The release of a number of reports by the federal Romanow  Commission has exposed its two-pronged public relations strategy: First, deny that there is a problem. Second, tag the provinces (especially Alberta) as the bad guys in health-care reform. 

This strategy adds urgency to health reforms now being considered in Alberta. 

The first report released by the commission provided the outcome of 12 focus groups conducted by the Canadian Policy Research Network, a think-tank that gets millions of dollars in funding from the federal government. 

According to the commission’s news release, the conclusions reached by the focus groups were “consistent across all 12 sessions.” 

Their surprising unanimity can be summarized as follows — raise taxes to pay for a health-care system that is little changed from today. 

Two weeks later, the commission released a study with the conclusion that “the evidence of a fiscal crisis in health care in Canada is not evident,” and further stated that there is “no empirical evidence” that Canadians are over-taxed. 

These commission-commissioned studies, while they do accord with Romanow’s earlier comments that he is “not convinced” there is a fiscal crisis in health care, fly in the face of nearly every other government commissioned report on health care — from Quebec’s Claire report, to Alberta’s Mazankowski report and even federal Liberal Senator Michael Kirby’s recent examination of health care. 

It was hardly a surprise, then, that the commission released another study with the following, conclusion: “The alternatives proposed by Quebec and Alberta target the methodical dismantling of the most important public services accomplishment in Canada.” 

This conclusion was reached by invoking a false dichotomy between Ottawa’s Canada Health Act which ensures “that all citizens have the same right to access health care based on need” on the one hand, and Quebec and Alberta’s so-called goal of “erecting conditions favourable to the delivery and funding of services by private enterprise” on the other. 

It must have just slipped the author’s attention that a large part of the current medicare system is delivered and funded by doctors who operate on a for-profit basis, or that Alberta has sworn full allegiance to the Canada Health Act, going so far as to entrench it into provincial legislation. 

The commission’s approach can therefore be summarized as: Status quo good, provinces bad. 

This approach lends additional urgency to reform efforts underway in the provinces — especially those in Alberta. 

The final Romanow report is not due until November of this year. That gives Alberta a very small window to entrench its reforms, to lead rather than to follow and to provide all Canadians with hope that health care will be available and sustainable as our population begins to age. 

Alberta has a blueprint for reform in its Mazankowski report. The provincial government has accepted all its recommendations in principle, though all it has really done so far is to raise health-care premiums (something the Romanow studies should be applauding — higher taxes for health care). 

Alberta should, therefore, announce that it will implement the most important reform in the Mazankowski report — the establishment of some sort of co-payment system for health services, utilizing the dollars that citizens already pay in health premiums. 

The changes are easy enough to implement. Albertans (poorer citizens are subsidized) already pay health premiums to the provincial government. 

Instead of merely dumping these premiums into general revenues, a simple accounting change should be made so that the money remains in an account for each Albertan. 

The next step would be to outline a list of services for which there would be a basic charge that would come from the account. 

This should probably include all routine costs, such as doctor visits as well as emergency ward trips, minor surgeries, etc. The initial charges do not necessarily need to match the exact costs of these services (which, in truth, we do not know, as there are no prices to convey this information), but will come to do so over time. 

The critical change is to get Albertans to start seeing the financial impact of their use of the health-care system. 

And all of this can be done without increasing the private delivery or funding that exists today. 

There are some wrinkles to iron out. For example, how to deal with any unused funds in the account — whether Albertans should pay the full cost of services over a small range if their account becomes depleted, after which full provincial funding takes over and the list of which services are to be charged against the account. 

But none of these wrinkles should prevent Alberta from introducing such accounts before Romanow’s November deadline. 

For that is the critical political objective. Following Romanow’s report in November, Ottawa’s public relations machine will be whipped up to hammer home its “don’t worry, be happy” mantra about health-care sustainability, along with the simultaneous “be worried, don’t be happy” mantra about provincial efforts at real reform of health care. 

Ken Boessenkool is president of Sidicus Consulting Ltd. in Airdrie. He is also an adjunct research fellow at the C.D. Howe Institute. 

Idnumber: 200208060085 Edition: Final Story Type: Business; Opinion Length: 848 words Keywords: HEALTH CARE; MEDICARE; ALBERTA; CANADA; RECOMMENDATIONS;   REPORTS Illustration Type: Graphic, Diagram Illustration: Graphic: (See hard copy for illustration). 

 How to reduce poverty in Canada National Post Wednesday, July 31, 2002 Page: A17 Section: Editorials Byline: Ken Boessenkool Source: National Post 

The National Council of Welfare did the country a great service this week by releasing its annual Poverty Profile. It is a wealth of statistics that show, among other things, that the reduction in poverty during the mid- and late 1990s occurred primarily in two provinces — Alberta and Ontario. It was a bit surprising, however, that in its analysis and public discussion, the Council neglected to mention that these reductions in poverty coincide nicely with welfare reform in these two provinces. 

Let’s start with Alberta. It began its welfare reforms in 1993. It lowered welfare rates, restricted welfare eligibility, and severely tightened the administration of welfare by removing all discretion from front-line welfare workers. The resulting drop in welfare use was astounding. The percentage of the population on welfare dropped from 7% of Albertans in 1992 to 2% by 1999, where it has remained. 

The data in the Council’s recent report shows what happened to low-income Albertans over this period. The number of Albertans living below Statistics Canada’s Low Income Cut-offs (or LICO, which the Council calls a poverty line, despite the fact that Statistics Canada does not approve of its use in this way) dropped by more than five percentage points in Alberta between the year before the reforms and 1999. This compares with a drop of less than one percentage point for the country as a whole over the same period. 

Now move to Ontario. A big part of the Harris government’s Common Sense Revolution was welfare reforms. They reduced welfare rates and implemented a massive program of workfare. While they focussed less on administrative reforms, and continue to spend much more per welfare recipient than other provinces, the results were modestly impressive. Welfare use fell from 12% of the population to 8% in 1999, and 7% today. 

The National Council of Welfare railed against these changes. It worried that the Ontario reforms created “a system that further entrenches poverty” and reversed “the host of improvements in the welfare system made by previous Liberal and New Democratic Party governments.” The Council failed to note that the Liberal and New Democratic changes resulted in driving up the number of Ontarians on welfare to an unprecedented 13% of the population, and also increased the number of Ontarians living in poverty (to use the Council’s wording). 

The Council’s recent Poverty Profile shows that the number of people living below the LICO in Ontario fell by more than two percentage points following the Harris workfare reforms. Again, this drop was larger than the drop experienced in the rest of the country over the same period. 

Perhaps the most interesting way to look at poverty reduction during the 1990s is to consider what would have happened had poverty not fallen so much in Alberta and Ontario during the mid- to late 1990s. The answer takes a little fiddling with the numbers, but it turns out that without the reduction in poverty in Alberta and Ontario, Canada would have seen an increase, not a decrease, in the number of Canadians living in poverty during this period. 

In other words, the economic recovery over that period did little to reduce the number of low-income Canadians. The reduction in the number of low-income Canadians was concentrated in provinces that implemented some combination of lower welfare benefits, stricter eligibility rules, tightened administration and workfare. The provinces that did some or all of these (Saskatchewan could be added to this list) were responsible for all of the reduction in the number of low-income Canadians that occurred in the late 1990s. 

The failure of the Council to highlight these successful poverty reduction strategies can be seen in recent statements made by the Alberta and Ontario governments. The post-Harris regime has promoted increasing welfare rates that are still generous compared to the rest of the country. Alberta rejected a report recommending welfare rate increases on the tepid grounds that the province “couldn’t afford them.” Instead, both governments should be promoting, and continuing, their welfare reforms as poverty reduction strategies. A properly attentive National Council of Welfare should be providing them with the fodder to do so. 

The federally funded Council states that its goal is to examine and inform Canadians and governments on “social and related programs and policies which affect low-income Canadians.” It is to the detriment of low-income Canadians from coast to coast that the Council ignores the important welfare reforms in Alberta and Ontario that did so much to reduce poverty in those provinces. 

Idnumber: 200207310147 Edition: National Story Type: Opinion Note: Ken Boessenkool heads a Calgary-based economic and public   policy consulting firm and is an adjunct research fellow at the C.D.   Howe Institute. Length: 747 words Keywords: SOCIAL WELFARE; POVERTY; REPORTS; REFORM; CANADA Company: National Council of Welfare 

 Equalization: the help that hurts National Post Tuesday, June 25, 2002 Page: A19 Section: Editorials Byline: Ken Boessenkool Source: National Post 

The federal equalization program — which distributes dollars to poorer provinces based on their ability to raise revenues — is rather simple in theory and noble in intent. According to the Canadian Constitution, equalization exists to “ensure that provincial governments have sufficient revenues to provide reasonably comparable levels of public services at reasonably comparable levels of taxation.” In practice, however, equalization is exceedingly complex and some of the incentives it creates are far from noble. In short, equalization appears to be help that hurts. 

For at least 30 years, we policy wonks have built economic models showing equalization creates incentives for less-developed provinces to raise their taxes. By manipulating their own tax rates, in theory poorer provinces can affect the size of their equalization payment, and get partially compensated for the debilitating effects of those higher taxes. 

But until now, no one has actually checked the evidence to see whether this prediction about equalization’s perverse incentives is actually borne out by the facts. Well, the verdict is in: There is strong evidence that equalization does, in fact, encourage poorer provinces to overtax their population. Start with the evidence about tax rates. The burden of personal income taxes in poorer provinces is, on average, one-third higher than in richer provinces (British Columbia, Alberta and Ontario). Capital taxes in poorer provinces are more than two times higher than in the rich provinces; sales taxes are half-again as high; and fuel taxes are one-tenth to three-fifths higher. Even if you take low-tax Alberta out of the calculation, and compare taxes in the equalization-receiving provinces only with those in Ontario and British Columbia, the conclusion still holds. 

Now the wonks not only predicted that taxes would be higher in recipient provinces; they also foresaw two other effects of equalization on taxes. First, they predicted that the bigger the province, the stronger the incentives would be — i.e. these incentives should be stronger for Quebec (the largest recipient) than for the Atlantic Provinces. Second, they predicted there would be a perverse incentive to levy higher tax rates on weaker tax bases (those tax bases most likely to shrink under the burden of heavy taxation) and lower tax rates on stronger tax bases (those more resistant to the effects of heavy taxes). 

The evidence supports both predictions — tax rates in Quebec are generally higher than tax rates in Manitoba and Saskatchewan, which are in turn higher than in the Atlantic provinces. To take but one example, average personal income tax rates as measured by Ottawa’s equalization calculations, are more than 43% higher than the national average in Quebec, 18% higher in Manitoba and Saskatchewan and 16% higher in the Atlantic provinces. Recipient provinces also show evidence of levying higher tax rates on relatively weak tax bases, and lower tax rates on relatively stronger tax bases. 

These findings are striking, for they confirm not only that the constitutional imperative to ensure “comparable tax rates” is not working, but that the predictions of the theorists about equalization’s perverse incentives are precisely mirrored in the real world. In short, equalization rewards recipient provinces for imposing high and damaging tax rates. For far too long, proponents of equalization have dismissed such concerns about perverse incentive effects as ivory tower analysts having too much fun with economic models. They were only partly right (we do have fun with our models). It will now be much more difficult to play down these incentive effects in the face of this empirical support. 

Of particular interest is the fact that the highest tax rates in recipient provinces tend to be on personal income and, to a slightly lesser extent, taxes on consumption. In other words, the perverse effects seem to be showing themselves most strongly via taxes on people. 

These higher tax rates that are a result of equalization’s perverse incentives threaten to derail a prosperous future for Canada’s poorer provinces. At a time when human capital is one of the most important keys to growth in an increasingly globalized and technologically dependent world, these incentives ought to worry all Canadians who are concerned with the future of our more economically dependent regions. These regions have faced enough challenges in the past, and in the present, without the noble intentioned equalization program creating further perverse results. 

Moreover, Canada’s wealthier provinces have clearly chosen a low-tax model as the basis for their future growth, and are in competition to lower tax rates. That means that the provinces most in need of growth, the equalization recipients, are now being rewarded for keeping their tax rates too high, as the wealthier provinces drop their taxes to make themselves a magnet for investment and jobs. Such a policy is almost guaranteed to keep the poorer provinces poor and to make dependence on transfers a permanent feature of Canada’s policy landscape. 

This opens up a new challenge, namely, how might equalization be reformed to reduce these perverse incentives. That work must now proceed if Canadians who live in recipient provinces are to be relieved from the excess tax burdens that equalization’s incentives appear to be producing. All Canadians have a stake in ensuring that we stop providing help that hurts. 

Idnumber: 200206250141 Edition: National Story Type: Business; Opinion Note: Ken Boessenkool is the president of a Calgary-based economic   and public policy consulting company, an Adjunct Research Fellow at   the C.D. Howe Institute and the author of Taxing Incentives: How   Equalization Distorts Tax Policy in Recipient Provinces, published   by the Atlantic Institute for Market Studies. Length: 861 words Keywords: GOVERNMENT FINANCE; FEDERAL PROVINCIAL FINANCES; TAXATION;   REPORTS; CANADA 

 Boosting Alberta’s resource reserves will cushion baby boom bust Calgary Herald Sunday, May 26, 2002 Page: D9 Section: Business Byline: Kenneth J. Boessenkool Source: For The Calgary Herald 

Any discussion of Alberta financial management must come to grips with the central role of resources revenues and the future financing of health and pensions. 

First, a quick review of Alberta’s revenues. 

In the past two decades, revenues from income taxes have followed a more-or-less upward trend. Recent substantial tax cuts on both the personal and corporate side have interrupted this upward trend, but only temporarily. 

Other revenues have been basically stable over the past few decades, with the exception of recent jumps in health care premiums and cigarette taxes, should continue to remain fairly stable in the future. 

Alberta’s resource revenues have exhibited neither growth nor stability. In the past four years they have fluctuated between $2.5 and $10.8 billion. Over the past two decades, they have made up as little as 15 and as much as 40 per cent of Alberta’s budgetary revenues. 

A revenue source that fluctuated between 15 and 40 per cent of total revenues would strain all but the best of administrations. 

Non-renewable resource royalties are of a fundamentally different nature from other types of revenues, and therefore should not properly be considered revenues like income taxes, sales taxes or other revenue sources. 

When oil or gas is sold all that happens is that a physical asset has been converted into a financial asset. The proceeds from the sale of oil or gas are not properly income — they are the proceeds from the sale of an asset, and royalties that the provincial government collects are Albertans’ share of that asset. 

Treating resource revenue as the proceeds from the sale of an asset was at least part of the explanation for diverting some of this money into the Alberta Heritage Savings Trust Fund in the ’70s and ’80s and for paying down its debt in the 1990s. In the former case, the Alberta government used resource revenues to build up an asset — a nest egg, if you will — and in the latter case it reduced a liability. 

In the early 1990s, the Alberta government substantially reduced its reliance on resource revenues to fund regular program spending — which is why it still ran a surplus when resource revenues fell to $2.5 billion in 1998/99. More recently, that has changed. The Alberta government has increased substantially its reliance on natural resource revenues to fund regular program expenditures. If resource revenues fell to $2.5 billion this year, the Alberta government would run a substantial deficit. 

This is unsustainable from an historic perspective, and wrong from an economic perspective. 

From an historic perspective the current reliance on resource revenues is higher than at any point since the provincial budget was balanced. The Alberta government’s current reliance on resource revenues is worryingly reflective of its dependence on resource revenues during the 1980s. 

From an economic perspective, the Alberta government should not be relying on resource revenues to sustain current program spending to this extent. In fact, since resource royalties are not properly income, they should not be used to fund current expenditures at all — doing so is a bit like selling your house to buy food. 

