Limiting the Federal Power to Spend

[August1991]

Should the federal government maintain its power to spend in any jursidiction, including provincial areas, or should it limit its power to spend money?

Today, Bob Rae wrote a good (if slanted) column about this issue:

When Stephen Harper was president of the National Citizens Coalition, he signed a manifesto known as the "firewall" letter: Keep the federal government out of Alberta, and let the province run its own affairs.

Whether firewalls or watertight compartments - that the federal government and the provinces live in their own worlds and never the twain shall meet - Canada's leaders have been engaged for generations in an ongoing discussion about who does what.

What's different today is that, for the first time in our history, we have a prime minister and a cabinet talking openly about giving up the game for the federal government. It is widely rumoured that this gruel of ending the spending power of the federal government implicit in the BNA Act and long upheld by the courts will be fed to the House of Commons in the coming Throne Speech. Bloc Québécois Leader Gilles Duceppe has now made this one of his conditions for propping up the Harper government.

Many might yield to a collective yawn about all this. What could be so bad about a federal government's agreeing not to spend money in "areas of exclusive provincial jurisdiction"? Looking backward and forward, we can find a simple answer: a lot.

Confederation was not a compact between two peoples or a carve-out by a few principalities. It provided for effective governments in the context of a rural country stretching 5,000 kilometres. Our history since then has seen the National Policy, two world wars, national pension, unemployment insurance, support for universities and colleges, national hospital insurance, the Canada Assistance Plan, a national housing policy, urban initiatives, medicare and, most recently, a new deal for cities and a national child-care policy that was shut down by the Harper Conservatives.

...

This is what Mr. Harper wants to end, either by constitutional amendment or federal-provincial agreement. For the first time, we have a national party - the Harper Conservatives - ideologically committed to a fundamentalist misreading of our history and Constitution, and a separatist party only too happy to reduce the Canadian government to a marginal role, just before, in their sad dreams, it disappears altogether.

Bob Rae in G & M

Canada is far more than the federal government and what truly makes Canada a great country are not things the federal government can do. It is the people in Canada who make Canada work.

It is almost frightening how Rae lists off all these supposedly great things about Canada - and all of these things mean bigger government. Is this what Canada really is? Federal government programmes?

It is also sad to see Rae use the same, tired Trudeau argument that Harper has become a weakling, giving into narrow provincial demands.

----

In another column in the National Post today, I read this:

In their last five years in office, the Liberals ramped up program spending by nearly 50%. Since taking over two years ago, the Conservatives have raised it another 15%.

In just his first two budgets, Finance Minister Jim Flaherty has increased spending by more than $25-billion. That seems to me the best place to start looking for money to pay down the debt.

Also, in less than a decade, the federal civil service has grown by 20%. All the bureaucrats cut during the austerity program in the mid-1990s have been replaced, and then some.

What's more, the new civil service hires have been for high-paying positions such as executives, lawyers, computer programmers, environmentalists and economists, whereas the people laid off in the 1990s tended to be at the lower end of the pay scale. So while the 20% rise in civil service bodies is stunning, the 50% increase in the federal payroll is staggering.

Lorne Gunter in NP

Do all these new, high paid federal civil servants make Canada a better country?

----

The idea of limiting federal spending powers would appeal to Quebec and some provincial governments. Provincial governments must have a certain sovereignty or autonomy within their jurisdiction and the federal government's power to spend should be limited.

More fundamentally, Canada is not defined by the federal government. Canada is defined by the people who live here.

----

Lastly, here is a good overview of the topic prepared by the federal Library of Parliament:

The concept of a federal "spending power" is a relatively recent constitutional development. It arises from federal government initiatives immediately following the Second World War, and is closely linked with efforts to centralize the taxing power.(1) By providing program funds for a variety of health, education and social development programs, either unilaterally or in co-operation with the provinces, the federal government substantially altered Canada’s approach to issues that were essentially within provincial jurisdiction.

The spending power thus became the main lever of federal influence in fields that are legislatively within provincial jurisdiction, such as health care, education, welfare, manpower training and regional development. By making financial contributions to specified provincial programs, the federal government could influence provincial policies and program standards.

Until the 1960s, most of the provinces acquiesced in this expanded federal influence, but Quebec both raised objections and refused to accept certain contributions. With the election of a new provincial government in 1960, Quebec’s objections crystallized, and during the early ‘60s other provinces also began to find the increased federal role objectionable. Accordingly, in 1964 the provinces were given the right to "opt out" of programs financed through the spending power with income tax abatements as compensation. Only Quebec took advantage of this provision.(2)

Edited October 2, 2007 by August1991

[jdobbin]

Should the federal government maintain its power to spend in any jursidiction, including provincial areas, or should it limit its power to spend money?

