benefited from for exports.

[Visionseeker]

The provinces were the source of the federal deficit to begin with, so it is a misnomer to suggest that anything was placed on their backs. Ottawa's fiscal headaches did not arise from federal spending on areas of its exclusive constitutional domain. Instead it was born from the 50/50 funding formula Pearson negotiated for the federal government's partnership with the provinces on matters of health, welfare and education. On the face of it, a 50/50 funding formula seemed fair if Ottawa was to engage itself in matters of provincial jurisdiction. But it would take fewer than 5 years before Ottawa was trying to renegotiate.

Finding themselves with popular social programs bolstered by a matching fund in the form of the federal treasury, all provinces began to spend like crazy on anything and everything that could fall under the formula. The result was that federal transfers to the provinces grew at three, then four and eventually six times the rate of all other federal spending. Basically, the provinces were hijacking federal fiscal policy. In 78, Marc Lalonde came close to reaching a new deal with the provinces, but provincial elections changed some of the actors and other premiers smelled electoral weakness in the federal Liberals and figured they'd keep the cake and eat it too - at least until the next PM came knocking.

Well, Clark wasn’t around long enough to change his clothes let alone policy. And when Trudeau returned his pre-occupation was understandably the constitution. Mulroney similarly ignored the problem until after he was done trying to re-re-patriate the constitution and made the first, albeit minor moves towards readjusting the funding formula. Fact is, until the early nineties, the deficit wasn’t a foremost concern to the average Canadian. That all changed shortly and dramatically after Chrétien came to power.

Chrétien had not campaigned as the deficit fighter – Reform was raising the biggest stink over the issue of any party on the campaign trail. But almost immediately after assuming office, Chrétien watched as the public mood dramatically shifted. Deficits were suddenly bad in the public’s mind, and Ottawa had to do everything it could to bring debt under control. What countless federal ministers of finance were disinclined to tackle for its obvious political unpopularity had now suddenly become the fiscal cause celebre.

Provincial ministries of finance scrambled to find a foil, but the debt to GDP ratio was a simple marker that most people could readily (mis)understand. The advantage was now in Ottawa’s hands after 20 years of provincial fiscal irresponsibility. But make no mistake, the provinces weren’t dumped on, they simply had their hands removed from Ottawa’s tap.