William Robson of the C.D. Howe Institute has calculated a health care liability of $20,000 per Albertan or $60 billion dollars. Another way to look at this liability is to say: If the Alberta government wanted to keep its taxes stable, it could only meet rising health expenditures in the next 40 years if it had a $60-billion nest egg yielding a six per cent return. But it would have to have that nest egg today. 

If there is to be any hope of meeting the funding needs of health care, the Alberta government is going to have to find a way to get through the coming baby-boomer bulge. And if the Alberta government wants to do that without raising taxes or planning for large deficits, it must set aside some money today — in short, it needs to start building that $60-billion nest egg. 

Turning to pensions, the 2000 Alberta budget contains the following passage: 

“. . . as a result of Alberta’s younger population and high employment rates, it could likely deliver a pension plan identical to the CPP with somewhat lower contribution rates.” 

How much lower? The budget states that an Alberta Pension Plan could deliver benefits equivalent to the CPP with a contribution rate somewhere between 7.8 and 9.1 per cent, compared to 9.9 percent for the CPP. That’s a 10 to 20 per cent payroll tax cut. 

The Alberta government could unilaterally opt out of the CPP using the CPP Act’s three years notice provision. 

But one of the key issues in setting up an Alberta Pension Plan is the unfounded liability that the Alberta government would inherit from the CPP. 

In once sense this is a red herring, since, as a co-sponsor of the CPP, Alberta already carries its portion of the liability. 

Still, the liability is substantial. The present CPP unfounded liability amounts to $19,900 per Canadian. Alberta’s demographic and labour force advantages would mean an Alberta Pension Plan would have a liability that is slightly less. 

The CPP is currently prefunding some of its future obligations by expanding the size of the investment fund through higher contribution rates. It is doing what Robson proposes to do for health — building a nest egg today to cap future contribution rates. 

The common thread in this discussion of health and pensions is the idea of prefunding — building up a nest egg today to limit future tax increases. 

And where might that nest egg come from? If resource revenues should be treated as a capital asset, this means they should be set aside in a capital account, not spent as if they were part of current revenues. And if the Alberta government treated its resource revenues in this way, that capital account would provide the prefunding necessary to start building nest eggs for health and pensions. 

In summary, the government of Alberta should move towards funding current spending out of revenues excluding resource royalties. Resource royalties should be put aside to build up a nest eggs so that health care and pensions can be funded with minimal future tax increases or deficits. 

Alberta is uniquely positioned in that it has a capital asset — oil and gas in the ground — that it can convert into a financial asset — a nest egg — that can be used to minimize sizeable future tax increases or deficits that are all but certain if the Alberta government is meet the funding needs of fund health care and pensions as the baby boomers age. 

Setting resource revenues aside today will make it more likely that the baby boomers will not bust the health budget, as well as ensuring that younger generations are not forced to pay tax rates for health and pensions that are even more punishing than they are today. 

Idnumber: 200205260004 Edition: Final Story Type: Business; Opinion Note: Kenneth J. Boessenkool is an Adjunct Research Fellow C.D.   Howe Institute. Length: 1154 words Keywords: GOVERNMENT FINANCE; NATURAL RESOURCES; ALBERTA Illustration Type: Black & White Photo Illustration: Photo: Herald Archive, Edmonton Journal / Alberta has   increased its reliance on natural resource revenues to fund regular   program expenditures. If resource revenues fell to $2.5 billion this   year, the government would run a substantial deficit. 

 What the poverty industry won’t tell you National Post Friday, May 24, 2002 Page: A19 Section: Editorials Byline: Ken Boessenkool Column: In Calgary Dateline: CALGARY Source: National Post 

CALGARY – Alberta’s poverty industry is at it again. A recently concluded review of Alberta’s welfare program saw the usual suspects trot out their heart-wrenching, single-mother-on-welfare anecdotes along with laments about welfare rates that are too low, affordable housing that is inadequate, medical coverage that is poor and child care that is in short supply. 

Despite all this, the Alberta government decided not to raise Alberta welfare rates or introduce other massive changes, because, “sorry folks, we just don’t have the money.” 

It was the right decision, of course, but for the wrong reasons. For the fact of the matter is that the Klein Conservatives have a remarkable story to tell about the success of their welfare reform measures. And to tell that story, you must get beyond heart-wrenching anecdotes and pore over the raw data. 

In the beginning (for Alberta, that was 1993), 7% of Alberta’s population was on welfare and 14% fell below Statistics Canada’s Low Income Cut-Offs (LICO), measured after taking into account all taxes and government transfers. Its welfare program was poorly administered, benefits were too generous and growing numbers of young people were getting trapped in a cycle of dependency — almost half of recipients were single, and about two-thirds were under 34 years old). 

Today, the percentage of Albertans on welfare has dropped to 2%. The most recent measure (1998) of the number of Albertans living below the LICO — again, after taking into account taxes and the now reduced government transfers — has fallen to 12.5%, a drop that is two-and-a-half-times larger than the drop in Canada as a whole over the same period. 

These are impressive numbers, but they do not tell the entire story. The real story is what happened to those individuals who no longer relied on welfare to pay the bills. That answer is found in a remarkable set of data recently drawn out of the 1996 Census by C.D. Howe Fellow John Richards. 

Richards compared labour force data in the cities of Calgary and Edmonton to Winnipeg, Regina, Saskatoon, Toronto and Montreal. He found that employment rates in Alberta were more than seven percentage points higher, and unemployment rates were 2.1 percentage points lower, than in these other cities. 

Even more interesting, Richards dug down to the neighbourhood level, and divided neighbourhoods into poor and non-poor neighbourhoods. He found that Alberta’s employment rate in poor neighbourhoods was 8.5 percentage points higher, and unemployment rates 4.7 percentage points lower, than in other Canadian cities. 

These results bolster earlier findings that showed that a large proportion of the reduction in welfare use came from preventing young (below 34) Albertans from getting onto welfare, and, more importantly, that the increase in employment rates for these same individuals was large enough to explain the reduction in welfare roles. In short, earlier evidence suggested that Alberta had discovered the most impressive job-creation program for youth that the country had ever seen. The twist that Richards has added is that Alberta has found the most impressive job creation program for poor youth that the country has ever seen. 

And, just to placate the critics, it wasn’t the economy which did the job. Economic growth in Alberta following the 1993 welfare reforms was weaker than economic growth during the late 1980s. Yet during the late 1980s, the number of welfare recipients in Alberta increased. 

Alberta’s success at welfare reform is all the more impressive when you compare it to similar efforts elsewhere. Ontario had 11% of its population on welfare in 1995 when it initiated its own reforms. It now has 7% on welfare — the level Alberta started with in 1993, and equal to the current national average. And Ontario’s reforms have been very expensive — workfare costs money, and Ontario has left its very generous disability program largely intact. According to data collected by Ottawa, Ontario spends 40% more per welfare client than Alberta does: $5,660 per individual versus $4,050 in Alberta (which is still higher than the national average of just under $4,000). 

Alberta’s 1993 welfare reform is a true and lasting example of what is now called compassionate conservatism. Before the Americans ended “welfare as we know it,” Alberta conservatives were putting it into practice. 

The only real shame is that they seem so reluctant to defend this legacy. Alberta should not maintain the welfare status quo because they have no money, but because of the remarkable success of a welfare reform package that has resulted in poorer, younger Albertans getting back to work. 

Idnumber: 200205240185 Edition: National Story Type: Business; Opinion Note: Ken Boessenkool heads up a Calgary-based economic and public   policy consulting company and is an Adjunct Research Fellow at the   C.D. Howe Institute. Length: 752 words Keywords: POVERTY; SOCIAL WELFARE; LOBBYING; STATISTICS; CANADA 

 Good firewalls make good policy National Post Friday, May 3, 2002 Page: A19 Section: Editorials Byline: Ken Boessenkool Source: National Post 

A well-designed computer network, like well-designed policy in a federation like Canada, depends on good firewalls. In a computer network, a good firewall alerts users to potential harmful interactions between the computer and the local network, and also between the local network and the Internet. Similarly, policy in a federation works better when firewalls limit potentially harmful intrusions by higher or external governments, or between governments and transnational organizations. 

Good firewalls do not prevent any and all interaction — rather, they limit unwanted intrusions that have the potential to cause damage. Firewalls can be configured to allow healthy interaction with networks and other computers (e-mail, surfing, exchanging files with known parties), but they also alert the computer user or network — usually via a pop-up window — of anything unpleasant. 

For example, my home has a network of two computers — one for the kids and one for the adults. A first firewall alerts me when the network tries to access my files or tries to use my computing power for, say, a resource-intensive game that the kids are playing. I can accept or reject the intrusions with the click of my mouse based on my assessment of whether the intrusion will slow or crash my system. 

A second firewall alerts me to intrusions from outside my network — usually the Internet. Again, I can accept or reject these intrusions based on whether they are regular interactions (e-mail, surfing known Web sites), whether I initiated the action (downloading software), or whether some external user or program is trying to search my files (this is how MP3 databanks are created). 

These firewalls do not prevent regular interactions because the firewall can be configured to allow certain programs to operate freely within certain confines (I have access to my kids’ computer, but they do not have free access to mine). 

Similar firewalls can be established between provincial and federal governments and between governments and external parties. The new panel to mediate health-care disputes between Ottawa and the provinces is similar to the firewall between my computer and the network. It will prevent Ottawa’s unilateral encroachment into provincial health policy — as it should, because the constitutional configuration gives control over health policy to the provinces. 

Prior to the establishment of the panel, the federal government reserved the right to punish a province for anything that it deemed to be a violation of the Canada Health Act. In other words, there was no effective firewall to prevent Ottawa from freely invading and changing provincial health policy. This firewall will not prevent mutually beneficial exchanges between Ottawa and the provinces on health care. However, any dispute referred to the panel (the policy equivalent of a pop-up window) gives the province an opportunity to determine whether the intrusion is benign, or whether it might slow or crash the provincial health-care system. 

Another example is the Kyoto program. In this case, both federal and provincial firewalls have been active. The federal government has been hesitant to allow the Kyoto program to operate in Canada unless it can get credits for natural gas sold to the United States and elsewhere. The fact that the federal Cabinet appears to be fighting over the mouse does not diminish the fact that firewalls at the federal level are effective at screening policy initiatives from transnational organizations such as the UN, WTO and IMF as well as other nations, particularly the United States. 

If Ottawa allows Kyoto past its firewall, the program will face another firewall — a pop-up window will appear in each province. Provinces can accept the intrusion by agreeing to jointly pass legislation to meet the Kyoto commitments. Or provinces can decide that the Kyoto program will result in a less than optimal operation of a province (or even a crash) and thereby refuse to allow it entry. Again, this is as it should be since the Canadian Constitution is configured to give provinces and the federal government joint jurisdiction over environmental policy. 

Policy firewalls, like their computer counterparts, will not prevent any and all action on the part of Ottawa if properly (and constitutionally) configured. In the area of interprovincial trade, for example, the constitutional configuration allows Ottawa to freely intrude — the Constitution prohibits barriers to the free flow of goods, services and people across the country. That Ottawa has been reluctant to eliminate attempts to hamper such flows is not an argument against firewalls, but rather reflects a lack of will to work with the current constitutional configuration. 

Good policy in a federation like Canada depends on good firewalls. Constitutionally configured firewalls can promote useful interaction between levels of government and the outside world while at the same time providing a useful tool for managing unwarranted or potentially damaging intrusions into domestic or provincial policies. As the recent developments in health-care and Kyoto files illustrate, well-designed policy depends on well-designed firewalls not only between the provinces and Ottawa, but also between Ottawa and the world wide web of governments and other transnational institutions. 

Idnumber: 200205030209 Edition: National Story Type: Opinion Note: Ken Boessenkool is president of Sidicus Consulting Ltd., and   an Adjunct Research Fellow at the C.D. Howe Institute. Length: 837 words Keywords: FEDERAL PROVINCIAL RELATIONS; HEALTH CARE; GLOBAL WARMING;   TREATIES; ARBITRATION; DISPUTES; CANADA 

 No two professors created equal Calgary Herald Sunday, April 7, 2002 Page: A13 Section: Comment Byline: Ken Boessenkool Source: For The Calgary Herald 

An outbreak of junior high Marxism at the University of Calgary’s faculty association may put the future of the U of C, and its substantial contribution to the City of Calgary, at risk. 

In a recent newsletter, the association says that the practice of paying market supplements to some professors (and by implication, not others) is “evil.” It wants the practice eliminated with any money saved redistributed equally among all professors. 

The trouble is, calling market supplements evil is really no different than calling gravity evil because I fall and skin my knee. For the faculty association can no more suspend the laws of supply and demand in the ivory tower than I can suspend the laws of gravity on my driveway. 

The demand for university professors is driven principally by two things. First, there is the demand for a particular skill outside of the academic environment. 

This works two ways. Most obviously, this affects disciplines where there is a large market for potential professors outside of the university — things like business professors, applied scientists, engineers, and perhaps economists. In these disciplines, the universities must, in order to attract top-notch talent, recognize the wider job market in setting salaries for their professors. 

As a result, salaries in universities should not be on the one-size-fits-all model proposed by the U of C faculty association. If Calgary wants to continue to home-grow top business, scientific, engineering and economic graduates, then these disciplines need access to market supplements to keep these professors from finding work outside of university (or inside another university that will pay them what they are worth). 

The second way in which the external demand for a particular skill manifests itself is with respect to the local market for a particular university. For example, Calgary, as a world-class centre for the natural resource industry, has a special need for geologists. 

It makes a tremendous amount of sense, therefore, for the U of C to try and attract top-notch academic geologists to teach and do research here. 

The average quality of our geology department should be greater than in a comparable university without a similar local need. 

This means there is a good reason for the U of C to pay above average salaries to attract top-notch geologists — not just for the benefit of the U of C, but in the interests of the wider community. 

The same might be said for political scientists and public policy economists — few cities can match Calgary’s claim of having spawned, and provided the intellectual heft, for a political movement that was the Reform party and is now the Canadian Alliance. If we want to retain that advantage then we may need to provide pay packets in political science and the public policy side of economics that are in excess of the average paid in other disciplines. 

The second thing that drives the demand for university professors is the internal ivory tower market for professors. 

If, for some reason, there is suddenly a sharp shortage of philosophy professors (perhaps because a bunch of them decide, at the same time, to become the head of their faculty association), then there will be a sudden, perhaps temporary, shortage of philosophy professors. As a result, there may be a need to temporarily pay higher salaries to professors of philosophy in order to ride out this temporary shortage. 

A market supplement program is the perfect tool to react to these types of unforeseen circumstances. 

In arguing that all professors should have the same basic pay structure the association is denying not just the reality within the ivory tower, but the importance of a university to those with their feet closer to the ground. 

Further, allowing the market supplement argument to take place merely between the philosophy department (I think, therefore I should earn the same as you) and the economics department (my marginal product of labour is bigger than your marginal product of labour) within the University of Calgary would be a grave mistake. 

Calgary is a world-class city — its quality of life, its business atmosphere, its cultural community — that needs a world-class university. 

If the faculty association gets its way, Calgary will not only lose a couple of slightly better- paid academics, it will lose a key ingredient that is critical in making Calgary a world-class city. 

If the University of Calgary loses the ability to attract top geologists, top business professors and top political scientists, then it fails to reflect the needs of the community in which it finds itself. And if the people of Calgary — its resource sector, its business community and its political class — fail to register their objections to the proposed elimination of market supplements on which the university relies to best reflect the community in which it operates, then it will have skinned its collective knee. 

