Stephen Harper said long ago that he would try to change Canadian federalism. If he still means it, this is the year. It probably means also that in 2008 we will have one of Canada’s most significant, as well as divisive, elections.

In two years the Harper government has done little but implement the slight policies by which it gained office. It has been remarkably void of innovations. In its minority position it has set aside the neo-conservatism of the PM’s opposition days. He has wooed Quebecers with money and national designation. He has wooed public and business opinion with tax cuts. He has honed his skills in reviling predecessors and opponents. He has raised to new heights the arts both of evading questions and of staging photo ops.

Despite all this and the miserable state of the Liberal Party, Harper looks little closer to a majority than he was in 2005. And he faces new troubles, besides Brian Mulroney’s envelopes of Schreiber cash. It has become necessary to dampen hopes of further tax cuts or expenditure largesse. With growing economic ”œuncertainty,” the government ”œwill be taking a very status quo, pay-down-the-debt orien- tation going forward.”

Paying off debt is a sound prescription for good times. It is unlikely to fit 2008. Certainly it is not in itself an ori- entation for political success. Experience permits little doubt about what will be added. When they have few fur- ther benefits to bestow, skilled politicians change the game. They undertake to do government differently. They prom- ise some reform that addresses a conspicuous source of troubles and thereby offers hope of great public benefit materializing in future.

Harper has prepared well for this. His early talk of changing our federalism tapped into public disillusion with its present working, into the widespread sense that good and necessary things don’t get done because they are con- fused between quarrelling politicians in Ottawa and the provinces. In the strongest speech of his 2005 campaign, he promised to establish ”œfull collaboration” between govern- ments through ”œa charter of open federalism.” Soon after taking office he proclaimed, ”œWe shall change the debate, change the program and change the federation.”

There is reason for the sweep of this enthusiasm. Change to the federation could provide cover for a federal government to implement a neo-conservative agenda by shuffling national responsibilities to the provinces.

That will come, however, a little later. The first step toward a changed fed- eralism is the Prime Minister’s present proposal for Senate reform. It deserves support from all national parties.

Federalism is the necessary form of government when people in dis- tinct areas have distinctive histories and concerns. Many such concerns are, in the language of the Canadian constitution, ”œlocal,” the business of provincial governments. But others relate to national affairs. They need distinct expression and consideration where national policy is made. In other democratic federations this is achieved through an elected second chamber of the national legislature. Canada is different by having no such chamber. Our unelected Senate repre- sents nothing but the patronage power of prime ministers, past and present. This democratic vacuum in Ottawa makes premiers the only spokesmen for their provinces, not just on the matters for which they are elected but also on the national issues for which they have no mandate.

This is at the root of the intergov- ernmental conflict from which we suf- fer much more than most federations. Thorough cure would require a consti- tutional amendment, but the provin- cial agreement necessary for that is not in prospect. The gradual Senate reform proposed by Harper is all that the feder- al Parliament alone can do meanwhile. Years will pass before it greatly reduces the tension of federal-provincial rela- tions and then, if nothing else is done, it will cause new problems in Ottawa.

Nevertheless, it is the direction in which Canada needs to move as far and as fast as possible. The opposition parties should not be so foolish as to reject the proposed legislation. Harper is not often constructive. His Senate proposal is. It could be marginally improved, but in any case it should be supported, not denigrated.

That is equally true for Harper’s impending other thrust to strengthen national government. Ottawa is respon- sible for the economy. Nothing is clear- er in the intent of the BNA Act. But that has not deterred provincial politicians eager to foster local interests.

A contemporary economy needs mobility of capital; this requires national securities regulation, but provinces stick with their separate sys- tems. A productive economy needs mobility of people; provinces stick with separate professional qualifica- tions and craft and apprenticeship standards. An advanced economy requires the competition that comes with free trade; provinces employ a variety of non-tariff barriers and pur- chasing practices to keep business at home. And so on. There have been many attempts to end such parochial- ism. Good intentions have been pro- fessed, even put on paper. Limited deals have been made between adja- cent provinces. But the Canada that has pinned so much on free trade across the US border remains well short of a free economy internally.

The Harper government is intent on getting the provinces to change their ways. Its handicap in bargaining is its minority status. The opposition parties can counter that. In the nation- al interest, no political calculation should be allowed to deter them from giving this Harper endeavour their unstinted support.

There, however, the harmony must end. Harper’s policy to ”œchange the federation” has a third and entire- ly different component. It is designed not to strengthen but to weaken national government. It threatens to remove much, perhaps most, of the federal spending power.

This is offered as an integral part of the package, a quid pro quo. If Ottawa stops using its spending power to intrude into their business, grateful provinces will stop their hampering of the national economic union. It is difficult to believe that the clever Stephen Harper is a true believer in so myth-based a misreading of federal-provincial bargaining.