Does any country limit federal spending? Why is it the issue of the day in Canada?

Several prime ministers from both Liberal and Tory governments have said that provinces will never be happy with anything the federal government does and will ask for everything they can. It makes for good local politics.

Harper just has to stop spending money so freely if he thinks it is an issue. He obviously doesn't because he has surpassed the level of spending he promised during the election.

[mikedavid00]

Today, Bob Rae wrote a good (if slanted) column about this issue

Oh no. You said the 'R' word!! We don't speak of him around here!!!

The name we don't mention is the Harper killer. I don't forget things and I'll never forget how the whole Libearl Party of Canada stood behind him during Leadership Convention and he was almost a shoe in as the next leader. Dion won becuase a group of Sikh's meddled in our political system.. sigh.. you know the rest of the story. Oh well, it's our gain ultimately.. lets just hope he doesn't get back into power or in the public spotlight.

Pundit after pundit said that Harper did not want to up against the name we don't mention in the debates becuase name we don't mention is extremely seasoned politically and well connected.

He also answers questions directly. He never double talks. He's a natural, true, leader. He has 'next PM' written all over him. He's almost American Democtrat!

Don't believe me?

[August1991]

I will say that Rae added this in his column:

Thirteen fiefs putting up more walls and moats between themselves and their neighbours does not make a country. If the next session of Parliament becomes a battleground on this issue, so be it. Mr. Harper's Ayn Randist fantasies need to be put to rest. We don't need another trip down the lane of constitutional definitions.

The walls and moats are of provincial doing and it's possible that Harper will insist that if he accepts a limit on federal spending, then the provincial governments must accept to allow easier access for people out-of-province.

And Ayn Randist? Huh?

[Renegade]

Not only should the state's power to spend be limited, so should its abilty to raise revenue through taxes.

[Pliny]

The concept of a federal "spending power" is a relatively recent constitutional development. It arises from federal government initiatives immediately following the Second World War, and is closely linked with efforts to centralize the taxing power.(1) By providing program funds for a variety of health, education and social development programs, either unilaterally or in co-operation with the provinces, the federal government substantially altered Canada’s approach to issues that were essentially within provincial jurisdiction.

The spending power thus became the main lever of federal influence in fields that are legislatively within provincial jurisdiction, such as health care, education, welfare, manpower training and regional development. By making financial contributions to specified provincial programs, the federal government could influence provincial policies and program standards.

Until the 1960s, most of the provinces acquiesced in this expanded federal influence, but Quebec both raised objections and refused to accept certain contributions. With the election of a new provincial government in 1960, Quebec’s objections crystallized, and during the early ‘60s other provinces also began to find the increased federal role objectionable. Accordingly, in 1964 the provinces were given the right to "opt out" of programs financed through the spending power with income tax abatements as compensation. Only Quebec took advantage of this provision.(2)

The influences of the UN in Canadian politics and the governance of other nations can be seen at this time. There was in most countries a move toward centralization. Lester Pearson brought most of that influence to Canada.

The federal government should have clearly defined limits in it's mandate, spending and means of taxation. Polliticians of course always work the other way wishing to increase their influence and "help" all the citizesn for the good of the country.

How can they do that if their hands are tied?

Edited October 2, 2007 by Pliny

[August1991]

The Conservative government's upcoming throne speech pledge to limit federal spending power in provincial jurisdictions will contrast sharply with the Liberals' preference for a centralized federalism that has aimed to keep "Quebec in its place," Prime Minister Stephen Harper's political lieutenant in Quebec says.

In an exclusive interview with CanWest News Service, Transport Minister Lawrence Cannon revealed for the first time Tuesday that the controversial issue of the division of powers between the two orders of government will be addressed in the Oct. 16 throne speech. While declining to provide precise details, Cannon hinted that constitutional amendments would not be necessary since the Canadian Constitution already clearly defines federal-provincial jurisdictions.

"Our policy in the province of Quebec, as well as in the rest of the country, is to say the Constitution states: 'This is the way things should be.' Let's work within the confines of the Constitution and it's always been like that," said Cannon.

The fathers of Confederation did not anticipate a confrontational kind of federalism when they drafted the Constitution, he said. But he argued that successive Liberal prime ministers, beginning with Pierre Trudeau, started to infringe on provincial jurisdictions.

"It is as if they deliberately go and pick a fight with the province of Quebec to show the rest of Canada, 'See here, I am the champion, I will be able to go out there to put Quebec back into its place,'" Cannon said.