Idnumber: 200204070085 Edition: Final Story Type: Opinion Note: Ken Boessenkool is an economic and public policy consultant   who has studied business, philosophy and economics. He is also a   sessional lecturer at the U of C. Length: 810 words Keywords: EDUCATION; UNIVERSITIES; TEACHERS; WAGES & SALARIES; CALGARY Company: UNIVERSITY OF CALGARY Illustration Type: Graphic, Diagram Illustration: Graphic: (See Hardcopy for Illustration) 

 Alberta leaves parents out of school equation: The people who pay for schools actually want to put their money into something that works. Ken Boessenkool explains. Calgary Herald Thursday, March 7, 2002 Page: A15 Section: Comment Byline: Ken Boessenkool Source: For The Calgary Herald 

“Research proves the most effective way to improve student learning is to ensure parents are actively involved in their children’s education.” — Former Alberta Teachers’ Association president, 

Bauni Mackay 

Given the critical importance of parental involvement, you would think that parents would hold considerable influence over the public education system in Alberta. Unfortunately, just the opposite is true. 

The recent meeting between Premier Ralph Klein and Alberta Teachers’ Association President Larry Booi illustrates that in Alberta, the nexus of power in public education lies between the provincial government and the teachers’ union, to the detriment of local school boards, principals and, especially, parents. 

Education is not immune to the golden rule — he who controls the gold, rules. In this case, the provincial government ultimately is responsible for funding education and the teachers, though their salaries, receive a lion’s share of that funding. In addition to being the recipient of much of the gold, the ATA’s power is bolstered by the fact that it also controls the certification of teachers — you must be a member of the ATA in order to teach in a public or separate school. This gives the ATA overwhelming power over the direction of education — from teacher training, to deciding what qualifications must be held in order to teach in Alberta. 

Local school boards, in contrast, have little control over education because they have lost control over the gold. Even though they formally are responsible for bargaining with the teachers and overseeing local schools, the fact that they do not raise their own revenues to pay for education — as they did when they set local education property tax rates — means that their influence is superceded too easily by a provincial government that has all the golden eggs in its basket. 

And because principals are required to be members of the ATA, they cannot be an effective counterweight for parents when that conflicts with the goals of the union. 

Lost entirely in the power nexus between the government and the ATA are the parents. Sure, there may be local parent advisory boards and parent councils, but, in practice, because parents do not control the gold, they have little influence over the rules. 

The golden rule in private and home schooling works in complete reverse. While the provincial government does provide partial funding for both, a significant share of funding for these forms of education comes from parents. 

In contrast with public education, the golden rule in private and home schools means that parents rule. In private schools, it is most often the principal, in concert with parent-driven school boards (or the parents themselves, in the case of home schooling) that determine the composition of the teaching staff, the curriculum and the overall tenor of the school. In other words, the power ranking is parent, principal, school board, teachers and, finally, the province. 

And, as you would expect, given the opening quote, private and home schools perform much better than public or separate schools, even when you adjust for socio-economic factors such as education of parents and income. 

There are ways to increase parents’ (and principals’ and local school boards’) influence over public education, but many of them are problematic. 

We could return taxing authority, for example, to local school boards. This would align much better the gold between parents (who would pay local taxes) and the school. The trouble is, there is a great variation in the ability of different regions to raise property taxes, resulting in great inequities in per-pupil funding across the province. 

We also might consider giving the ultimate power to hire and fire school teachers to the principals, and perhaps even require a parent-board to hire the principal — moves that would require principals to be outside of the ATA. But the ATA has been very effective at preventing principals from exiting the union, despite repeated attempts over the past decade. 

A third possibility would be to remove the responsibility of the ATA to certify all teachers, giving schools a choice over whether they hire ATA-certified teachers or not. But, again, the golden rule gives teachers enough power in the current system to effectively prevent this change — their withholding of services would weaken the resolve of any government bold enough to try. 

But, Alberta, because it already funds choices in education such as charter, private and home schools, is well suited to give power to parents by changing who holds the gold. 

Putting gold in the hands of parents, yet retaining a universal education system, could be done by moving to a system of education vouchers. The system would work as follows. Each parent with a school-age child would receive a voucher from the province. That voucher could be used by the parent in any school of their choice, and an equal per-pupil grant would go to that school. A voucher-based system would, therefore, radically increase the importance of parents within our education system, by moving the golden eggs from the province to parents. 

Power and control over public education in Alberta is exactly backwards, relegating parents to a minor, if not irrelevant role, and giving most of the power to the government and the teachers union. A voucher system would return to parents the power they deserve over the education of their children. And, that, as the opening quote from the ATA suggests, would be good for everybody. 

Ken Boessenkool is the president of Sidicus Consulting Ltd., a Calgary-based economic and public policy consulting firm and an Adjunct Research Fellow at the CD Howe Institute. 

Idnumber: 200203070163 Edition: Final Story Type: Opinion Length: 928 words Keywords: EDUCATION; TEACHERS; LABOUR UNIONS; GOVERNMENT POLICY;   ALBERTA; PARENTS Illustration Type: Graphic, Diagram Illustration: Graphic: (See Hardcopy for Illustration) 

 The sixth commandment: the provinces are taking back control of Medicare, and it’s high time Time (Canadian Edition) F 4’02 Page: 37 Byline: Ken Boessenkool Source: The Canadian Index (Magazines) Volume: VOL. 159, NO. 5 

 

Idnumber: 200202040607 Subject: Canada — Federal-provincial relations; Medical care — Laws   and regulations Version: CBCA: Fulltext Reference; CBCA: Index 

 Game theory and military preparedness National Post Wednesday, December 19, 2001 Page: A17 Section: Editorials Byline: James B. Davies and Ken Boessenkool Source: National Post 

Those who have ever said to their boss, “If you do that, I’ll quit,” or to their kid “If you do that, you can’t watch TV for a week,” and then backed down when the transgression occurred, will quickly learn the importance of making credible threats. They will also learn that it is especially effective if you can commit to your threatened behaviour in advance. Learning these lessons puts you well on your way to becoming a game theorist. 

Game theory is a seemingly arcane and complex branch of mathematics and economics that has, at its core, a solid body of common sense. Canada lays claim to impressive game theorists, occupying positions in our top universities and those of the United States. But we also lay claim to a distinguished group of game players in Ottawa — our federal Liberals. 

The Liberals have unique opportunities to hone their game theory skills. As a party that expects to be perpetually in power, they can afford to think ahead not just to the next election, but to the long future over which they expect to reign. Seeing the recent budget as one of these unique opportunities can help explain its otherwise inexplicable character. 

In the months since the horrific events of Sept. 11, Canada has joined the United States, Britain and others in an ambitious and apparently successful attempt to root out the terrorists from their home in Afghanistan. While Canadian servicemen and women have contributed to this effort with distinction, our overall military contribution has been small. This has been the inevitable result of the size and limitations of our armed forces, limitations stemming from a long series of budget cuts for the armed forces. 

These cuts have resulted in lousy salaries for military personnel; helicopters that aren’t airworthy; transport aircraft that cannot be relied on to make it to the battle zone; and only a few thousand battle-ready soldiers who actually carry guns. 

The dismal state of funding of our armed forces was in part the result of the need to trim expenditures in the battle against deficits and debt. The United States under Bill Clinton also substantially reduced expenditures on the military in an effort to get their deficit under control. 

In these extraordinary times, however, Ottawa has decided it is necessary to deviate sharply from the course it has charted since 1995 and had reinforced just months ago, when the Finance Minister said that massive new spending would “risk the country’s hard-won victory over deficit financing.” Ottawa charted a new course with a budget that proposes to increase spending by nearly 10% next year, the largest increase in decades. Sept. 11 and its economic aftermath, Mr. Martin now says, make necessary a dramatic about-turn in spending plans. 

With such a significant increase in spending, you might expect big dollars for the armed forces to fill the gaps and correct past deficiencies, to say nothing of increasing the size and capacity of our forces. But the budget provides nothing like that. The armed forces are getting only $300-million over and above the direct expenditures incurred to allow them to take part in the war in Afghanistan. This amount represents only 2% of the increased spending promised in the budget, and a fraction of one per cent of total federal program spending. 

While inexplicable on its face, game theory can provide an explanation for this pitiful increase. 

Suppose (economists’ favourite word after “other” and “hand”) you are the leader of a perpetual party in power in Ottawa. You expect the United States to become engaged in future conflicts, wars and military adventures ranging from small to large. And you realistically expect that either the United States will apply pressure for Canadians to assist in these efforts or Canadians themselves will spontaneously choose to do so. 

But suppose, and here’s the kicker, that you are not all that interested in participating in these future efforts. You would prefer to commit yourself to not participating. 

Game theory would direct you to resolve this dilemma by limiting the resources allocated to the armed forces. You reduce manpower, expenditures, quality and quantity of equipment as much as the electorate will stand for. When Uncle Sam comes asking for help you can say, “Yes, we’ll give you as much help as we possibly can, keeping in mind our other commitments. We’re sorry we can’t provide more help, but you see, our armed forces are rather small.” 

By starving the armed forces, the Liberals can commit to withhold significant future military assistance. The implicit threat is credible and, from a game theory point of view, effective. 

That should not be a surprise. If the perpetual party in power in Ottawa decides in advance that it doesn’t really want to help out much on these occasions, not funding the military is just common sense. 

Idnumber: 200112190137 Edition: National Story Type: Opinion Note: James B. Davies is a professor of economics at the   University of Western Ontario. Ken Boessenkool is president of   Sidicus Consulting Ltd. and an Adjunct Research Fellow at the C.D.   Howe Institute. Length: 806 words Keywords: POLITICS; GOVERNMENT; ARMED FORCES; BUDGETS; GOVERNMENT   SPENDING; CANADA 

 Ottawa must get off the health care pulpit National Post Saturday, November 17, 2001 Page: A13 Section: Editorials Byline: Ken Boessenkool Source: National Post 

In the mid-1990s, National Post’s prolific columnist William Watson wrote he would miss deficits when they were gone. It was a way of pointing out that stultifying inertia would replace the refreshing force of reform once Canadian governments got their fiscal houses in order. 

And nowhere is inertia more stultifying than in health care. For the past few years, the drive has been to find more money to push into the health care envelope. That money was not directed toward improving health care delivery or toward reforming our single-payer system. Instead, cash infusions drove up health care inflation via increases in wages to health care providers. Four-fifths of a 14% increase in funding for the regional health authority in Calgary, for example, is going to increased wages and salaries following an obscene 22% province-wide wage increase for nurses. 

With the prospect of deficits, the force of reform is returning. The first order of business will be to establish who will drive the debate — Ottawa or the provinces. 

During the last bout with deficits, Ottawa accelerated its three-decades long retreat from the health care field when the 1995 budget proposed to reduce cash contributions to health by 40%. This made sense at just about every level, for there is no real reason for Ottawa to be involved in the evolution of health care in Canada. 

The provinces, not Ottawa, administer health care programs. Ottawa, generally, does not run hospitals, pay nurses or bargain with doctors. It does not design payment mechanisms or decide which services should be funded. All it has is a bully pulpit based on the Canada Health Act and the stick of financial penalties under cash transfers to the provinces. 

Ottawa makes political use of its pulpit and penalties, which results in confusion about which government is responsible for health care. This confusion is not costless: It allows the provinces to shift the blame to Ottawa when it makes mistakes, and allows Ottawa to claim credit for reforms it had nothing to do with. Ottawa’s cash transfers also mean provinces do not have to bear the full tax cost of health care spending — particularly in recent years, as the provinces have allowed (nay, begged) the feds to play a bigger financing role. 

From an economic point of view, there are no interprovincial issues that warrant national oversight. User fees in Alberta will not affect the health of people in Saskatchewan. Agreements between provinces already address the issue of border crossers — a person carrying an Alberta Health Care card into a Saskatchewan hospital will trigger payments between the two governments. 

There are real advantages to allowing provinces to design health care systems that differ across provincial boundaries. Just as competition in the private markets results in greater innovation, so does competition between provinces allow for experimentation and a better alignment of health care to the desires of electorates. 

Contrary to Canadian health care mythology, there is no single Canadian health care system. Services covered in some provinces are subject to user fees in others (abortions, for example). Some Canadians pay health care premiums, while others do not. Private hospitals have been allowed to operate in some provinces (Ontario, B.C.), but not in others. 

Only Ottawa’s pulpit and penalties stand in the way of new experiments. If the people of Ontario wish to allow higher income individuals to take the strain off the system by purchasing health care without travelling to the United States, they should be allowed to do so. If Alberta wishes to implement co-payments for certain services through a medical savings account funded by health care premiums, it should do so. If the people of Saskatchewan wish to have every possible service, including home care and pharmaceuticals, paid for by the government and are willing to pay the required taxes, they should do so. 

The remaining provinces could then observe these experiments and decide which model they like. 

This experimentation will take boldness on the part of provincial governments. To win the health care debate, they might consider paying up-front penalties to Ottawa for reforms outside the health act. Those penalties should reflect the relative size of Ottawa’s contribution to health — so if a province charges $100-million in user fees, it would pre-pay a $13-million penalty to reflect the fact Ottawa’s contribution is 13% of the cost of provincial health care. 

In the longer term, provinces should rally around the idea that Ottawa should replace its distorting cash transfers with additional tax room for the provinces to fund health. This tax room will enter the equalization formula, so all provinces would get similar amounts to fund health care demands. The provinces might even consider allowing Ottawa to keep some of this additional money as a contribution toward national security. 

Canada’s last bout with deficits produced some refreshing health care reforms: Ottawa reduced its role, most provinces restructured or regionalized their delivery systems; and a debate over the sustainability of our single-payer system began. The reform initiative receded when money became plentiful. The sense of reform is now returning, mainly because governments are facing the prospects of fiscal deficits. 

These deficits are, therefore, welcome, but only in a Watsonian kind of way. 

Idnumber: 200111170171 Edition: National Story Type: Opinion Note: Ken Boessenkool is president of Sidicus Consulting Ltd., a   Calgary based economic and public policy consulting firm, and an   Adjunct Research Fellow at the C.D. Howe Institute. Length: 867 words Keywords: FEDERAL PROVINCIAL RELATIONS; HEALTH CARE; GOVERNMENT   SPENDING; RESTRUCTURING; MANAGEMENT; CANADA 

 Security is Ottawa’s Job 1 National Post Thursday, October 18, 2001 Page: A17 Section: Editorials Byline: Ken Boessenkool Source: National Post 

Ottawa has been widely criticized for a sluggish response to the events of Sept. 11. While the recent bill on terrorism sparked positive reviews, the rush and admitted lack of preparedness surrounding it is worrying. Many reasons can be cited for this sluggishness, but key among them is that for too long Ottawa has neglected the core functions of what a national government ought to do. 

Before Sept. 11, the most important cabinet posts in Ottawa were thought to be Finance, Health, Industry and Human Resources Development and, perhaps, Foreign Affairs. This is where the major contenders for leadership of the Liberal party were found, though Foreign Affairs has in the past been viewed as a political capstone rather than a stepping stone. 

After Sept. 11, the ranking shifted — Health, Industry and Human Resources were bumped by Defence, Justice, Solicitor General and Immigration. The spotlight on these core national functions reveals that they have been suffering what might at best be called benign neglect. 

It is no secret Canada long has been a target and a base for actual and suspected terrorists. CSIS briefings have become ever more clear, and specific, on the risks Canada faces — 350 individuals and 50 organizations have been on their target list. If these warnings are not enough, as early as 1999 the infamous Ahmed Ressam case laid bare Canada’s national security vulnerabilities. And benign neglect is too friendly a term to describe the treatment of our military over the past few decades. 

This lack of focus is analogous to the situation large, private-sector firms find themselves in when they stray outside their core competencies to get in on the next big thing. When senior management’s attention is diverted, too often core competencies — often the source of revenue needed to pursue the next big thing — suffer a similar neglect, and profits suffer. 

Such firms can return to profitability by using a number of different strategies. One is to split the company into core units, each with its own autonomous management team, as Canadian Pacific has recently done. Other firms opt for a higher risk strategy of shifting their core competency to the new product or service line. A third, and more common strategy is to return to basics. Moore Corp. is a recent example of a company returning to its core competencies. 

