A critical question in this federal election is who will pay for the deficit in program and infrastructure spending that developed in recent years.
Health, education, security, agriculture and infrastructure all need more money.
The obvious answer to who will pay is the taxpayer. But the taxpayer sends money to three levels of government – municipal, provincial and federal.
While municipal and provincial governments struggle to make ends meet with their resources, Ottawa has posted seven consecutive fiscal surpluses. An imbalance has developed.
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As government makes necessary cuts to spending, what can be reduced or restructured in the budgets for agriculture?
For example, while Ottawa debates how to spend its extra cash, the Saskatchewan government has an agricultural innovation agenda that it can’t fund.
Farm spending in its last budget had to be reallocated to fund the province’s share of the agricultural policy framework. Where in the past the province had millions of dollars to encourage value-added processing and research, it now has almost nothing.
Similar situations exist in most provinces where the costs of health care, education and other provincial responsibilities are growing faster than revenues.
The provinces fear a worsening fiscal situation.
As the baby boom demographic moves into its 50s and 60s, health-care costs are set to balloon. More than half of a person’s lifetime health-care expenditures occur after age 65.
If nothing changes, the provinces say they will rack up ever increasing debt while Ottawa will reap ever increasing surpluses.
The federal government replies that the provinces have adequate taxing power to fund services, but most have cut taxes in recent years.
Ottawa notes it has increased transfers to the provinces for health care. It also notes that when it cuts taxes, all Canadians share the benefit, no matter where they live.
All this is true, but it doesn’t negate the fact that some provinces, with smaller industrial and resource bases, will struggle to keep up with growing program costs without burdening their citizens with unsupportable tax levels.
This may cause a vicious circle of growing imbalance, with rich provinces able to decrease taxes while poorer jurisdictions have to raise taxes, leading to more outflow of business and people to rich provinces and growing resentment among those left behind.
Don’t be confused. We hold provincial governments responsible for sound fiscal and economic management. But to stem the growing alienation dividing the country, new thinking is needed in the way governments share our tax dollars.
Equalization is enshrined in our constitution, ensuring that the provinces have sufficient revenues to provide “reasonably comparable levels of public services at reasonably comparable levels of taxation.”
That isn’t happening now.
The major parties in this election all say they will address equalization.
A key question for the voter is which party has the best plan and is most likely to carry it out.