The myth is about how Ottawa began to subsidize major provincial programs. It did not barge in. Initially, it was dragged in. Saskatchewan started hospital insurance by itself. People liked it. Other provinces came under great pressure to save their citizens from the high costs of going to hospital. They looked to Ottawa for help. Some younger federal politicians were sympa- thetic, but the cautious and complacent Liberal government, led by the tired Louis St-Laurent, was reluctant. It gave way only when the Conservative gov- ernment of Ontario was particularly insistent. Even so, the legislation pro- vided for cost-sharing only when a majority of provinces had adopted the prescribed program. It was not until the arrival of the Diefenbaker Conservative government that this barrier was lifted and any province got federal money as soon as it started hospital insurance. Then the key to the federal treasury was indeed turned, and public opinion required that people from St. John’s to Victoria have their share.

By the late 1950s, after two decades of remarkable growth in the econ- omy, opinion across English Canada was eager for the welfare state. And in 1960 came the Lesage government in Quebec. It wanted medicare and other social reforms as much as the Liberal Party that had become committed to them nationally. And the new Quebec needed money, both for those pro- grams and to catch up in infrastructure and economic investment. Lesage was delighted to get it through the federal spending power ”” provided that the error of the 1950s was not repeated.

Then the federal legislation for hospital care had prescribed in some detail how a provincial program would qualify for cost-sharing. In contrast, the 1960s legislation ”” for medicare, for social services and social assistance, for post-secondary education ”” stated only general principles for the provincial services whose costs would be shared by Ottawa. On those terms no province opposed the use of the federal spending power. True, the Manning government of Alberta objected to medicare, but it was an objection in principle, irrespective of where the money came from. One Conservative government attacked the allegedly cynical politics of the federal Liberals.
Some grumbled that their priorities for using the money would have been different. It is not in the nature of provincial politicians to bestow gratitude or credit on feds. But they all went along, as did the Ottawa Conservatives who voted for all the cost-sharing legislation.

Canada’s social programs were not created by a spending-empowered fed- eral rape of provincial jurisdictions. They were created by federal and provincial governments in a consensus driven by democratic will, by a tide of public opinion. The spending power enabled provinces, rich and poor, to move together.

Some governments rode the surf with delight, some drifted with the tide, but all ended on the same shore and found it, for a time, smooth and warm. I am biased in thinking that something was owed to the skill of sev- eral of the governments involved.

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One of the 1960s measures has stood subsequent political weather conspicuously better than the others. The Canada/Quebec Pension Plan is therefore sometimes cited as an exam- ple of how Ottawa can act in areas of provincial jurisdiction provided it allows provinces to opt out and still get federal money. It is nothing of the kind. Public pensions (as distinct from targeted income supports for the needy elderly) have nothing to do with the federal spending power.

Constitutional amendments in 1951 and 1964 brought pensions into federal jurisdiction concurrently with provincial jurisdictions, but the provinces retain pri- macy; that is, Ottawa can legislate a pen- sion plan but it does not apply in a province that prefers to operate its own. That was Quebec’s choice in 1964, prima- rily for financial reasons. The Quebec government recognized, however, that everyone would be better off if its pen- sion contributions and benefits were the same as in the rest of Canada. A sensible negotiation resulted in two plans that, while separately operated, are essentially identical for contributors and pensioners.

Concurrent jurisdiction with provincial primacy exists only in this one case. It has worked well there. But it could not be widespread. For other social purposes, programs Canada- wide depend on the federal spending power. They have not worked as well.

The reason is not, however, that the provinces came to object to federal money in their jurisdictions. The destroyers were federal politicians. They tired of providing the money. They reneged on the promises with which the programs began. The reason was simple and is enduring. Ottawa found that there was no continuing joy in imposing taxes so that provin- cial politicians could provide services for which, once they were established, federal politicians got very little of the political credit.

The retreat began 30 years ago, when the Trudeau government was in deep economic and financial trouble. Thereafter it and its Conservative suc- cessor seized on every opportunity to make their mounting interest costs into mounting excuses for further curtailing transfers to the provinces. Finally, the 1995 Chrétien/Martin budget ended all vestige of federal commitment to a defined share of any provincial program costs. The surviving ”œhealth and social transfers” are block amounts fixed by political pres- sures and the state of federal finances.

Little in Canadian politics is more important than healing the stultifying federal-provin- cial conflicts of the last thirty years. Harper states the right objective. But it will not be implemented if the origin of the problem is misunder- stood or misrepresented. It is not that Ottawa used its spending power to invade provincial jurisdiction against provincial wishes. It is not that the provinces changed their minds. It is that Ottawa let the provinces down. It set up apparently permanent subsidies but did not stay with its commitment.

There will be no getting out of fed- eral money for medicare, though there is danger that the program will be increasingly inadequate unless the form of its financing is radically changed. But otherwise, the day of such transfers is done. Ottawa effectively abandoned them eight years ago, when it signed with the provinces the Social Union Framework Agreement (SUFA). Any future trans- fers, whether by cost-sharing or by block grants, would have to be condi- tional on nothing tighter than an ”œagreed Canada-wide objectives frame- work.” Each province would choose its own way to fulfill the objective but be entitled to its share of Ottawa’s money.