Ottawa could pursue a version of the first strategy by shuffling its key cabinet ministers into its core areas. Defence would be a stepping stone portfolio like health, rather than the tombstone portfolio it has unfortunately become. Having a key minister at the helm matters, as the current Minister of Foreign Affairs has demonstrated in recent weeks. But the federal government is ultimately ruled by a single Prime Minister from a single party. It is easy to envision Ottawa straying, as it has in the past, in the face of political or public pressure. Benign neglect of national security is too easy when Canadians have health care on their minds. 

Shifting entirely out of national security is not tenable, as there is no replacement for our federal government in these matters, and relying more than we already do on the United States would compromise our identity as a nation. 

Ottawa should therefore go back to basics. This means scaling down or eliminating its presence in non-core areas. The easiest big-ticket areas would include health care, post-secondary education, welfare and labour market programs — all provincial areas of responsibility where provinces do most of the heavy lifting. Other possibilities are unemployment insurance and the child tax benefit. 

On health, post-secondary education and welfare, Ottawa should eliminate transfers to the provinces, and allow provinces to raise their own taxes to fund these programs. Equalization would ensure adequate revenue for all provinces. Ottawa should also fulfill the obligation it made in 1995 to get out of labour market programs — including the 40% of unemployment insurance spending that is not insurance against unemployment. Devolving unemployment insurance and the child tax benefit programs to the provinces would require a bit more spadework. Giving unemployment insurance to the provinces might require a constitutional amendment. But devolution of the program holds out the potential of removing its regional inequities — and unemployment insurance cash flows have provided an excuse to Ottawa to worsen these inequities. Provincializing the program would also allow provinces to better align their unemployment insurance and labour market programs. As for the child tax benefit, it is better thought of as Ottawa’s contribution to provincial welfare schemes — with the attendant overlap. Besides, many provinces have their own child tax credits. Provincial child benefits that are integrated with provincial welfare programs makes sense. 

A back-to-basics approach would give national security the attention it deserves — both at this time of heightened concern, and in the future. If Finance, Foreign Affairs, Defence, Justice, Solicitor General and Immigration had been properly treated as the core competencies of our federal government before Sept. 11, it is hard to imagine our response would have been so sluggish. After all, there would probably have been leadership ambitions on the line. 

Idnumber: 200110180121 Edition: National Story Type: News; Crime; Opinion Note: Ken Boessenkool is a Calgary economist and an Adjunct   Research Fellow at the CD Howe Institute. Length: 852 words Keywords: GOVERNMENT; TERRORISM; SECURITY; LAWS AND REGULATIONS;   GOVERNMENT SPENDING; CANADA 

 Beware of Grits bearing gifts Calgary Herald Friday, August 24, 2001 Page: A25 Section: Comment Byline: Ken Boessenkool Source: For The Calgary Herald 

Albertans are currently witnessing the spectacle of federal cabinet ministers liberally sprinkling dollars across our province. And while the attention may be welcome, the unfortunate reality is that each new dollar Ottawa doles out costs Albertans at least 35 cents. 

If Ottawa wanted to spend a new dollar on each and every Canadian, by, say, increasing transfers to the provinces for health care, it needs first to raise the revenues (something politicians like to forget). And it is in the raising of the revenues that Alberta gets the short end of the stick. 

If Ottawa raised personal income taxes to get the money for this new transfer, the C.D. Howe Institute calculates it would do so by raising about $1.35 in Alberta and Ontario, just over a buck in British Columbia, and only 67 cents from residents in all other provinces. 

This is because personal incomes in Alberta and Ontario are much higher than in all other provinces, so any personal income tax rate levied across Canada brings in more revenues from these provinces. 

So, even if Ottawa sends an equal per capita cash transfer to each Canadian, this transfer would actually cost Albertans and Ontarians (and to a lesser extent British Columbians) more than it would bring in. This math makes plain the peculiarity of Mike Harris’s recent campaign to get more federal dollars for health. Each additional health dollar Harris asks for would cost Ontario residents 35 cents. Ditto for Alberta. 

And that’s the best-case scenario. It gets worse when the largesse spread around by Ottawa is not spent equally among provinces. Which takes me back to the current Liberal dusting of Alberta with cash. 

Many of the projects in the recent announcement-per-day-blitz are the kind of programs where Alberta rarely sees its share — things like research dollars, job training assistance and federal infrastructure dollars. 

For example, when it comes to training programs offered under the Employment Insurance program, Alberta sees only 66 cents on the dollar. 

The result is that, while on the revenue side Alberta is giving Ottawa $1.35 and the poorer provinces are giving 67 cents, on the spending side, Alberta is all too often getting the 67 cents and the poorer provinces the $1.35. 

This works out to a net loss of 68 cents because we get only half of what we are paying. This makes little sense in a country that has a program that explicitly redistributes money across provinces — the federal equalization program. 

Equalization calculates the ability of all provinces to raise revenues, and Ottawa shuffles money around to bring the poorer provinces up to a representative average. 

Ottawa’s goal in spreading cash around Alberta might therefore be read not as a vote-getting exercise, as some have said, but as an attempt to justify continued extravagance elsewhere. How then, should Alberta respond to this gift that keeps on taking? 

Alberta should, as it does, acknowledge the importance of providing all provinces with an equitable base from which to fund their programs. But beyond this, it should demand that federal expenditures outside of equalization treat all Canadians equally. 

Much better would be a polite refusal to take the money in the first place — with the caveat that we would gladly exchange less federal spending in return for more tax cuts. That way we can keep the money and manage programs such as training, infrastructure and health, closer to home. And, this would not rob poorer provinces, as equalization would continue to provide them with an equitable revenue stream. 

By making these tax and spending decisions in provincial capitals rather than in Ottawa, the programs are much more likely to be tailored to the needs of our diverse provincial economies and the desires of the provincial populations. 

This is not just true for the three “have” provinces of Alberta, Ontario and British Columbia — after all, is it really believable that Ottawa has done a better job managing the fisheries than the Atlantic provinces could have done? 

Best of all, when the Alberta government spends a dollar, it only costs Albertans one dollar. 

Ken Boessenkool is a Calgary economist and Adjunct Research Fellow at the C.D. Howe Institute. 

Idnumber: 200108240123 Edition: Final Story Type: Business; Opinion Length: 697 words Keywords: FEDERAL PROVINCIAL RELATIONS; CANADA; ALBERTA; FINANCES,   GOVERNMENTAL 

 The case for overhauling equalization payments The Telegram (St. John’s) Monday, August 13, 2001 Page: A6 Section: Editorial Byline: Ken Boessenkool and Brian Lee Crowley Source: Special to The Telegram 

The current debate on Ottawa’s equalization payments to economically disadvantaged provinces is not primarily, as Intergovernmental Affairs Minister Stephane Dion asserted in the Globe and Mail a few days ago, about special treatment or about disincentives that the program creates for recipient provinces — as worthy as these topics are for discussion. The real debate is about the proper role of nonrenewable resources within the equalization program. 

Resource revenues have been a constant trouble spot for equalization. When equalization was created in 1956, the formula excluded resource revenues. Half of resource revenues were added in 1962, and for the next 20 years Ottawa fiddled with the treatment of resource revenues eight times. 

In 1982, Ottawa moved to a five-province standard, excluding Alberta, and hence its resource revenues, from the calculation of payments to recipient provinces. More recently, Ottawa has further tinkered with the resource formula to try to reduce its disincentive effects on the provinces. Finally, as Dion’s piece stated, Ottawa has created a number of cash transfers into the Atlantic region (Hibernia, various development funds) to offset the impact of falling equalization payments as resource royalties grew. 

There is a good explanation as to why resource revenues have never quite fit properly within the equalization formula — nonrenewable resource royalties are of a fundamentally different nature from other types of revenues. 

An accounting illustration provides the backdrop. The revenue from bread that Bill the baker sells is income — it affects the profits and losses of the bakery. 

However, if Bill sells one of his ovens, the money from that sale does not enter the income statement. This sale is a balance sheet transaction. (This is a simplification: interest on the cash from the sale may later enter the income statement, replacing the depreciation that existed before.) 

Taxes on personal and corporate income, as well as sales, are like revenue from the sale of bread. They are properly considered income for the purposes of providing public services. 

Nonrenewable resource royalties are quite different. According to the Canadian Constitution, the provinces own these resources. (While offshore resources legally belong to the federal government, Ottawa has granted de facto ownership to Nova Scotia and Newfoundland by allowing them to collect all the royalties.) 

When these resources are sold and a royalty is levied on that sale, all that changes is that the province now has a cash asset instead of an asset in the ground. 

The trouble is, equalization does not make the distinction between income and the proceeds from the sale of a capital asset. It treats royalty revenues the same as it treats personal, corporate and sales taxes. Equalization payments fall in response to changes in royalties even though all the province has done is convert a physical asset into a financial asset. 

The flip side to this argument is that it matters what Nova Scotia or Newfoundland does with the proceeds from the sale of the capital asset. For if royalties represent the conversion of an asset in one form to another, the resulting cash should not be used to pay for current program spending (just as it would be unwise for Bill the baker to spend the proceeds of the sale of his oven on paying wages for his staff). In the case of the Atlantic provinces, this cash should be used to either reduce debt, or invest in long-term infrastructure. 

Which is arguably what Alberta did with its royalties in the 70s and 80s when it diverted some of this money into the Alberta Heritage Savings Trust fund. Today, Alberta is using resource revenues to pay down its debts and increase infrastructure spending to accommodate the rapid financial and physical net immigration to Alberta. 

It is our view that voters in Atlantic Canada should decide on the proper use of the proceeds from the sale of their capital assets, and that these assets should not be seized via the equalization back door by Ottawa. The critical point is that the sale of the asset itself should not affect the income statement — or fiscal capacity in the terminology of equalization buffs — of the provinces. 

The elimination of nonrenewable resources from equalization will mean provinces can use these financial assets to improve the economic outlook of the provinces — which in turn will reduce their reliance on equalization as Ottawa reduces payments in response to the resulting growth in personal, corporate and sales tax revenues. This is precisely how once-poor Alberta escaped an earlier variant of equalization. 

By removing nonrenewable resources from equalization, Ottawa has a chance to get out of the way and let Nova Scotia and Newfoundland make a success of their own natural economic strengths. This would be both a more equitable, as well as a more economically defensible, position. It would meet Dion’s goals of ending special treatment, making the program more equitable, and it would also improve economic incentives — a public policy hat-trick all too rare in the arcane world of equalization. 

Idnumber: 200108130047 Edition: Final Story Type: Opinion Note: Ken Boessenkool is the Calgary-based author of Taking off   the Shackles: Equalization and the Development of Natural Resources   in Atlantic Canada, published last month by the Atlantic Institute   for Market Studies (AIMS). He was recently named an adjunct research   fellow of the C.D. Howe Institute. Brian Lee Crowley is the   president of AIMS. Length: 832 words 

 On health, provinces should go it alone National Post Monday, July 30, 2001 Page: A15 Section: Editorials Byline: Ken Boessenkool Source: National Post 

The story of a repeatedly jilted lover who, with vain hope, returns again and again to his partner is tragically familiar. Just as familiar as, say, provincial governments asking Ottawa for additional dollars for health care. 

In the beginning of the storied relationship on health funding between the federal government and the provinces, the provinces vowed to provide universal public health and Ottawa vowed to fund half the cost. Ottawa’s funding took various forms, from cash transfers to lowering federal taxes so provinces would have more “tax room” to fund health care (a transfer of “tax points” to the pointy-headed crowd). 

The early signals of Ottawa’s unfaithfulness were innocent enough — it changed the calculation of cash transfers by including provincial revenues that were the result of the tax point transfer. But the sideways glances soon became more overt. Having promised this tax room to the provinces, Ottawa proceeded to take it back with a series of tax increases. Ottawa’s cash contribution therefore declined in line with provincial growth while at the same time its total tax take was higher than it was prior to the transfer of tax points. 

Ottawa’s successful flirtations lead to an increased boldness. It reneged on the vow to cover half of health spending, but still used growing tax points to offset the cash payable to make up the smaller total. By the time the Chretien Liberals took office, the combination of caps, and continuing to count the tax points as part of their contribution, drove Ottawa’s cash contribution down to 17% of health care spending. 

Ottawa stopped using tricks to sidestep its vow with the 1995 budget announcement that total transfers for health, education and welfare would drop from $18.3-billion to $11-billion over the next few years. At this point, any self-respecting counsellor would have advised the provinces to cut their losses, and stop pretending that Ottawa should have a meaningful role in the funding of health. Better, the counsellor would have suggested, that provinces strike out on their own and think of other creative ways of funding health care. 

But no, like the jilted lover, the provinces began an annual pilgrimage to try and patch things up. Ottawa occasionally relented, but not without further reducing the self-respect of the provinces from time to time. Ottawa’s most offensive move came in 1998 when it gave up a few extra dollars for health in return for nine signatures on the Social Union Accord, an accord that allowed Ottawa much freer rein to intervene in other areas of provincial jurisdiction. Only Quebec reversed the humiliation — it refused to sign the Social Union Accord, but still took the money. 

Quebec is also one of only two provinces (Alberta is more quietly the other) that occasionally proposes a clear path back to self-respect — a greater degree of separation between Ottawa and the provinces on health care. And what better way to facilitate this separation than to ask Ottawa to provide additional tax room to the provinces to fund their own health care needs. Getting there needn’t require a full blown, 10-signature national accord. 

All the provinces need to do is change their request from $7-billion dollars in additional federal cash transfers to $7-billion in new federal tax cuts. For if Ottawa cut its taxes by $7-billion, provinces could then use this additional room (admittedly by raising their tax rates) to fund health care while keeping the tax burden on Canadians constant. 

This proposal has two other side benefits. First, Canada’s poor provinces would have access to just as much tax room as the rich provinces, because the equalization formula would include the additional tax room provinces used to fund health care. 

But even more important, this new revenue would grow as part of the provincial revenue stream. As economies expanded, the $7-billion would grow as well (again, equalization would spread this wealth around). No such mechanism currently exists with respect to federal cash transfers for health, never mind that any such mechanism would be subject to change at Ottawa’s whim. 

It’s high time the provinces chose the path to greater self-respect by starting the process of separation. And for those who think the provinces are unequal to the task, it is worth remembering that they have been single in the past — health care, after all, came of age in the province of Saskatchewan. 

Idnumber: 200107300135 Edition: National Story Type: Opinion Note: Ken Boessenkool is a Calgary economist and an adjunct   research fellow at the C.D. Howe Institute. Length: 728 words Keywords: HEALTH CARE; MEDICARE; GOVERNMENT FUNDING; FEDERAL PROVINCIAL   RELATIONS; TAX REFORM; CANADA 

 Ottawa scheme confiscates East Coast’s chance for a real future Calgary Herald Wednesday, July 25, 2001 Page: A11 Section: Comment Byline: Ken Boessenkool and Brian Lee Crowley Source: For the Calgary Herald 

The debate over Ottawa’s equalization payments to economically disadvantaged provinces is not primarily about special treatment or about disincentives the program creates for recipient provinces. 

The real debate is about the proper role of nonrenewable resources within the equalization program. 

Resource revenues have been a constant trouble spot for equalization. When the equalization system was created in 1956, the formula, which sees richer provinces help poorer ones, excluded resource revenues. Half of resource revenues were added in 1962, and for the next 20 years Ottawa fiddled with the treatment of resource revenues eight times. 

In 1982, Ottawa moved to a five-province standard, excluding Alberta, and hence its huge resource revenues, from the calculation of payments to recipient provinces. More recently, Ottawa has further tinkered with the resource formula to try to reduce its disincentive effects on the provinces. And, the federal government has created a number of cash transfers into the Atlantic region (Hibernia, various development funds) to offset the impact of falling equalization payments as resource royalties grow. 