Liberal Leader Stephane Dion has continued his party's tradition of supporting centralized federalism, to the detriment of Quebec, Cannon charged.

....

In a recent article in the National Post, former Ontario premier Bob Rae, who ran for the Liberal leadership and was given a high-profile critic's position in Dion's shadow cabinet Tuesday, already attacked Harper's decentralized approach to federalism. Canadians, Rae argued, favour a strong federal government overseeing national programs such as health care.

CanWest

This is clearly going to be Harper's approach as a wedge issue against the Liberals. It will play well in Quebec and in the West but perhaps not so well in the Maritimes and in urban Canada.

This could well be the issue that forces the Liberals to vote against the Throne Speech. Dion and Rae will not compromise on this (and Harper knows this).

IMV, Harper is right about this.

Not only should the state's power to spend be limited, so should its abilty to raise revenue through taxes.

The state is free to borrow and that is the same as tax revenue. IOW, it is really the power to spend that we want to limit.

I frankly don't know how one can limit the government's overall power to spend. The best chance is to limit the federal government's power to spend in provincial jurisdiction since provincial governments will object.

Edited October 10, 2007 by August1991

[jdobbin]

This is clearly going to be Harper's approach as a wedge issue against the Liberals. It will play well in Quebec and in the West but perhaps not so well in the Maritimes and in urban Canada.

This could well be the issue that forces the Liberals to vote against the Throne Speech. Dion and Rae will not compromise on this (and Harper knows this).

IMV, Harper is right about this.

Just what would you have the federal government limit its federal spending in?

[Pliny]

Just what would you have the federal government limit its federal spending in?

Not the argument. The argument is staying within a budget or not spending beyond it's means.

How the federal government does that, or how it chooses to do that is for another thread.

What really untied the hands of government was the adoption of a fiat currency, that policy along with the institutionalizing of the central bank did a lot to untie their hands. There were social benefits to adopting a fiat paper currency but, historically, fiat paper currencies have always led to revolution and/or the collapse of government usually in a matter of a years, a few decades at most. The social and economic instability we see today is, IMO, due to that. Governments are willing to go into huge debt, and justify it by using their tax base, people and resources, as collateral. I consider that indebting future generations, who have no say in the matter, to be a severe dereliction of duty. They will have a say in the matter when they throw out the government but unless they understand some basic economic laws the next government will wind up as corrupt or repressive as the one they threw out.

[jdobbin]

Not the argument. The argument is staying within a budget or not spending beyond it's means.

How the federal government does that, or how it chooses to do that is for another thread.

What really untied the hands of government was the adoption of a fiat currency, that policy along with the institutionalizing of the central bank did a lot to untie their hands. There were social benefits to adopting a fiat paper currency but, historically, fiat paper currencies have always led to revolution and/or the collapse of government usually in a matter of a years, a few decades at most. The social and economic instability we see today is, IMO, due to that. Governments are willing to go into huge debt, and justify it by using their tax base, people and resources, as collateral. I consider that indebting future generations, who have no say in the matter, to be a severe dereliction of duty. They will have a say in the matter when they throw out the government but unless they understand some basic economic laws the next government will wind up as corrupt or repressive as the one they threw out.

I'm still not sure what you are proposing here.

I agree that if you want to limit federal spending though, it starts with control over your budget and not going over what you said you promised.

Edited October 11, 2007 by jdobbin

[geoffrey]

I wonder if Quebec's insistance on Federal spending powers would end if we started with slashing all the health and education transfers?

Edited October 11, 2007 by geoffrey

[Visionseeker]

I wonder if Quebec's insistance on Federal spending powers would end if we started with slashing all the health and education transfers?

It would not.

The limiting of federal spending powers argument is a vacuous as the "fiscal imbalance" nonsense. In terms of the latter, provinces have always had their own taxation powers to address their fiscal needs; as for the former, if a province is so opposed to the intervention, they can simply refuse the money.

Quebec's financial nationalism is nothing more than empty bluster. Give in to it and you solve nothing in terms of Quebec's self-inflicted difficulties and find yourself only creating tension elsewhere in the country.

[Wilber]

It's a pipe dream but I would rather see them limited as to how much they can tax.

[Fain]

I like this idea. I'll probably vote conservative next time around if this is an election issue. Also depends on what Flaherty decides to do with the surplus.

[Renegade]

The state is free to borrow and that is the same as tax revenue. IOW, it is really the power to spend that we want to limit.

