Why Harper is Not Going to Halifax

The provincial premiers are meeting on the economy in Halifax today and tomorrow and Prime Minister Harper will not be joining them.  Several of them have offered up expressions of surprise and disappointment and have lamented the absence of the Prime Minister. The operatic drama that often characterizes exchanges at federal-provincial meetings has been absent the last few years given that one of the chief actors refuses to come.  I suppose the premiers are unwilling to replicate the Clint Eastwood approach to political discourse and simply address an empty chair.

The rhetoric is quite interesting.  Interim Liberal Leader Bob Rae says: “I don't know any other federation in the world where the first minister refuses to have a meeting with all the premiers. It's without parallel in the world."  I suppose Rae is referring only to parliamentary federations, as I am not aware of regular policy meetings in the American federation between the President and all the state governors (though Presidents have addressed the annual meeting of the National Governors Association).  Dalton McGuinty apparently remains unapologetic about prorogation and his unwillingness to meet his opponents in the arena of the legislature but is critical that Stephen Harper will not come to Halifax and meet with the premiers.  Oddly enough, the two have much in common when it comes to dealing with legislative bodies.

There are explanations as to why Harper has displayed a reluctance to meet with the premiers that perhaps Julius Caesar should have displayed with respect to the Roman Senate. Going to meet the premiers is a politically risky business with high costs and few benefits.  Inevitably the meetings become attempts by the premiers to score political points by beating up on the federal government as they call for more resources.  The Prime Minister does not seem to like public events that can rapidly become unscripted and therefore prefers to meet with the premiers individually.

More to the point, why go to a meeting that will be inevitably marked by demands for more federal transfers even if the meeting is supposed to be about “the economy”.  Harper probably believes the provinces have more than enough resources to meet their own needs.  As the two accompanying figures show, the provincial-territorial governments combined have larger revenue to GDP ratios than the federal government.  The revenue data for these figures come from the Federal Fiscal Reference Tables.  The figure on the left shows that the share of total federal revenue to GDP has declined from about 18 percent in 2000 to 14 percent in 2011.  Total provincial-territorial revenues to GDP have stayed at about 21 percent.  

The right-hand side figure tries to show "effective" revenue resources available once inter-governmental transfers are accounted for.  Provincial revenues here subtract the transfers that they make to local government.  Federal revenues subtract the transfers made to the provincial and territorial governments.  This figure shows the provincial-territorial "effective" revenue share of GDP fluctuating between 17 and 19 percent over the period 2000 to 2011.  Once transfers made to the provinces are subtracted, the federal "effective" revenue to GDP over the same period drops from 15 to 10 percent. 

One can make the argument that the federal government’s declining revenue to GDP ratio is the result of its own tax policies and that it would be higher if it had reduced taxes less aggressively.  Less aggressive tax reduction might have resulted in higher federal revenues and more money potentially available to hand over to the provinces. Or, you can ask if the provinces need more money for health and education why they do not move into the room vacated by the federal government by raising their own taxes?  Why do they need Harper at a meeting to do that?

Comments

[Determinant]

Subtracting transfers to local government from provinces is problematic. Unlike provinces, municipalities are creatures of their provincial government. In Ontario we downloaded welfare onto municipalities and give them transfers to help. Welfare is a key mission of all provinces but Ontario chooses to use municipalities as agencies and uses their property tax bases to partially fund welfare.

Second, there is no constitutional reason why there *should* be First Minister's meetings; John A. Macdonald never held any or attended one. Provinces did hold meetings, starting in the 1880's, but it was observed in Ottawa that the cry would always be "more money". This is true in practice.

Politically, if a province can get money from the Federal Government from the Fed's tax base, it's the Feds that take the hit for raising taxes if necessary. It's easier than taking the brave decision of raising provincial tax rates, where "brave" is used in the "Yes, Minister" sense of "it will cost you a few seats in the next election."

[Jacques René Giguère]

In the Canadian Federation, most its constituents ( the four originals, the near-miss original PEI and NL) were "independant" at least of one another without any central body to defer to and the kings, french or british, so far away that neither side of the ocean cared much about the other. They had been separate polities for centuries. Apart from money, ( and which human being wouldn't want more under any pretenses), they want respect due to their seniority. That respect can be marked by appropriate tribute. Said tribute may also be useful for real ends.
We're talking history, sociology and politics here. Economics is merely the McGuffin.

