Off Balance

On the surface, the fiscal imbalance is a simple problem: the federal government takes in more from the provinces in taxes than it pays out in transfer payments and services.

On the surface, the fiscal imbalance has a simple solution: have Ottawa give more money to the provinces.

But this is not a simple accounting problem, and Jim Flaherty is telling the provinces to find another solution than demanding more money from the feds:

The federal Conservatives want to do more to help Ontario and other provinces with post-secondary education and urban infrastructure, but are not about to throw open Ottawa's vault to pay for every demand from provincial capitals, Finance Minister Jim Flaherty says.

Flaherty's measured stance won praise from Ontario Finance Minister Greg Sorbara, but it may have set the stage for tough negotiations with Quebec and other provinces that are calling for billions of dollars a year in extra federal funding to fix the so-called fiscal imbalance.

"Billions and billions of dollars, that's not realistic," Flaherty told reporters as he and his provincial counterparts gathered here yesterday to kick off what is expected to be six months or more of intense negotiations on revamping fiscal federalism.

The outcome of the talks will have a long-term impact on what citizens receive in government health, social and education services in exchange for their tax dollars.

But Flaherty warned the treasurers that it would be a mistake to think that designing new federal-provincial financial arrangements is simply a matter of how much cash Ottawa can hand over. "It's not just about money," he said bluntly.

"This isn't a meeting about how much more money is the government of Canada going to transfer to the provinces. If that's all this was going to be about, I imagine we could do it in a conference call."

On the surface, there appears to be an even simpler solution: end the myth of the federal spending power and leave it to the provinces raise all the money they need to fund their social services and infrastructure projects--thus ending the federal encroachment on provincial jurisdiction that is especially upsetting to constitutional purists, most notably in Quebec and Alberta, though each for different reasons.

But that myth will not go away, even under a Conservative government. No government ever voluntarily gave up the power of the purse on principle alone.

Source: Toronto Star