It is true that borrowing is the same as tax revenue, just deferred. IMV, the state should not be allowed to borrow except in case of dire emergency (war, disaster, etc)

I frankly don't know how one can limit the government's overall power to spend. The best chance is to limit the federal government's power to spend in provincial jurisdiction since provincial governments will object.

I'm not sure how it is limited either, but some thoughts are:

Defining the specfic programs it can spend on.

Requiring larger majorities of MPPs to agree for any budget increases (over inflation)

Limiiting the size of the public sector as a percenage of GDP or population.

[old_bold&cold]

This is not a fair poll as I think for the most part people lie somewhere in between no spending and unlimited spending. The federal government must keep its ability to act in a unified way to help out the provinces, or to even pressure them into doing what is baest for all of Canada. The provinces have already been given much more lattitude in things, then they ever had before. To now stop all federal spending in provincial areas, is not realistic. Yes the provinces would rather they get the money and spend it where they see fit, but that sometimes goes against what the rest of Canada is getting and doing. So yes they need to be able to spend to some degree and take the provincial politics out of that, so the effects are more immediate then taking the long way round route.

But to say they should have unlimited access, is not right either. There should be a compelling reason for spending in provincial areas and ones that show a federal hand is what is needed. So if this poll were to be more to finding the true will of the people, there should be a middle vote where it says spending but with limits to areas that will balance the benefits to all Canadians advantage. For example Spending in the area of northern job losses due to some outside issue. Where interm federal spending in this area, will save job losses and maybe even keep mining and other employers there until things blow over. But this is in the interrests of all the people in Canada as it will affect us all in many ways. We need the ability to do what is right in a fast and correct manner. If we let two levels of government argue it all till they agree there would be nothing left to agree to.

[no queenslave]

This is not a fair poll as I think for the most part people lie somewhere in between no spending and unlimited spending. The federal government must keep its ability to act in a unified way to help out the provinces, or to even pressure them into doing what is baest for all of Canada. The provinces have already been given much more lattitude in things, then they ever had before. To now stop all federal spending in provincial areas, is not realistic. Yes the provinces would rather they get the money and spend it where they see fit, but that sometimes goes against what the rest of Canada is getting and doing. So yes they need to be able to spend to some degree and take the provincial politics out of that, so the effects are more immediate then taking the long way round route.

But to say they should have unlimited access, is not right either. There should be a compelling reason for spending in provincial areas and ones that show a federal hand is what is needed. So if this poll were to be more to finding the true will of the people, there should be a middle vote where it says spending but with limits to areas that will balance the benefits to all Canadians advantage. For example Spending in the area of northern job losses due to some outside issue. Where interm federal spending in this area, will save job losses and maybe even keep mining and other employers there until things blow over. But this is in the interrests of all the people in Canada as it will affect us all in many ways. We need the ability to do what is right in a fast and correct manner. If we let two levels of government argue it all till they agree there would be nothing left to agree to.

If the people in Canada had done their political duty and created a constitution as to how they wanted to be governed ; instead of allowing the government to impose a constitution on the people as to how the government wanted to govern you ;you would not have this problem. Edited October 12, 2007 by no queenslave

[no queenslave]

If the people in Canada had done their political duty and created a constitution as to how they wanted to be governed ; instead of allowing the government to impose a constitution on the people as to how the government wanted to govern you ;you would not have this problem.

[Wilber]

The state is free to borrow and that is the same as tax revenue. IOW, it is really the power to spend that we want to limit.

Yes but they have to pay the principal and interest on that borrowing out of tax revenue.

[August1991]

I wonder if Quebec's insistance on Federal spending powers would end if we started with slashing all the health and education transfers?

That's an interesting point - and it gets to the heart of the issue.

As a poor cousin, would you rather pay for your share of a family meal collectively ordered or would you rather choose (and pay for) your own à la carte meal?

The limiting of federal spending powers argument is a vacuous as the "fiscal imbalance" nonsense. In terms of the latter, provinces have always had their own taxation powers to address their fiscal needs; as for the former, if a province is so opposed to the intervention, they can simply refuse the money.

Quebec's financial nationalism is nothing more than empty bluster. Give in to it and you solve nothing in terms of Quebec's self-inflicted difficulties and find yourself only creating tension elsewhere in the country.

You`re wrong. The federal power to spend is nothing like the so-called fiscal imbalance.

This is not a fair poll as I think for the most part people lie somewhere in between no spending and unlimited spending.

The choice is between limiting something, or not limiting something. You're either preganant, or you're not.

Judging by your answer, I'd put you in the "limit federal power to spend" category and I suspect Harper has already figured that. Bob Rae, judging by his column above, will have a hard case to make in an election campaign.