[Shangwen]

Those meetings are pure bung baloney. Paul Martin made it a big lovefest when he was elected was appointed PM, and that gave us the Star Trek-inspired Council of the Federation. Now they have all the subtlety and sincerity of a Klingon initiation ritual.

Determinant is correct: no constitutional mandate. Plus, if the provinces are so darned autonomous and wisely led, why do they need to meet at all, other than to mooch of other people? Listening to them complain is like sitting in on a support group at the Betty Ford clinic.

[Determinant]

In the Canadian Federation, most its constituents ( the four originals, the near-miss original PEI and NL) were "independant" at least of one another without any central body to defer to and the kings, french or british, so far away that neither side of the ocean cared much about the other. They had been separate polities for centuries. Apart from money, ( and which human being wouldn't want more under any pretenses), they want respect due to their seniority. That respect can be marked by appropriate tribute. Said tribute may also be useful for real ends.
We're talking history, sociology and politics here. Economics is merely the McGuffin.

Absolutely false, Jacques, both in historical fact and in constitutional theory. There weren't four originals, there were three: The United Province of Canada, Nova Scotia and New Brunswick. None were independent, all were colonies. London had and in fact exercised the power of Reservation and Disallowance, colonial acts could be and were overturned if the Governor on London's orders said so. The usual excuse was the colonial act was "repugnant to the Laws of England", which could mean anything.

Neither Ontario or Quebec existed at the time as political units, Confederation created these provinces afresh. that's why the BNA Act spends as much time talking about the new Ontario and Quebec legislatures as it does about the Federal Parliament. What became in 1867 Ontario & Quebec had been united, broken up and then reunited since 1763, all on London's order and without any local say whatsoever.

Confederation is not and never was a compact, the Federal Government does not derive any of its authority from the acceptance of provincial legislatures; it derives its legitimacy from the Parliament of Canada, which gets its legitimacy directly from the ballot box. That is why provincial legislatures have no say whatsoever in the legislative process at the Federal level. Quite the reverse, in fact. Ottawa has the explicit power to Reserve (suspend) and Disallow (veto) provincial laws. As an example, if Mme. Marois should act on her election promise of creating "Quebec Citizenship" (which as a person who wants to move to Quebec I regard as a sick joke in very poor taste, and which makes its promoters look terrible*) Ottawa could and probably should Reserve the bill** and refer it directly to the Supreme Court

There is no such thing as seniority in Confederation, legally speaking, as the Quebec Court of Appeal and the Supreme Court both stated in 1981. All provinces are legally equal and have equal access to the powers of Section 92. The only minor difference is Section 94 which aims for uniform civil law in common-law provinces, it has never been used and Quebec is excluded due to its Civil Code. I could rewrite it to make it much more useful, but all it says is that there are two ways to get to the same destination, not that the provinces are unequal. Choosing a different path to the destination does not make one or the other junior. Nova Scotia and New Brunswick have minor powers to appoint some extra provincial judges for Surrogacy Court (wills and estates) that are appointed federally in Ontario and Quebec, but these are footnotes to Confederation.

Finally, speaking about greed and money, The BNA Act specified a few Joint Assets of Ontario and Quebec that were to be split up between the two new provinces after Confederation, the residual assets of the old Province of Canada. Most items were split as expected except one, the Common School Fund, which was based on the sales of land in what is now Ontario. Ontario and Quebec couldn't agree on how to split the money so the Government of Canada, as custodian of the joint assets until they were assigned still pays both provinces a few thousand dollars a year as simple interest, as it has since 1867. We've been having these arguments forever.

*The legislative proposals of Mmme. Marois and her previous draft Bill 178 have a terrible provenance, they are copied directly from known legal gimmicks to restrict the franchise. I wonder if Quebec politicians realize how bad they look repeating these reprehensible arguments.

** An injunction without the costs of a lawyer, and you don't need to find a representative plaintiff.

[KV]

Really? Asking for more money is all they can think to do at these meetings? That sorta seems unintuitive and disappointing.