The agreement was a nice way to write an obituary without declaring death. Its flexibility removes any polit- ical benefit to Ottawa from such use of its money. The programs would be dis- tinctively provincial. As soon as they were in operation, the federal money would be lost to sight. Only the most short-sighted of governments would commit to it. The only one to have done so was the Martin government in its late, despairing days. Its offer was for the worthy purpose of getting some more and better daycare, but it was a hasty, disjointed improvisation that would have created too many anom- alies to survive. Cancelling it was no doubt one of Harper’s easiest decisions.

The obituary, it must be empha- sized, is for the kind of transfers that flourished in the 1960s, the kind that were intended to be continuing but the provinces later learned not to trust. No doubt the future will see other transfers, to the provinces and via the provinces to municipalities. They will be not for continuing programs but for specific projects. They will be mostly for infrastructures, which all can see, which provide the photo ops in which all politicians rejoice. No one will be so churlish as to condemn them as rude federal invasions of the constitutional powers of the provinces.

So what, in the third and apparent- ly very much major part of his three- pronged program, is Harper about? How will legislation to ”œcircumscribe” the federal spending power ”œchange the federation”? His rhetoric implies that for generations federal governments, Conservative as well as Liberal, have been in breach of the Constitution. What is the division of powers for which he will restore respect?

There is an explanation that pays due respect to the Prime Minister’s intelligence. In opposition he thought that government ”” government as a whole, federal and provincial com- bined ”” should spend less on social programs. That is not popular politics. But there is an indirect way to attack social spending. The division of pow- ers can be said to make it the preroga- tive of the provinces. Ottawa’s involvement through the spending power can be treated as an improper intrusion, so that withdrawing it sim- ply restores federalism to the way it should be, the way it was until rav- ished by Liberals and their allies in the former Progressive Conservative Party.

In fact, the Constitution does not limit, never has limited, federal spend- ing. The division of ”œpowers” is not about spending. What it separates between the two orders of government is the delivery of public services. Ottawa can- not, for example, run hospi- tals or schools (except for some classes of people). It can provide money for the run- ning of hospitals and schools and much else.

There is indeed a spending restriction in the Constitution, but it is solely on the provinces. They can impose direct tax- ation ”œwithin the Province” to provide revenue ”œfor Provincial Purposes” only. The federal Parliament, by con- trast, can legislate for ”œthe raising of Money by any Mode or System of Taxation.” Period. There is no restric- tion of purpose.

If federal spending were restricted to federally delivered services, Canada would have long been a different coun- try. That it would now be a nation at all is unlikely. Certainly the Constitution would not contain, as it has done since 1982, the equalization principle by which the federal government is com- mitted to transfer to provinces the money necessary to provide ”œreason- ably comparable” levels of the public services in their jurisdiction. Without the federal spending power we would never have had our first major social program, the family allowance paid directly to all Canadian mothers. Without the federal spending power there would not be the subsidized stu- dent loans that finance much of our post-secondary education. And, as the advertisers say, much, much more.

Harper is not impractical. He can- not be seriously afraid that the federal spending power will be used for large new transfers to provincial programs. If his circumscribing of it is indeed intended to change the federation, to make it again how it was before the welfare state, his legislation will have to apply to the more general use of the spending power: that is, to make transfers not to provincial treasuries but directly to people and organiza- tions. Such spending is in no way hedged by the conditions now attached to transfers to the provinces. SUFA stipulates merely that, before implementing ”œnew Canada-wide ini- tiatives funded through direct trans- fers to individuals or organizations,” Ottawa will ”œgive at least three months notice and offer to consult.”

Is this the spending power that Harper hopes to circumscribe? With transfers to the provinces discredited, certainly direct transfers to people are now the crucial instrument for social and economic improvement, for invest- ing in our human capital, for combat- ing social deprivations, for equalizing opportunities. Responsibly deployed, the direct spending power is the means to ensure a basic family income for Canadians; to make early childhood care and education universally available at parental choice; to provide equitable and efficient, income-contingent financing of post-secondary education and of advanced skills training; to move medicare from treating sickness to the promotion of health.

Direct federal spending empowers people. There is no reason for it to encroach on provincial delivery of services that people want. It can be deployed in full collaboration with provincial governments. Perhaps that is what Harper really intends, the sub- stance beneath the rhetoric. If so, he will simply be clarifying the way the spending power can be most effective.

The indications are otherwise. They are that his objective is to curb Ottawa’s role in social policies for all Canadians. If that proves to be the nature of his legislation, it will indeed change the federation. It will threaten the greatest damage done to Canada since, 70 and more years ago, govern- ments turned their backs on the mis- eries of the Great Depression because the power to act was thought to lie with provinces that lacked the means.

Legislation that significantly limits the federal spending power would have to be at all costs resisted. The national interest would require that national parties ”” Liberals, NDP, Greens ”” sink other differences and join in ensuring that the Harper government is defeated in Parliament and at the polls.

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