----

Yes but they have to pay the principal and interest on that borrowing out of tax revenue.

Wilber, I don't want to hijack this thread into a different topic - but I'll answer you here anyway. The federal government borrows at interest rates lower than you, me, any corporation or even Paul Desmarais can borrow. Why? The federal government can put you, me, Paul Desmarais or any other of 30 million people in prison if we don't pay the taxes that the federal government is free to assess at any time. With such collateral, it's no wonder the the federal government can borrow at such advantageous interest rates.

Wilber, have you ever considered that we Canadians should do all of our borrowing this way? Collectively, like a bulk purchase?

Edited October 12, 2007 by August1991

[Visionseeker]

As a poor cousin, would you rather pay for your share of a family meal collectively ordered or would you rather choose (and pay for) your own à la carte meal?

Most Canadians are recognizing that Quebec is ordering the chateau briand with an empty wallet.

You`re wrong. The federal power to spend is nothing like the so-called fiscal imbalance.

Great argument. So you concede that the fiscal imbalance was nonsense but contend that the limiting of federal spending power is worthy because it is "different". And so how is this vacuous argument different from the other nonsense advanced?

The choice is between limiting something, or not limiting something. You're either preganant, or you're not.

Good point. I say, not. Equating federal spending power as evil when, outside Alberta, the fed is the only government that seems to have its fiscal act and capacity in order is a losing argument.

Judging by your answer, I'd put you in the "limit federal power to spend" category and I suspect Harper has already figured that. Bob Rae, judging by his column above, will have a hard case to make in an election campaign.

Nice. Presume the opinion. That ott'a win votes.

Wilber, I don't want to hijack this thread into a different topic - but I'll answer you here anyway. The federal government borrows at interest rates lower than you, me, any corporation or even Paul Desmarais can borrow. Why? The federal government can put you, me, Paul Desmarais or any other of 30 million people in prison if we don't pay the taxes that the federal government is free to assess at any time. With such collateral, it's no wonder the the federal government can borrow at such advantageous interest rates.

You have a rather one dimensional understanding of public debt. I, for one, am pissed at the generation that preceded me and left a huge debt tag for all the services they consumed. Those tax dodging baby-boomers are worthy of my (and the following generations) contempt for leaving the state of affairs worse off than which they found it.

Yet you like to argue that the cycle should continue. I say ENOUGH! Accountability begins here, now and for perpetuity. Debt is a vehicle for investment, not tax avoidance.

Wilber, have you ever considered that we Canadians should do all of our borrowing this way? Collectively, like a bulk purchase?

Indeed, let us financially Costco another generation into unemployment and bankruptcy. August, you are beginning to reveal yourself as a crank with each post.

Edited October 12, 2007 by Visionseeker

[no queenslave]

as a person who wants a constitution by the people as to what powers we want the government to have and not what we have now ; a government who does not swear to obey the constitution only a foreign queen. The current system is a system of corruption, as is continually demonstrated with no accountability, with a supreme court part of the corruption.

[Pliny]

as a person who wants a constitution by the people as to what powers we want the government to have and not what we have now ; a government who does not swear to obey the constitution only a foreign queen. The current system is a system of corruption, as is continually demonstrated with no accountability, with a supreme court part of the corruption.

I agree that changes should be made but you need to get over your resentment of the current structure. It was built that way to protect the monarchy from the people who have a penchant to chop off the heads of rulers, to keep people from storming the Bastille as it were.

It is best that people think the monarchy is merely symbolic, and I think, were you of royal blood, you would perhaps devise the same scheme for your own protection.

Meanwhile, the subjects of the Queen, have done well by her.

Now, governing is a risky thing and I consider it no more than a monopolization of criminality. It's origins lie in the exploitation of others not in the protection or welfare of the populace. There has always been those who wish to avail themselves of the production of the wealth of others - an exploitive class. There is no better way to exploit than to make it legal. So any current system of government is a system of corruption and exploitation. I believe your proposal for a constitution is simply your system of exploitation. You have not expressed any policy or plan to replace the BNA act but simply rail against it so I cannot say with any certainty that you have any solution to the problem of government. What do you propose? Something along the lines of Marx, I would surmise.

[August1991]

Bump.

[Zachary Young]

lol @ anyone who thinks for a second they can reverse the centuries old trend of government spending increasing, by passing a law or signing a letter. IT'S NOT THAT EASY KIDS. First you have to reeducate the entire country... once you've done that, the rest doesn't even matter, but that's a little easier said than done...