There is a good explanation as to why resource revenues have never quite fit properly within the equalization formula. Nonrenewable resource royalties are of a fundamentally different nature from other types of revenues. 

An accounting illustration provides the backdrop: 

Revenue from bread that Bill the Baker sells is income — it affects the profits and losses of the bakery. However, if Bill sells one of his ovens, the money from that sale does not enter the income statement. This sale is a balance sheet transaction. (This is a simplification: Interest on the cash from the sale may later enter the income statement, replacing the depreciation that existed before.) 

Taxes on personal and corporate income as well as sales are like revenue from the sale of bread. They are properly considered income for the purposes of providing public services. 

Nonrenewable resource royalties are quite different. According to the Canadian Constitution, the provinces own these resources. (While offshore resources legally belong to the federal government, Ottawa has granted de facto ownership to Nova Scotia and Newfoundland by allowing them to collect all the royalties.) When these resources are sold and a royalty is levied on that sale, all that changes is that the province now has a cash asset instead of an asset in the ground. 

The trouble is, equalization does not make the distinction between income and the proceeds from the sale of a capital asset. It treats royalty revenues the same as it treats personal, corporate and sales taxes. 

Equalization payments fall in response to changes in royalties even though all the province has done is convert a physical asset into a financial asset. 

The flip side to this argument is that it matters what Nova Scotia or Newfoundland does with the proceeds from the sale of the capital asset. For if royalties represent the conversion of an asset in one form to another, the resulting cash should not be used to pay for current program spending (just as it would be unwise for Bill the Baker to spend the proceeds of the sale of his oven on paying wages for his staff). In the case of the Atlantic provinces, this cash should be used to either reduce debt, or invest in long-term infrastructure. 

This is arguably what Alberta did with its royalties in the 1970s and ’80s when it diverted some of this money into the Alberta Heritage Savings Trust fund. Today, Alberta is using resource revenues to pay down its debts and increase infrastructure spending to accommodate the rapid financial and physical net immigration to the province. 

Right now, Nova Scotia receives about $1.4 billion from equalization payments each year and Newfoundland gets about $1.1 billion. These payments are made mostly from Ontario, Alberta and B.C. 

Under the current claw-back scheme, Nova Scotia keeps only 19 per cent of its royalties with 81 per cent going to Ottawa. 

It is our view that voters in Atlantic Canada should decide on the proper use of the proceeds from the sale of their capital assets, and that these assets should not be seized via the equalization back door by Ottawa. The critical point is that the sale of the asset itself should not affect the income statement — or fiscal capacity in the terminology of equalization buffs — of the provinces. 

The elimination of nonrenewable resources from equalization will mean governments can use these financial assets to improve the economic outlook of the provinces — which in turn will reduce their reliance on equalization as Ottawa reduces payments in response to the resulting growth in personal, corporate and sales tax revenues. This is precisely how once-poor Alberta escaped an earlier variant of equalization. 

By removing nonrenewable resources from equalization, Ottawa has a chance to get out of the way and let Nova Scotia and Newfoundland make a success of their own natural economic strengths. 

This would be a more equitable and economically defensible position. It would meet the goals of ending special treatment for some provinces, making the program more equitable, and it would also improve economic incentives — a public policy hat-trick all too rare in the arcane world of equalization. 

Ken Boessenkool is the Calgary-based author of Taking off the Shackles: Equalization and the 

Development of Natural Resources in Atlantic Canada, published by the Atlantic Institute for Market Studies (AIMS). 

He was recently named an Adjunct . Research Fellow of the C.D. Howe Institute. Brian Lee Crowley is president of AIMS. 

Idnumber: 200107250077 Edition: Final Story Type: Opinion Length: 912 words Keywords: FEDERAL PROVINCIAL FINANCES; NOVA SCOTIA; ROYALTIES Illustration Type: Cartoon Illustration: Cartoon: (The illustration shows a farmer milking a cow with   a crown entitled, “Nova Scotia.” The farmer is seen milking with one   hand and the other is seen feeding a drink to the cow. His chair is   entitled, “Ottawa.”) 

 Alberta has the tools to strengthen its energy hand Calgary Herald Tuesday, July 17, 2001 Page: A13 Section: Comment Byline: Ken Boessenkool Source: For The Calgary Herald 

While only the truly paranoid would argue there is a risk of a repeat of the disastrous National Energy Program, Albertans are right to be nervous of Ottawa operating solo when it comes to discussing continental energy policy with the U.S. and Mexico. 

And they are nervous. 

In a recent poll for the National Citizens’ Coalition, nearly two-thirds of Albertans said they are not confident Ottawa will protect Alberta’s interest in energy talks. 

This adds democratic wallop to the constitutional case (ownership of natural resources is constitutionally assigned to the provinces) for provinces not only demanding a major role in these discussions, but for Premier Ralph Klein to do all he can to strengthen the resource industry’s access to U.S. markets while ensuring that Ottawa keeps its hands off. 

Of course, Ottawa could not do today what it did two decades ago when the federal government created a devastating recession in Alberta by forcing a “made in Canada” oil price which was well below the international price. 

First, Canada’s international trade agreements would prevent it. 

Second, there is widespread acknowledgment that protection from world prices allowed Canada to avoid the restructuring that took place in other countries, with the result that the economy suffered in the long run. 

Ottawa has, however, other policy levers that can single out the natural resources industry for its version of special treatment. And it has demonstrated a penchant for using them. 

For example, in the last federal budget Ottawa brought the corporate tax rate to 21 per cent for all industries except one — natural resources. Of course, Ottawa is an equal opportunity discriminator — this also affected Ontario’s mining sector, Saskatchewan’s potash firms, B.C.’s forestry companies, Atlantic offshore resource conglomerates as well as Alberta’s resource industries. 

But in relative terms, Alberta is “more equal” than the others given the sheer size of its natural resource industry. 

Another lever is the environment — specifically the Kyoto accord. 

Recently, Canada’s Natural Resources Minister Ralph Goodale wrote on these pages that Ottawa remains “firm” in its commitment to the Kyoto accord — which requires Canada to reduce emissions to six per cent below the 1990 level , despite the rise in emissions since then. 

But meeting Kyoto targets raises significant risks. First, Canadians cannot simply assume these targets can be met without a significant economic cost. 

President George W. Bush (and the U.S. Senate before him) makes the reasonable case that the economic cost of meeting Kyoto targets far exceed the uncertain environmental benefits. Second, meeting the increased U.S. demand for natural resources would require an increase, not a decrease in emissions. Increasing our resource exports to the U.S. while meeting the Kyoto targets can only raise the economic costs for all Canadians. 

In short, fulfilling our Kyoto obligations would worsen Canada’s competitive disadvantage vis-a-vis the U.S. and hobble Canada’s, and particularly Alberta’s, ability to benefit from rising energy needs in the U.S. 

But what can provinces do? Ottawa calls the shots when it comes to signing international agreements, and Canada can only have one seat at the table in negotiations with the U.S. and Mexico. 

The provinces are not without leverage, however. Provinces regulate natural resource industries, and share jurisdiction with Ottawa on environmental matters. If Ottawa signs an agreement on energy, at some point it will need the provinces’ co-operation to implement the deal. The same goes for the Kyoto accord. 

Provinces can, therefore, make it clear that they will not agree to regulate the energy industry or the environment in ways that are contrary to provincial interests — both environmental and industrial. 

Which leads to the final, and more difficult question — what outcome is in resource-rich provinces’ best interest when it comes to continental energy discussions? 

Aside from having a say at the negotiating table, the answer lies in the treatment of natural resources under the North American Free Trade Agreement. 

In the current agreement, trade in oil is slightly more free than trade in natural gas. This means that Ottawa’s ability to put restrictions on trade in oil with the U.S. is slightly lower than its ability to put restrictions on trade in natural gas. It is, therefore, in the interest of provinces like Alberta to make trade in natural gas and electricity as free as trade in oil. This will improve access to U.S. markets for our secure supply of resources other than oil, as well as minimizing Ottawa’s ability to meddle. 

According to the poll mentioned above, nine out of 10 Albertans are supportive of Alberta having direct involvement in continental energy discussions. Klein has a mandate to use the tools at his disposal to make the best of the continental energy discussions. 

He could also effectively rally other resource-rich provinces into pushing for improvements in NAFTA, thereby tying Ottawa’s hands a little tighter on its ability to fiddle with the resource sector. 

Ken Boessenkool is an Adjunct Research Fellow at the C.D. Howe Institute. Poll results are from a Cameron Strategy Inc. poll of 803 Albertans between June 11 and June 22. Results are considered accurate plus or minus three per cent, 19 times out of 20. 

Idnumber: 200107170061 Edition: Final Story Type: Business; Opinion Length: 859 words Keywords: ENERGY; OIL; POLICIES; CANADA; ALBERTA; FEDERAL PROVINCIAL   RELATIONS Illustration Type: Graphic, Diagram Illustration: Graphic: (The illustration shows a caricature of Ralph Klein   and Jean Chretien in a convertible car.) 

 Super provinces won’t let Ottawa get so pushy Calgary Herald Thursday, June 28, 2001 Page: A23 Section: Comment Byline: Ken Boessenkool Source: For the Calgary Herald 

It may seem like an odd time to forecast a rebalancing of power between Ottawa and the provinces with the forces for centralization as strong as they are in Ottawa. 

However, the current realignment of two provinces — Ontario and British Columbia — will force a rebalancing in favour of the provinces that Ottawa is powerless to stop. 

There is a seismic shift currently taking place in Ontario — in Toronto’s Queen’s Park, not Ottawa’s Parliament Hill. 

As chronicled in journalist John Ibbitson’s new book, Loyal No More, the Mike Harris government is shifting further and further away from the “Ontario is Canada” view and towards the “Ontario is Ontario” view. 

We are, Ibbitson cogently argues, witnessing a return of Ontario to its deep history of autonomy and resistance to federal domination. This may seem odd to Albertans who think Toronto is just as politically distant as Ottawa. But, supporters of classical federalism — the view that provinces and the federal government should be sovereign in areas of their own jurisdiction — owe a great deal to Oliver Mowat, premier of Ontario from 1872 to 1896. 

Mowat was Canada’s most successful champion of provincial rights. He used every tool at his disposal — pure power politics, legislation, and the British Privy Council — to wrest control away from Ottawa. During a time in which the dominion was still finding its footing, Mowat successfully shifted the balance of power from Ottawa to the provinces. In doing so, he reversed many of the early victories that his bitter rival, Sir John A. Macdonald had won against waffling provincialists during the Confederation debates. 

Mowat set the stage for a long period where Ontario held pride of place over Canada in what was already then Canada’s largest and most dominant province. 

The more recent and common view of “Ontario as Canada” grew out of a spirit of compliance that ruled Ontario for 40 years. It is a view that is not only derisively shared by many Canadians outside Ontario, it is also proving remarkably resilient within Canada’s largest province. The seeds for this view were sown by Ontario Premier Leslie Frost; they blossomed under Bill Davis, who sacrificed Ontario’s interests to Pierre Trudeau’s; and they reached their disastrous apex under David Peterson, who traded Ontario’s interests for just about anything. 

Ibbitson’s central argument is that Queen’s Park is returning to a spirit of independence and away from a spirit of compliance. 

Mike Harris is resurrecting Mowat’s vision, and increasingly views Ontario as a North American region state, in the words of the prominent economist Tom Courchene. 

Where Ibbitson uses political history, Courchene uses economic analysis to argue that Ontario should pay much more attention to its own destiny — principally that Ontario’s North-South trading relationships were outstripping its East-West relationships. 

Events in Lotusland are also playing in favour of a power shift between the provinces and Ottawa. You don’t have to scratch too far below the surface of the victorious B.C. Liberals to find Reform roots. In fact, B.C. Liberals resemble the federal variety only in the way James Bond resembles Austin Powers. 

The B.C. Liberal election platform talks openly about the equality of citizens and provinces, about equitable distribution of federal dollars and equal voting rights for all Canadians (code for giving B.C. its rightful allotment of House of Commons seats). New B.C. Premier Gordon Campbell has made no secret of keeping these Reformers in the tent by being forceful in his dealings with Ottawa. 

What does this all mean for Alberta? 

Ralph Klein, now the senior statesmen among premiers, can face Ottawa with a pair of partners that not even Ottawa can push aside. And if you add in careful doses of Quebec, Ottawa is playing with a very weak hand. 

This will play itself out in the coming months in important ways. First, Klein will get his place at the continental energy table — both Campbell and Harris have already lent support to this quest. 

The next move should be to build a coalition among these provinces to push for strengthening the North American Free Trade Agreement’s provisions regarding natural resources — giving natural gas “secure supply” status, and protecting Alberta from any future energy-based tax raids by Ottawa. 

Second, Ottawa’s Romanow commission on health care will be completed well after these provinces mark out their own strategy for health that will have little role for Ottawa. 

The coalition will coalesce around the idea that health reform must be driven by the provinces, not according to dictates from Ottawa. 

The health care report, by former Saskatchewan premier Roy Romanow, will either toe this line, or be tossed aside — along with further federal meddling in provincial health plans. 

Finally, the Social Union Accord — in which the provinces traded jurisdictional control for a few extra health dollars in 1999 — is up for its three-year renewal next February. 

The new alignment, along with Quebec which never did sign the original accord (but got the money anyway), will insist on opting-out clauses and further restrictions on Ottawa’s ability to meddle. Failing that, they will join Quebec in not signing on for a second round. 

A coalition of Ontario, Alberta and British Columbia, and sometimes Quebec, will mean a rebalancing of power in the areas of health care and energy trade. 

Ottawa has always been able and willing to trade off the interests of Central Canada against the regions, of the Central Canadians in Ontario against Central Canadians in Quebec, and of region against region. 

But a common front is emerging between Canada’s largest provinces that will mean stronger provinces and a weaker Ottawa. This will ultimately mean the policies in all parts of Canada will better reflect local economies and local desires — and that cannot help but lead to a stronger country. 

Ken Boessenkool is one of six authors of The Alberta Agenda, a proposal urging Alberta to make greater use of its constitutional jurisdiction. 

Idnumber: 200106280168 Edition: Final Story Type: Opinion Length: 994 words Keywords: FEDERAL PROVINCIAL RELATIONS; ONTARIO Illustration Type: Graphic, Diagram Illustration: Graphic: (From left to right is a caricature of Gordon   Campbell, Ralph Klein and Mike Harris wearing hats and holding   swords together.) 

 Equal time on equalization National Post Monday, June 18, 2001 Page: C17 Section: Financial Post: Editorial Byline: Ken Boessenkool Column: Letters Dateline: CALGARY Source: Financial Post 

Please allow me the liberty of quoting at length the last paragraph in Mr. MacLean’s editorial. Names and identifying characteristics have been changed to protect the innocent: 

“This country has many senior rank economists, including ones in Atlantic Canada, possessing great expertise on federal-provincial relations. Wouldn’t it be better if our newspapers paid more attention to their scholarly research on equalization and less attention to biased opinion pieces by junior rank policy advocates? Wouldn’t it be better if the Atlantic provinces could be represented by economists based there rather than by Mr. MacLean, an Ontario-based and -educated author of studies advocating socialism in Asia?” 

Am I the only one who finds the implications of this line of thinking appalling? 

Ken Boessenkool, author of Taking off the Shackles: Equalization and the Development of Nonrenewable Resources in Atlantic Canada, and co-author of The Alberta Agenda, a proposal for Alberta to make greater use of its constitutional jurisdiction, Calgary 

Idnumber: 200106180046 Edition: National Story Type: Business; Letter Length: 155 words 

 Alberta heading for cash crunch Calgary Herald Thursday, May 31, 2001 Page: A23 Section: Comment Byline: Ken Boessenkool Source: For the Calgary Herald 

Sometimes you have to take government at its word. 