[Robillard]

It was my understanding that, historically, the federal government collected the lion's share of the taxes, and split it among the provinces either through federal programs or transfers. This was called the "power of the purse". I thought that this one way that the federal government convinced the provinces to accept the Canada Health Act - by paying for a lot of it. Now I see that the Federal government only collects a small portion of taxes, and the provinces are much more self-reliant with respect to revenue.

What has caused this shift? Is it because provinces now collect significant amounts of resource royalties? Is it because of decline of federally-determined tariffs on imports as a revenue source? Federal marginal personal and corporate income tax rates are higher than provincial rates, so I'm not clear on how the federal government's share of revenues has gotten smaller than the provinces collectively.

[Shangwen]

Given the premiers' bafflement and relative silence when Harper increased their health funding but didn't tie any strings to it, and given their lack of howling when he removed Martin's old 6% "escalator" for health care in the last budget, I would say these meetings are clearly not policy events.

[Mark]

"Or, you can ask if the provinces need more money for health and education why they do not move into the room vacated by the federal government by raising their own taxes? Why do they need Harper at a meeting to do that?"

Natural resource disparities lead to vastly different fiscal capacities that federal taxation/transfers can help overcome. No sales tax Alberta and 9.5% QST is only sustainable up to a limit.

[Jacques René Giguère]

Determinant: You and I often view the world through different lenses. You take a legalist view. I have been in politics long enough to look at how history has developped and how people feel.
A United Canada signed the 1867 pact and immediately split in two. Because they recognized that there was two polities and two societies, so historicallly and politically there were four constituants,whatever the text may say.
The Maritimes provinces never really want to merge because they are different.
Legally, Canada is not a pact between two nations. So? A significant number of its population feel like it is and act accordingly. One could show that the long-term economic interest could be to change its view. We could argue that the Catalans should feel more Spanish or that Flemish and Wallons feel more Belgians. That's not how politics works.
The concept of "consent of the governed" is there to ensure we align the legal structure to the socio-political one. When we don't do that, conflict ensues and last to the detriment of everyone.

Mark: in hindsight, maybe the Canadian Constitution should have given mineral rights to the federal authority as is the case in OZ. Just too late. Political and social realities have been created. We now have to work around them. Maybe many currencies coordinated by the BoC?

[Determinant]

@Jacques:

The Australian Constitution did not and does grant resource royalties to the Commonwealth (the Oz Constitution is one of my hobbies, it has given me ideas to upgrade our own. The Charlottetown Accord would have done the same thing).

What happened is that Australian Fiscal federalism went one step further than our own. First, the Commonwealth stripped the States of their income taxing power in 1942 and this was confirmed in two High Court rulings in 1942 and 1957. The Commonwealth levies the whole tax that a taxpayer can reasonably pay (47% marginal rate, etc) and gives the States unconditional transfers in lieu. The Oz constitution has two features:

1) Commonwealth laws are paramount (superior) to state laws, including tax laws. This is the same as in Canada.
2) There is a specific clause in the Oz constitution that says that the Commonwealth may make grants with any conditions it thinks fit.

Canada has an (very strongly) implied Clause 2, this is the Federal spending power. In Canada the Federal government has the reserve powers, anything that isn't in Section 92 for the provinces is by default federal. In Oz it's the opposite. But Canberra has used its explicit grant condition power and its total control of income taxes to impose a myriad of conditions on states. Canada doesn't even come close, if we did Quebec would scream blue bloody murder. If you thing Ottawa pulls the province's strings, we don't hold a candle to Canberra. They really are the hand in the state puppet's behind.

Specifically, Oz uses the Grant Condition Power to engage in symmetrical equalization. If a state collects more revenue than average, that is automatically deducted from its grants, which is most state revenue. Canada only gives provinces money, it doesn't take it away immediately, directly and automatically. Thus resource revenues get split across the Commonwealth in effect. Canberra is devilishly good an indirect compulsion.

On Robillard's point, in Canada the Feds have the explicit authority to levy any tax they wish, under Section 91. The Provinces can levy "direct taxes" which includes property and income taxes explicitly, and HST by convention, though if you wanted to be a nitpicker GST/HST is an excise and thus in indirect tax, but the whole direct/indirect distinction is obsolete according to modern economic thought.

Thus Ottawa has a bigger tax pool (the whole country) and if push came to shove, it could displace the ability of provinces to levy the same taxes (that has never really happened, not the way it did in Oz). It also prints the currency and thus has macro tools the provinces don't.

On Jacques' political point:

Consent of the governed works both ways. The National Assembly doesn't outrank Quebec's 75 MP's, who can and do speak just as much for Quebec. Of course most of those are NDP members now, a situation that will continue if present polling is to be believed. But you can't make Confederation into something it isn't and never was. There is a point where perception turns into delusion. You can certainly make it better, as I said overhauling Section 94 to make it look like the Referral Power in Australia would be a good start. But we can't have better conversations if we don't admit reality. In Quebec, that means admitting that English Canada is far more diverse and divergent in opinions than the papers like to say. The eight English provinces don't all think the same, not by a long shot and let's not even start on New Brunswick. After spending a few month's reading La Presse, there are quite a few political myths floating around in Quebec that impair decent conversations. They are zombies that infest political conversations, like the idea that the "Yes" side really won the 1995 Referendum, English Canada is a monolith or Ottawa has an undue amount of power over broadcasting (see TVO and SCN). They are a form of "truthiness".

All the other provinces are willing to zig if Quebec wants to zag, as long as everyone has equal opportunity to make that choice. Different does not mean more special. Quebec doesn't outrank Manitoba which was created by Act of Parliament out of acquired territory. They are equal and have equal powers. Any suggestion that they are not is dead on arrival in every province outside Quebec.

As for the Quebec Sovereignty movement, I will say that after Marois' citizenship proposal, I believe it has "jumped the shark" and reached its best-before date. Because that idea stank and showed a clear lack of good judgment, foresight and self-awareness.

[Determinant]

Sorry to DP, but good politics is satisfying the majority while protecting the minority, preferably while eating a free lunch.

Supreme Court bilingualism is just such a free lunch. Really.

Supreme Court justices are not normal people. They come from a narrow pool, 90% come from provincial courts of appeal. There are 100 appeal judges in all of Canada. Under the Constitution, it's the Feds that appoint these judges, pay their salaries and are responsible for HR issues. Hence the Canadian Judicial Council. Fine. Dandy, been that way since 1867.

Just pay for language training for Appeal Court justices. Deliver it through the Canadian Judicial Council. Nobody really cares if BC Appeal Court justices are bilingual. But the smart, ambitious ones will fall all over themselves to learn French if it's free and given to them through the workplace. So they can sport a CCC rating when they come for nomination to the Supreme Court in Ottawa, especially if the PM intimates that those who weren't sufficiently enthusiastic about French lessons won't be considered. There, problem solved. Quebec just has to compromise a little bit on a unilingual justice appointed directly from legal practice. There is only ever one of them on the bench at a time, we let Quebec Civil Code-trained justices rule on Common Law civil suit appeals, so it's not as if it's not done.

[Bob Smith]

Harper has an ideological advantage vis-a-vis the premiers that did Martin didn't have. As a result of our constitutional division of powers, many (most) efforts by the federal government to play a more active role in providing services/programs to Canadians requires the cooperation of the provinces.

If you're a Prime Minister who wants to drive change in, say, health care or education (hello Mr. Martin), you have to get the premiers on side. On the other hand, if you're a Prime Minister (such as Mr Harper) who thinks that the federal government should stick to its knitting, and that the provinces are both capable of providing their citizens with the programs or services they want and better situataed to determine what those programs or services are (or aren't), then it isn't clear what upside (if any) there is from the Premier's meeetings or what possible reason he might have for attending.

[Determinant]

Mark: in hindsight, maybe the Canadian Constitution should have given mineral rights to the federal authority as is the case in OZ. Just too late. Political and social realities have been created. We now have to work around them. Maybe many currencies coordinated by the BoC?

I can't believe you just said that, Jacques. Natural Resource control is one of the Province's main powers, the other being the almighty Property & Civil Rights.

So you are saying Quebec should never have had control of its asbestos industry, the North Shore iron ore deposits, the Noranda copper deposit and that Plan Nord ought to have been a federal responsibility? I shall have to have a drink and lie down for a while to recover.