In the case of the latest Alberta budget, two sentences in the government’s fiscal plan suggest its spending plans are unsustainable. 

Exhibit A is the sentence at the top of page 11: “Historical revenue trends indicate the government can plan for revenue growth of about four per cent per year.” 

This is an indication that Ralph Klein and Co. know the current spike in oil and natural gas revenues are not sustainable over the longer term. This is borne out in the revenue forecast where the past two years of massive increases in revenue are balanced by the next two years of substantial reductions in revenue. 

The budget even has a nice picture showing that revenues followed the long-term trend through most of the 1990s, jumped above the trend in the past two years, and will return to the trend line in three years. That picture even identifies the difference between the resource-induced spike and the long-term trend as money that is meant for accelerated debt repayment and one-time expenditures. 

The message is crystal clear: The Alberta government cannot increase spending by more than about four per cent over an extended period of time without, at some point, risking the prospect that revenues will no longer be adequate to meet expenditures. And in any year where revenues grow faster than the long-term average, the extra money should be used to pay down debt and/or for one-time expenditures. 

The budget lays out exactly what it considers “one-time” or “extraordinary” costs. While these sound an awful lot like “temporary tax,” I said I was taking government at its word. 

The budget dumps these one-time expenditures into three buckets. The first is infrastructure, and the other two deal with instability in commodity markets — energy rebates and agricultural assistance. In the latter categories, a return to commodity market stability should mean the end of these expenditures. 

On infrastructure, Alberta is going to spend an almost unbelievable $3 billion this year. This is four times the normal annual amount of infrastructure spending, and it makes you wonder what they will be paving when they run out of roads. 

There is an internal logic, however, for using extra money for infrastructure. Infrastructure is probably the most important thing the Alberta government can do when the economy is expanding at the rapid rates we’ve seen lately. Without adequate infrastructure, our rapid growth rates would be at some risk. Further, Alberta attracted 22,000 people from other provinces last year, and these people (as the premier constantly reminds us) do not bring along their roads, hospitals and schools. 

Finally, during the lean years when governments were paring spending to eliminate deficits, the path of least resistance meant that infrastructure was too often the first thing cut, so there has been some catching up to do. 

If you strip one-time infrastructure and commodity based expenditures out of total spending, you get what the budget calls “base spending.” Which brings me to Exhibit B, the sentence at the top of page 12: “Total base spending is forecast to increase by . .  an average of 4.3 per cent per year.” 

In the government’s own words, then, base program spending is growing faster than the historical trend for revenues. And if you think that the difference of 0.3 per cent (4.3 per cent minus 4.0 per cent) between spending growth and revenue growth is no big deal, it is worth recalling that the difference between these two numbers in Alberta’s 10 lost years between 1983 and 1993 was only 0.5 per cent. 

When spending grows faster than revenues, even by a small amount, it can lead to big problems if sustained over an extended period of time. 

The current situation is, of course, fundamentally different than the 1980s and early 1990s. The primary reason spending grew during the earlier period was that interest costs rose as the debt grew. In fact, spending on programs actually grew slower than revenues. But now interest costs are falling, and fast. 

In fact, spending on programs will grow at a remarkable annual average of 5.5 per cent for the next three years. 

So there you have it: Long-term revenues grow at four per cent while program spending is growing at 5.5 per cent. 

This is an unsustainable path that must be corrected if we do not wish to repeat past mistakes. That correction requires putting a brake on spending. 

And you can reach that conclusion by taking the government at its word. 

Ken Boessenkool is a Calgary economist and former policy advisor to Alberta Treasury. 

Idnumber: 200105310201 Edition: Final Story Type: Business; Statistics; Opinion Length: 770 words Keywords: INFRASTRUCTURE; BUDGETS; FINANCES, GOVERNMENTAL; ALBERTA 

 The cruel hand of equalization: Atlantic Canada sees little revenue from nonrenewable resources National Post Thursday, May 31, 2001 Page: A18 Section: Comment Byline: Ken Boessenkool and Brian Lee Crowley Source: National Post 

After 44 years and $180-billion dollars in equalization spending (not adjusted for inflation) the Atlantic provinces are only barely more able to meet the needs of their citizens with their own revenue sources than they were when equalization was introduced in 1957. On average, about 40% of provincial budgets in the four Atlantic provinces comes from federal transfers, most in the form of equalization. 

Apologists for the regime say it was never equalization’s purpose to “close the disparity gap” with the rest of the country, but simply to compensate for its existence. But what we have discovered after nearly half a century is that incentives matter, and the incentives attached to equalization can penalize the poorer provinces for developing their economy and encourage them to settle for permanent reliance on federal transfers. “Sharing” has its virtues, but surely the prime object behind our fiscal arrangements should not be to maintain poorer provinces in a state of splendid dependence, but rather to build their capacity to pay their own way. The greatest victory of fiscal federalism could and should be the elimination of the need for equalization payments. 

The time has never been better for the Atlantic provinces to lessen their dependence on federal transfers and to become masters of their own fate. Energy prices are high, shortages are emerging in Canada’s major U.S. markets, and the Prime Minister has responded favourably to U.S. requests to speed up the development of new energy supplies. The picture is positive for the newly emerging offshore oil and gas industry in Atlantic Canada. Within a few years, Newfoundland is projected to be producing around 40% of Canada’s conventional oil, while a natural gas pipeline, possibly the first of several, already connects Nova Scotia with New England. It appears that offshore and onshore petroleum resources may be discovered in or around virtually every province in the region. 

The development of natural resources, primarily oil and gas but also other minerals, such as the Voisey’s Bay nickel deposit, creates the conditions in which economic growth in the region could well outstrip that of the rest of the country. 

Unfortunately, with equalization, the potential for growth, and realizing that potential, are two different things. 

Unlike Alberta, the Atlantic provinces see little reward from developing nonrenewable natural resources. The reason is that the equalization program can strip more than 90% of any new provincial revenue from such development. Thus, the perverse incentives of the program shackle economic policy in the Atlantic provinces. 

Consider this: Ottawa lets Newfoundland and Nova Scotia keep 30% of revenue from offshore petroleum resources. The result is that the provinces have little reason to try to maximize their long-term tax revenue and economic development from the offshore, most of which would be scooped up by wealthy Ottawa. Instead, they try to extort superficial benefits out of the industry, such as lots of short-term and often relatively low-skilled jobs. They build outdated gravity-based structures for oil extraction, or require companies to make vague promises of massive exploration and development spending in exchange for drilling rights. They could sell more of the resource up front, to retire some of their huge debt and reduce their crushing interest payments, but after Ottawa’s huge take, it hardly seems a good move. 

An attractive way to fix a major part of the problem would be to remove all nonrenewable resource revenue from the equalization formula. The reasons for doing so are at least three. First and most important, this change would eliminate the clawback on nonrenewable resource revenue. Second, including this revenue within equalization makes little economic sense. It is not annual income; it is the transfer of a stock of wealth from one form to another, generating no increase in wealth. Further, the economic activity that follows the exploitation of natural resources is a sure-fire way to drive up other prices, such as wages and housing prices, which are already captured in the equalization formula. Removing nonrenewable natural resources from equalization would end this double counting. 

This change would provide the Atlantic provinces with the incentive to rely on natural resources development as a centrepiece of their economic strategy in place of pleading for larger transfers from equalization. Gone would be the days when an Atlantic province might forfeit a nickel mine, or forgo sound long-term development of offshore oil and gas deposits because of the perverse incentives of the equalization program. 

Removing nonrenewable natural resources from the equalization formula would require the Atlantic provinces to accept small decreases in their equalization entitlements — smaller than the recent increases in equalization payments and nothing that a modest transition mechanism could not fix — but leave the region much stronger in the long run. 

Taking off the shackles would make Atlantic Canadians the big winners as provincial policy in the region shifted away from dependence on Ottawa toward greater self-reliance. Indeed, the inter-regional economic gap would shrink, and all Canadians would benefit. 

Idnumber: 200105310164 Edition: National Story Type: Business; Opinion Note: Ken Boessenkool is the author of Taking Off the Shackles:   Equalization and the Development of Nonrenewable Resources in   Atlantic Canada published this week by the Atlantic Institute for   Market Studies (AIMS), a Halifax-based public policy think tank.   Brian Lee Crowley is the president of AIMS. Length: 822 words Keywords: PETROCHEMICALS INDUSTRY; OFFSHORE OIL; REGIONAL DEVELOPMENT;   FEDERAL PROVINCIAL RELATIONS; ROYALTIES; GOVERNMENT FINANCE;   ATLANTIC CANADA; CANADA 

 Provinces will soon have the upper hand National Post Wednesday, May 23, 2001 Page: A16 Section: Comment Byline: Ken Boessenkool and Stephen Harper Source: National Post 

All attention these days is focused on the political de-alignment that seems to be taking place in Ottawa. But it is an emerging political re-alignment in Canada’s provinces that will fundamentally reshape the country within the emerging global economy. It will shift power away from Ottawa and to the provinces. The emerging consensus in Queen’s Park, the views of the new government in British Columbia and the historical forces for greater provincial autonomy in Alberta and Quebec will align and successfully challenge Ottawa’s hegemony. 

First and foremost, we are witnessing a return of Ontario to its deep history of autonomy and resistance to federal domination. Indeed, supporters of classical federalism — that provinces and the federal government should be sovereign in areas of their own jurisdiction — owe a great deal to Oliver Mowat, premier of Ontario from 1872 to 1896. Mowat used every tool at his disposal — pure power politics, legislation, and the British Privy Council — to wrest control away from Ottawa. Both Mowat and his immediate successors were successful in thwarting Sir John A.’s vision of a virtually unitary state. 

The more recent and common view of “Ontario as Canada” grew out of a spirit of compliance that ruled Ontario for 40 years. The seeds were sown by Leslie Frost; they blossomed under Bill Davis, who sacrificed Ontario’s interests to Pierre Trudeau’s; and they reached their disastrous apex under David Peterson. 

Queen’s Park is returning to a spirit of independence and away from a spirit of compliance. Bob Rae’s “fair share” debate over unilateral cuts to Ontario transfer payments was the beginning of a new era. Mike Harris has increasingly tried to resurrect Mowat’s vision, doubtlessly influenced by Tom Courchene’s economic analysis of Ontario as a new North American Region State. Even more topically, journalist John Ibbitson’s new work Loyal No More traces Ontario’s rediscovery of its quest for a separate destiny. 

The most recent manifestation is Mike Harris’s recent statement that Ontario is going to do what is right on health care, no matter what the Ottawa-appointed Romanow Health Commission might say in 18 months. 

In British Columbia, the provincial Liberals will not take long to align with the calls for more provincial autonomy as they tap into the feeling of alienation from Ottawa that is nowhere stronger than in Lotusland. Further, taking on Ottawa’s mismanagement and disconnection is the most practical way of keeping old Reformers in the B.C. Liberal tent. 

Alberta has its own reasons to crank up the volume on its role in the federation — not least in order to ensure a leading role in any continental energy policy. (Substantial offshore oil and gas reserves off the East Coast may bring some Atlantic provinces into alignment on this issue, a refreshing change.) In addition, restive Alliance members may well turn their attention to the provincial scene and start urging Premier Ralph Klein to move forward on the Alberta Agenda in such policy areas as pensions, health care and taxes. 

The decentralist agenda will, of course, play well in Quebec. Despite Premier Bernard Landry’s bellicosity about sovereignty, senior players in the sovereignty movement, as well as the strategically important Action Democratique party, are increasingly promoting a confederal arrangement with the other provinces. While Alberta, Ontario and British Columbia may be reluctant to push the envelope this far, a decentralist strategy is likely to be much more popular in Quebec than dangling the prospect of another sovereignty referendum. 

This alignment will be successful because not even Jean Chretien can withstand a coalition that includes Ontario, never mind one that includes both Ontario and Quebec. With the addition of the big Western governments, this strategic alliance will represent provinces containing well over 80% of the population and a yet greater share of the country’s economic output. 

The treatment of provincial health reform bears out the difference this alignment is already beginning to make. Two years ago, Ottawa went ballistic when Alberta proposed to limit the growth of private health clinics within the publicly funded health system. Yet when the Ontario government talks about fully private hospitals, Ottawa melts into a much more soothing response. 

This coalition is likely to exert itself in three arenas in the next 12 months. First, all four provinces are likely to have their own health care plans outlined well in advance of the Romanow report — making its publication, as well as any subsequent federal role in health, largely superfluous. Second, the pressure for Ottawa to focus on economic issues through cuts in taxes rather than increases in “investment” will become much louder. Finally, the coalition will have little patience for boutique federal programs in provincial jurisdictions. This will ultimately lead to a rewriting of the rules surrounding the Social Union Agreement when that deal comes up for renewal early in 2002. 

As this coalition plays itself out, supporters for a more centralized vision of Canada will increasingly be found only in the elite corridors in Ottawa, among hard-core Liberal centralists in Quebec, in outposts in Atlantic Canada and the eastern half of the Prairies and, last but not least, among “old Canada” thinkers who are forever trying to redistribute wealth among provinces rather than export good policies to all parts of the country. 

These forces for centralization will not be enough to counter a united front of the four big provinces. This will ultimately mean the policies in all parts of Canada will better reflect local economies and local desires — and that cannot but lead to a stronger country. 

Idnumber: 200105230155 Edition: National Story Type: Opinion Note: Ken Boessenkool, a Calgary economist, and Stephen Harper,   president of the National Citizen’s Coalition, are two of six   authors of the Alberta Agenda, a proposal urging Alberta to make   greater use of its constitutional jurisdiction. Length: 922 words Keywords: FEDERAL PROVINCIAL RELATIONS; NATIONAL UNITY; FORECASTS;   CANADA 

 Alberta leads the way in fostering prosperity Calgary Herald Friday, April 27, 2001 Page: A17 Section: Comment Byline: Ken Boessenkool Source: For the Calgary Herald 

Two prominent Alberta-based institutes recently released reports that risk feeding the politics of envy that says Alberta’s economic success is unfair. Fortunately, a closer look at the reports combined with a clear understanding of federalism suggests that Alberta’s success is more likely to lead to prosperity for all. 

In the first, the Canada West Foundation documents rising disparities between the four western provinces and asks, but does not answer, the question of how those disparities might be bridged. 

In the second, the Pembina Institute combines 12 economic, 22 social and 17 environmental variables on an equal basis into a Genuine Progress Indicator that shows, as one headline summarized, “Albertans pay for prosperity.” 

All the Pembina’s GPI really shows, however, is that if you subjectively combine enough variables, you end up with a subjective summary measure. To their immense credit, the authors readily admit this, and call for a debate. Well, here goes . . . 

Not surprisingly, Alberta is doing well on the economic front. To combine two measures, Albertans are making more and working fewer hours. In constant 1998 dollars, Albertans earned an average of $25.64 per hour worked in 1999, up from $9.52 per hour in the 1960s. 

On the social front, Pembina concludes that Alberta is not doing as well. This is odd, because although some variables have worsened since the 1960s, a number of critical ones have shown a remarkable improvement during the 1990s. 

For example, the number of Albertans living below Statistics Canada’s Low Income Cutoffs fell by a commendable 20 per cent between 1992 and 1999. Most of this occurred when Alberta severely tightened its welfare eligibility and lowered benefits. Economic growth no doubt played a role, but it is noteworthy that much stronger economic growth of the late 1980s did little to reduce the number of Albertans below the LICO. Clearly, the welfare reforms played a role in the 1990s decline. 

But how? A 1996 C. D. Howe publication showed that youth employment growth in Alberta was by far the strongest in the country during this period. Simply put, Alberta was moving young people from welfare to work. 

For another example, a broad measure of income inequality (the Gini Co-efficient) has been falling steadily for the past 30 years in Alberta — in 1999 it was three-quarters of what it was in the 1960s. Further, unemployment has fallen dramatically in the 1990s, which is drawing record numbers of Albertans into the workforce. 

Sure, Albertans may be slightly fatter and die in more car accidents, but at the end of the tumultuous 1990s, we are doing better at sharing our wealth than the critics ever predicted. 

On the environmental front, Alberta has much larger emissions, is using much more energy and has seen large increases in “greenhouse gas emissions.” This would be much more worrying if the headline measures — water quality and air quality — had not improved so much in the past 30 years. 

My brief but also subjective ranking suggests that a better headline for the Pembina story would be: “Albertans sharing their prosperity.” Alberta restructured its government in the early 1990s, and the result has been economic prosperity, better employment prospects and a reduction in the number of poorer Albertans. And by Pembina’s own ranking, little damage seems to have been done to air or water quality. 

And it wasn’t just oil and gas that brought these successes. During 1998, oil prices fell to their lowest levels in 30 years, yet Alberta’s economy continued to outperform other provinces. Further, Alberta is now much less dependent on oil revenues than in the past — if oil and gas prices had been two-thirds of their 10-year average, the Alberta budget would have remained balanced in every year since 1994. In other words, Alberta treats oil and gas revenues as a one-time sale of an asset, not as a sustainable revenue source, which is why most of it is being used to pay down debt. 

Which takes me back to Canada West’s question. When other provinces look at Alberta’s prosperity, they would do well to put away the politics of envy and pull out the principles of federalism. The core idea of federalism is that provinces have the freedom to experiment, which includes the right to succeed or fail. Other provinces are given the opportunity to replicate success and avoid failure in a collective race to the top. 

That is why you hear a lot more these days about bringing the Klein-Harris revolution to B.C. than bringing the Harcourt-Clark-Dosanjh revolution to Alberta or Ontario. And that is also why the question raised by Canada West is so timely, and why the answer buried in the Pembina study is so important not only for Alberta and the West, but for the entire federation. And finally, it is why a number of us continue to urge the Alberta government to continue to lead the way — it is simply the best ticket to prosperity for all. 

Ken Boessenkool is one of six authors of the Alberta Agenda, a proposal urging Alberta to make greater use of its constitutional jurisdiction. 

He was also the author of Back to Work: Learning from the Alberta Welfare Experiment, published by the C. D. Howe Institute in 1996. 

Idnumber: 200104270160 Edition: Final Story Type: Business; Opinion Length: 878 words Keywords: ECONOMICS; ECONOMY; ALBERTA; REPORTS Illustration Type: Graphic, Diagram Illustration: Graphic: (A man dressed as a piper on his pipe.) 

 How to tell if provincial spending is rising too fast Calgary Herald Monday, April 23, 2001 Page: A10 Section: Opinion Byline: Ken Boessenkool Source: For the Calgary Herald 

The most important number in this week’s Alberta budget is $3 billion — the average level of natural resource revenues that poured into Alberta coffers during the 1990s. Let me explain. 

In 1981, Alberta relied on non-resource revenues to fund all but $2.6 billion of program spending, even though it took in nearly $4.7 billion in oil and gas revenues. The result was a surplus of $2.1 billion, which went into the Alberta Heritage Savings Trust fund. 

Alberta saw these additional revenues not as a reliable stream of income, but as the sale of a capital asset. The government wisely realized that the oil in the ground could be sold only once, and that future generations should benefit from this one-time sale. 

That forward looking attitude changed in the following year. 

Alberta ramped up its spending by an almost unbelievable 35 per cent, and as a result, the gap between spending and non-resource revenues grew to $4.9 billion. The government moved to a position where the budget could only be balanced if natural resource revenues exceeded this amount — which they didn’t, and as a result the province ran a deficit of nearly $1 billion in 1982. 

The bottom line was rescued in 1983 because natural resource revenues jumped to nearly $5 billion, so no corrective action was taken on the spending front. In fact, spending continued to grow faster than non resource revenues for the next few years until Alberta required $6 billion in natural resource revenues just to keep the budget balanced. 

We all know the result — oil revenues never did hit $6 billion, and when natural resource revenues fell to $2 billion in 1986, a new spending level had been entrenched and a string of deficits ensued. 

Alberta’s over-reliance on natural resource revenues lasted for nine years — in every year from 1982 until 1993, the gap between spending and non-natural resource revenues exceeded $3 billion. The success of the Klein revolution was to squeeze spending so that reliance on natural resource revenues fell below the magical $3 billion. 

Reliance on natural resource revenues stayed below the $3-billion watermark in every balanced budget since then — suggesting that growth in spending in the last few budgets was sustainable. 

And Alberta returned to the previous forward looking view with a law that says 75 per cent of any unanticipated surplus (which nearly always results from better than expected natural resource revenues) must be used to pay down the debt — a direct benefit to future generations. 

Unfortunately, the Alberta government’s third quarter report released prior to the election contains a worrying signal. In that report, natural resource revenues for 2000 had shot up to a remarkable $10.2 billion. But instead of a surplus of $7 billion ($10 billion in resource revenues minus the $3-billion watermark), that report showed a surplus of only $5.5 billion. 

Spending had risen faster than non-resource revenues. To repeat: In fiscal year 2000/01 the Alberta government is, for the first time since 1994, relying on more than $3 billion in natural resource revenues to keep the budget balanced. 

I realize that there are a large number of so-called one-time expenditures contained in that spending — from energy rebates to money set aside for an endowment fund — that could be cut back to bring our reliance on resource revenues below the $3-billion mark. And in addition, the forecasts for oil and natural gas prices remain high. But those are just the kinds of things people were saying in the mid 1980s as spending ramped up in the expectation of never ending growth in oil revenues. 

And that is the reason the most critical number in the 2001 budget will be $3 billion. If Alberta is to continue to be the poster-province of fiscal rectitude, it will have to keep its total spending at a level that is sustainable — and history shows us that in order to do that, the difference between total spending and non resource revenues should remain below $3 billion. 

Ken Boessenkool is a Calgary economist and former policy advisor to Provincial Treasurer Stockwell Day. 

Idnumber: 200104230105 Edition: Final Story Type: Business; Statistics; Opinion Length: 685 words Keywords: BUDGETS; FINANCES, GOVERNMENTAL; ALBERTA 

 Poster-province economics 101: Difference between total spending, non-resource revenues the key Edmonton Journal Monday, April 23, 2001 Page: A12 Section: Opinion Byline: Ken Boessenkool Column: Guest Column Dateline: Calgary Source: Freelance 

The most important number in next week’s Alberta budget is $3 billion — the average level of natural resource revenues that poured into Alberta coffers during the 1990s. If the government relies on natural resources for more than this amount, it invariably gets itself into trouble. Let me explain. 

In 1981, Alberta relied on non-resource revenues to fund all but $2.6 billion of program spending, even thought it took in nearly $4.7 billion in oil and gas revenues. The result was a surplus of $2.1 billion, which went into the Alberta Heritage Savings Trust fund. Alberta saw these additional revenues not as a reliable stream of income, but as the sale of a capital asset. The government wisely realized that the oil in the ground could be sold only once, and that future generations should benefit from this one-time sale. 

That forward-looking attitude changed in the following year. Alberta ramped up its spending by an almost unbelievable 35 per cent and, as a result, the gap between spending and non-resource revenues grew to $4.9 billion. The government moved to a position where the budget could only be balanced if natural resource revenues exceeded this amount — which they didn’t, and as a result the province ran a deficit of nearly $1 billion in 1982. 

The bottom line was rescued in 1983 because natural resource revenues jumped to nearly $5 billion, so no corrective action was taken on the spending front. In fact, spending continued to grow faster than non-resource revenues for the next few years until Alberta required $6 billion in natural resource revenues just to keep the budget balanced. 

We all know the result — oil revenues never did hit $6 billion, and when natural resource revenues fell to $2 billion in 1986, a new spending level had been entrenched and a string of deficits ensued. 

Alberta’s over-reliance on natural resource revenues lasted for nine years – in every year from 1982 until 1993, the gap between spending and non-natural resource revenues exceeded $3 billion. 

The tables turned in 1994, which was the first year in which the provincial budget required less than $3 billion in natural resource revenues in order to stay balanced. The success of the Klein revolution was to squeeze spending so that reliance on natural resource revenues fell below the magical $3 billion. 

And in each of the budgets since 1994, total spending minus total non-resource revenues has stayed below this level. So while there has been a large increase in spending in the last few budgets, that increase has been sustainable as it was matched by increases in non-resource-based revenues. 

Alberta also returned to the forward-looking view of using excesses in resource revenues to benefit future generations. 

In 1999, a new law said that 75 per cent of any unanticipated surplus (which nearly always results from better than expected natural resource revenues) must be used to pay down the debt. 

Unfortunately, the latest signal from the Alberta government is signaling trouble. In the Alberta government’s third-quarter report released prior to the election, natural resource revenues for 2000 had shot up to a remarkable $10.2 billion. But instead of a surplus of $7 billion ($10 billion in resource revenues minus the $3-billion watermark), that report showed a surplus of “only” $5.5 billion. Spending had risen faster than non-resource revenues for the first time since 1994. To repeat: in fiscal year 2000/01 the Alberta government is, for the first time since 1994, relying on more than $3 billion in natural resource revenues to keep the budget balanced. 

I realize that there are a large number of so-called one-time expenditures contained in that spending — from energy rebates to money set aside for an endowment fund — that could be cut back to bring our reliance on resource revenues below the $3-billion mark. And, in addition, the forecasts for oil and natural gas prices remain high. But those are just the kinds of things people were saying in the mid-1980s as spending ramped up in the expectation of never-ending growth in oil revenues. 

And that is the reason the most critical number in the 2001 budget will be $3 billion. 

If Alberta is to continue to be the poster-province of fiscal rectitude, it will have to keep its total spending at a level that is sustainable. 

And history shows us that in order to do that, the difference between total spending and non-resource revenues should remain below $3 billion. 

Ken Boessenkool is a Calgary economist and former policy adviser to then-provincial treasurer Stockwell Day 

Idnumber: 200104230075 Edition: Final Story Type: Column Length: 757 words Keywords: BUDGET; ALBERTA; NATURAL RESOURCES; OIL ROYALTIES 

 Sweet talk no substitute for action National Post Saturday, April 14, 2001 Page: A15 Section: Editorials Byline: Ken Boessenkool and Stephen Harper Source: National Post 

In a recent stopover in Calgary, Jean Chretien, the Prime Minister, said Albertans should stop bringing up past grievances and instead focus on the future. As an example, Mr. Chretien wants Westerners to note his newfound fondness — notwithstanding his reported private comments to the contrary — for marketing Western natural resources to an energy-hungry United States market. 

All this talk about developing U.S. markets for Western Canadian natural resources is certainly welcome. But two recent actions of the federal government suggest Albertans would do well to pay more attention to what Ottawa does than what it says. 

First, following the United States’ formal withdrawal of its support for the Kyoto Accord, the federal Minister of the Environment made a formal statement saying Ottawa intends to “meet the greenhouse gas emission reduction commitment we made in Kyoto in 1997.” 

This statement contained no evidence that the views of provinces were considered — despite the environment being a joint federal-provincial area of responsibility and energy being primarily a provincial jurisdiction (the feds have some responsibility for international trade in energy). 

The lack of formal consultation with the provinces flies in the face of a federal-provincial agreement reached on April 24, 1998, in which environment ministers “agreed to establish a process to examine the consequences of Kyoto and provide for the full participation of the provincial and territorial governments with the federal government in any implementation and management of the Protocol.” Ottawa’s unilateral move to adhere to the Kyoto commitments also makes a mockery of the 1998 Canada-Wide Accord on Environmental Harmonization. 

Furthermore, Ottawa’s unilateral commitment puts to rest the federal government’s talk about respecting Western economic interests — and adds weight to reports of Mr. Chretien’s private comments in support of export taxes on energy. While appearing to court Alberta, they are leaving open the possibility of harmful energy taxes or similar measures that can only harm the development of Western natural resources — eerily reminiscent of past Liberal treatment of Western oil and gas. 

But it is not enough for Alberta to gripe about Ottawa’s unilateralism. While Ottawa has the ability to sign these international agreements, they need the continued participation of the provinces to implement them. Alberta should therefore withdraw its commitment to the Kyoto Protocol while remaining committed to environmental improvements that are consistent with sustainable economic growth. This would prevent Ottawa from implementing the accord without blatantly overriding Alberta’s prerogatives in the areas of environment and energy. 

Exhibit two is Jean Chretien’s appointment of Roy Romanow to head up an inquiry into Canada’s health-care system. The Liberal government’s contribution to health care since 1993 has amounted to withdrawing federal dollars for health, producing a dust-gathering National Forum on Health study that recommended no further funds were required following those cuts, then replenishing funds the forum said were not necessary, and picking selected political fights with selected provinces over how they choose to run their health-care system. 

There is every reason to believe the Romanow inquiry will merely be a smokescreen to promote further federal intrusion into health care through such boutique federal programs as pharmacare and homecare. What possible other reason is there for a commission to report to the only senior government in Canada that does not administer an actual health system? The Romanow commission makes a mockery of co-operative federalism, particularly egregious because health is a provincial jurisdiction. 

It is unlikely the commission will make the case (as Alberta and Quebec have in the past) that the federal government should transfer the tax power needed to fund health care to the provinces — and that the federal role in health care, beyond perhaps ensuring portability, should end. Despite the fact that health care had its origins in a province, not in Ottawa, it is unlikely the commission will come to a vision that puts provinces at the forefront of health-care reform, as the laboratories most likely to find solutions. 

The Alberta government is much better placed than Ottawa to decide how to best meet the health needs of Albertans — particularly as federal pronouncements on violations of the health act (including past baseless rhetorical charges against Bill 11) seem more often motivated by the political needs of Ottawa than the health needs of Albertans. 

In our view, Alberta could, and should, back up this view with a promise to make Alberta’s health-care system the best in Canada. The province should also make it clear that it would rather pass on federal health dictates and any attendant federal money than sacrifice this goal. 

On Kyoto and on health, the federal government clearly has no intention of being sensitive to Alberta. It would be easier for Albertans to heed Mr. Chretien’s advice to focus on the future if his actions — as opposed to his words — didn’t consistently remind us of the past. 

Idnumber: 200104140220 Edition: National Story Type: Opinion Note: Ken Boessenkool, a Calgary economist, and Stephen Harper,   president of the National Citizens’ Coalition, are two of the six   authors of the Alberta Agenda, a recently published proposal for   Alberta to make full use of its constitutional jurisdiction. Length: 807 words Keywords: FEDERAL PROVINCIAL RELATIONS; GOVERNMENT POLICY;   PETROCHEMICALS INDUSTRY; GLOBAL WARMING; CANADA 

 Electoral system may be messy, but it works Calgary Herald Tuesday, April 3, 2001 Page: A13 Section: Comment Byline: Ken Boessenkool Source: For the Calgary Herald 

There is a growing sentiment, at least among certain political elites and their counterparts in the media, that our electoral system is broken. Yet, nearly three Canadians are satisfied for every Canadian who is dissatisfied with the way federal elections work, according to the Institute for Research on Public Policy. 

Over the weekend, participants from all the major political parties, representatives from the political left and right, and assorted other populists gathered in Ottawa to launch Fair Vote Canada, a group whose goal is to dump our current electoral system in favour of, well, something else. Unfortunately, the cure is worse than the disease. 

The core disease this group is trying to rid us of is an electoral system where the person who wins the most votes in a constituency gets the entire prize — what is called the first-past-the-post electoral system. This system, it is alleged, leaves many Canadians disenfranchised because in any given riding a member of Parliament can win with less than 50 per cent of the vote. This is magnified 301 times across the country, with the result that the federal Liberals have won three straight elections with about 40 per cent of votes cast. 

But we should be careful in discarding the longest-lasting system of electing representatives in the world because, to paraphrase Sir Winston Churchill, first-past-the-post is the worst type of electoral system except all those other systems that have been tried from time to time. 

Broadly speaking, there are two alternatives to first past the post. The first is a preferential ballot — voters mark their first, second and sometimes third choices. If the first choices do not lead to a 50 per cent winner, the second choices are added. 

But under a preferential ballot, new challenges arise. What if two candidates have more than 50 per cent after round two? What if the third-place candidate on the first ballot has the most votes after the second ballot? Should second choices count as less than first choices? Is 50 per cent the magical number, or do we now believe that the most votes overall won? 

The second alternative is to move toward a proportional system, where the number of seats won is brought into line with the popular vote. 

A proportional system is the most problematic in our constitutional democracy. Since 1921 (when we first saw three parties in the House of Commons) there have been only two elections where a single party won a majority of the votes — 1940 for the Liberals and 1958 for the Conservatives. Proportional representation is thus a recipe for instability; minority governments in Canada have rarely lasted more than one year. 

Further, minority governments shift power from parties that win the most votes to parties that win few votes. For example, under New Zealand’s recently adopted proportional-style electoral system, the New Zealand Alliance party received 20 per cent of the cabinet positions on the strength of only seven per cent of the popular vote as a result of a coalition agreement with the leading Labour Party. 

The first-past-the-post system requires that political parties build coalitions, ensuring that any winning platform has a broad base of support across a number of regions in the country. A more proportional system gives incentives to parties to put forward more radical platforms, in the hope of getting their key planks implemented as part of a coalition government. Proportional systems breed a plethora of parties with narrow agendas. 

A proportional system also breaks the link between MPs and their constituencies. The only way to ensure a match between popular vote and constituency results is to have additional members drawn from party lists. But this means we will have at least some elected officials who have no immediate ties to a constituency. Do we really want two tiers of MPs? 

Proportional systems also tend to be hideously complicated. In New Zealand, citizens mark a ballot for a local party representative, as well as for their favourite party (they need not match). The constituency results produce the local MP, and the party results determine the balance of the parties in the legislature. The final result is determined by an algorithm that only a PhD in mathematics could appreciate. 

Democracy is a messy business and first past the post may be a bad way to run a democracy, but there is no reason to make it worse by adopting an alternative, especially when most Canadians seem pleased with the current arrangements. 

Ken Boessenkool is a private sector economist in Calgary and one of six authors of the Alberta Agenda, a letter urging the government of Alberta to make greater use of its constitutional jurisdiction. 

Idnumber: 200104030083 Edition: Final Story Type: Opinion Length: 780 words Keywords: ELECTIONS, FEDERAL; CANADA; VOTING; POLICIES; REGULATIONS 

 Dion gave us a shake and a slap Calgary Herald Saturday, March 17, 2001 Page: OS08 Section: Ideas Byline: Ken Boessenkool Source: For the Calgary Herald 

In a 20-minute speech in Regina, Ottawa’s point man on Western Canada breezily dismissed all of Alberta’s longstanding concerns with the Canadian federation and suggested all would be solved because he, Stephane Dion, minister of intergovernmental affairs, respects us. Dion thereby managed the difficult manoeuvre of slapping our face while at the same time shaking our hand. 

Dion, using partially released and mostly Ottawa-funded polls, asserts that the West is no more conservative than the rest of the country. He ignores the fact that Albertans have consistently voted for the most conservative choice on the ballot in nearly every provincial and federal election for at least half a century. In short, Dion is openly rejecting the democratic outcome of Alberta elections in favour of polls paid for by Ottawa. 

Dion then dismisses the desire for greater provincial control over policy. Nearly every poll conducted for anyone can discern a noticeable difference in the levels of trust Albertans put in their provincial government compared with the federal government (note to Dion — trust in the provincial government is nearly twice as high). 

Further, the Canadian Constitution clearly delineates the division of responsibilities between federal and provincial governments. Over the years, Ottawa has taken over more than its share of these powers which is one of the reasons why the Alberta Six (of which I am one) recently wrote a letter to Premier Ralph Klein urging him to make greater use of our constitutional jurisdiction. We have suggested, for example, opting out of the Canada Pension Plan and creating an Alberta Pension Plan (which, according to the most recent Alberta budget, could offer the same benefits as the CPP at a contribution rate that is lower by as much as 10 per cent). 

In short, Dion is telling Albertans that their confidence in their provincial government is misplaced, the Constitution is wrong and Alberta should just accept that Ottawa should run things. 

Finally, Dion dismisses the need for democratic reforms by saying that western governments are no more democratic than Ottawa. But when was the last time Ottawa mailed a questionnaire asking citizens for their input on the future direction of policy, as the Alberta government has done twice in the last three years? And why has Ottawa refused to appoint the two senators that have been directly elected by Albertans? In short, Dion is telling Alberta that the Prime Minister’s Office in Ottawa knows better than the people of Alberta, not to mention the people elected by Alberta, what is good for them. 

This approach to Alberta should not be surprising. In fact, it is just what the Alberta Six predicted in their Alberta Agenda letter to the premier. The Liberals are merely continuing their federal election strategy of writing off Alberta in a ploy to gain or retain support elsewhere. 

The facts on this are well documented — the prime minister called westerners, and Albertans in particular, “different,” and everyone got the joke. The prime minister also said he “preferred doing business” with Canadians outside of the West, and we got the hint. The Liberal party then ran blatantly false advertisements about health reform in Alberta — which made the case by innuendo, something Allan Rock was unable to do by looking at the facts, that Alberta was moving away from a publicly funded health-care system. 

Then, just to be absolutely clear, a Liberal cabinet minister tarred the Canadian Alliance, its supporters and voters — 60 per cent of Albertans according to the latest federal election result — as “racists, bigots and holocaust deniers.” The prime minister lent his agreement to this assessment by his subsequent silence. 

Things got no better after the election. The prime minister said Alberta just needed a little bit of “tough love” and Dion all but accused westerners of “separatist blackmail” even though a majority of westerners, including the Alberta Six, have advocated policy ideas which can be accommodated within the existing constitutional arrangements — making Alberta stronger within the Canadian federation. 

Now Dion says he wants to “respect us” but only on his terms — he will respect us only as long as he does not have to listen to any of our ideas. 

Marginalizing Alberta was a successful Liberal strategy during the recent election, and now Dion has indicated the federal Liberals have no desire to change the strategy during their mandate. For Albertans, this means that they should approach any outstretched hand from Ottawa by assuming a defensive posture — because the sting of a slap will linger longer than the soft shake of the palm. 

Idnumber: 200103170024 Edition: Final Story Type: Opinion Note: Ken Boessenkool is a private sector economist in Calgary and   one of six authors of the Alberta Agenda, a letter urging the   government of Alberta to make greater use of its constitutional   jurisdiction. Length: 764 words Keywords: POLITICIANS; CANADA; SPEECES & STATEMENTS; FEDERAL PROVINCIAL   RELATIONS; WESTERN CANADA; ALBERTA Name: STEPHANE DION 

 The great EI ripoff: You’re being gouged, and only Ralph Klein or Mike Harris can save you The Ottawa Citizen Monday, March 5, 2001 Page: A15 Section: News Byline: Ken Boessenkool Source: Citizen Special Page Name: Argument&Observation 

Auditor General Denis Desautels said last week that the federal government may be illegally hoarding billions of dollars in Employment Insurance (EI) premiums. The auditor general reported that, last year alone, the federal government collected $7.2 billion more in EI premiums than Human Resources Minister Jane Stewart managed to shovel out the door in unemployment benefits and various other sundry programs. 

This works out to an over-collection of $236 for every man, woman and child in the country. 

The cumulative surplus in the EI account is now $35 billion. And, contrary to the impression left by the auditor general, that $35 billion is not in a savings account somewhere in Ottawa. Instead of saving these surpluses, the federal government has been redirecting EI surpluses into general revenues and spending them on an annual basis. 

The Ontario Tories have been making the loudest complaints about this EI ripoff, and for good reason. EI premiums per Ontarian amounted to $667, while total EI expenditures in Ontario amounted to $256 per person. In other words, the federal government is skimming more than $400 in EI premiums from every person in Ontario to fund programs in other areas. 

EI treats the other provinces better than Ontario, but only in the sense that four cat-tails hurt less than nine. The federal government skims $284 for every man, woman and child in Manitoba, $240 in Saskatchewan, and $254 in British Columbia. Alberta is in the eight cat-tails range of paying $360 more per person than it gets back in total EI program payments. 

These net contributions are not just due to differences in unemployment rates. If you strip away what the EI defines as “regular benefits” (basic unemployment benefits which include different rules for high unemployment regions), the same five provinces are still getting ripped off. 

Alberta and Ontario get $70 per capita in other benefit programs (including maternity, parental, sickness and fishing benefits) while the national average is $78. And when it comes to labour force programs, which are also funded by EI premiums, the federal government shovels between $100 and $275 per capita to the five eastern provinces, but only between $54 and $77 to Ontario and the West. 

Since, regular benefits are the only portion of EI spending that can really be called “insurance,” Ontarians are in reality paying $534 more per person than the federal government spends on bona fide unemployment insurance in that province. Alberta’s net contribution per person on this basis rises to $492. 

Given that the federal equalization program redistributes revenues across the country so that all provinces have access to comparable revenues, what possible defense is there for this “super-equalization”? It is nothing short of a vote-buying exercise, where Ontario and the West get snookered. 

But what can be done? The federal government controls the EI levers — it sets the contribution rates and recently relaxed the rules to make the redistribution outlined here even worse. 

It turns out that provinces could make some trouble for the federal government on the EI front, if they were willing to be creative with the rule in our constitution that says the federal government cannot tax provincial or municipal governments — the Crown cannot tax the Crown. This is why provincial governments do not pay GST, and why the feds do not pay PST. 

Provincial governments do, however, pay the employer portion of unemployment insurance premiums on behalf of their employees. They do this on the basis that EI premiums are not a tax, but a cost for a benefit plan for their employees. 

But the current EI program has become quite different than a group health-insurance plan. A significant portion of EI premiums do not fund a program for employees, but are a tax levied by the federal government for general revenues and other sundry non-insurance EI programs. 

What provincial governments should do, therefore, is stop paying the “tax” portion of employer-funded EI premiums on behalf of their own employees. For Ontario, this would mean withholding the employer portion of the $534 per Ontario resident that the federal government is skimming off the program for non-insurance purposes. The Ontario government could do this only for its own employees, but doing so would send a powerful message to the federal government. 

Mike Harris would then wait for the federal government to react, confident that he could win any constitutional challenge, and relishing the public exposure that would follow any parliamentary debate to change the rules. The only real question is whether Mike Harris or Ralph Klein will be the first to act. 

Ken Boessenkool is a private sector economist in Calgary and co-author of The Alberta Agenda, urging the province to make full use of powers granted to it under the constitution. 

Idnumber: 200103050082 Edition: Final Story Type: Business; Opinion Length: 791 words Illustration Type: Black & White Photo Illustration: Black & White Photo: Ottawa Citizen / Alberta Premier Ralph   Klein and Ontario Premier Mike Harris could (imaginatively) use the   constitution to end excessive EI premiums set by the Chretien   government. 

 Alberta could put a stop to the great EI ripoff Calgary Herald Saturday, February 24, 2001 Page: O7 Section: Comment Byline: Ken Boessenkool Column: Guest Column Source: For The Calgary Herald 

In his most recent report, the Auditor General reported that Ottawa collected $7.2 billion dollars more in Employment Insurance (EI) premiums than Jane Stewart managed to shovel out the door in unemployment benefits and various other sundry programs. Just for reference, this works out to $236 for every man, woman and child in the country. 

The cumulative surplus in the EI account is now $28.2 billion. And that $28.2 billion is not in a savings account in Ottawa. Instead of saving these surpluses, Ottawa has been redirecting EI surpluses into general revenues and spending them on an annual basis. 

The Ontario Tories have been making the loudest complaints about this rip-off, and for good reason. EI premiums per Ontarian amounted to $667, while total EI expenditures in the province of Ontario amounted to $256 per person. Ottawa is skimming more than $400 per person in Ontario to fund programs in other areas. 

EI treats the western provinces better than Ontario, but only in the sense that four cattails hurt less than nine. Ottawa is skimming $284 for every man, woman and child in Manitoba, $240 for each resident in Saskatchewan, and $254 for each resident in British Columbia. Alberta is in the eight-cattails range of paying $360 more per person than it gets back in total EI program payments. 

These net contributions are not just due to differences in unemployment rates. If you strip away what the EI defines as “regular benefits” (basic unemployment benefits which include different rules for high unemployment regions), the same five provinces are still getting ripped off. Alberta and 

Ontario get $70 per capita in other benefit programs (including maternity, parental, sickness and fishing benefits) while the national average is $78 per person. 

And when it comes to labour force programs which are also funded by EI premiums, Ottawa shovels between $100 and $275 per capita to the five eastern provinces, but only between $54 and $77 to Ontario and the west. Regular benefits are the only portion of EI spending that can really be called “insurance.” 

In reality, then, Ontarians are paying $534 more per person than Ottawa spends on bona fide unemployment insurance in that province. Alberta’s net contribution per person on this basis rises to $492. Given that the federal Equalization program redistributes revenues across the country so that all provinces have access to comparable revenues, what possible defense is there for this “Super-Equalization”? 

It is, I would argue, nothing short of a vote-buying exercise where Ontario and the west, in particular, are getting snookered. 

But what can be done? Ottawa controls the EI levers — it sets the contribution rates and recently relaxed the rules to make the redistribution outlined here even worse. It turns out that provinces could make some trouble for Ottawa on the EI front, if they were willing to be creative. 

There is a rule in our Constitution that says Ottawa cannot tax provincial or municipal governments — the Crown cannot tax the Crown. 

Provincial governments do, however, pay the employer portion of unemployment insurance premiums on behalf of their employees. They do this on the basis that EI premiums are not a tax, but a cost for a program for their employees. 

However, the current EI program hardly fits this role. Not only is Ottawa collecting billions more than it is spending, the program itself is effectively a slush fund for excessive redistribution. 

What provincial governments should do is stop paying the “tax” portion of employer funded EI premiums. For Alberta this would mean withholding the employer portion of the $492 per Albertan that Ottawa is skimming off the program for non-insurance purposes. 

Alberta could do this only for its own employees, but doing so would send a powerful message to Ottawa. Alberta would then wait for Ottawa to react, confident that it could win any court challenge to pay up, and relishing a parliamentary debate that would expose the EI ripoff for all to see. 

The only real question is whether Ontario or Alberta will be the first to act. 

Ken Boessenkool, a former policy adviser to Stockwell Day when he was treasurer, is one of six Albertans who authored the Alberta Agenda, urging the provincial government to make full use of the powers granted to provinces under the Constitution. 

Idnumber: 200102240026 Edition: Final Story Type: Business; Column Length: 715 words Keywords: UNEMPLOYMENT INSURANCE; CANADA; FEDERAL PROVINCIAL FINANCES;   FEDERAL PROVINCIAL RELATIONS; FINANCES, GOVERNMENTAL 

 Politics and pogey: The Liberals cut off debate, but there is another way to get EI reform on the agenda National Post Friday, February 16, 2001 Page: A14 Section: Comment Byline: Tom Flanagan and Ken Boessenkool Source: National Post 

In 1940, the Canadian provinces, battered by a decade of Depression, agreed to a constitutional amendment transferring unemployment insurance to federal jurisdiction. That solution to the problems of their day has given rise to a new generation of problems crying out for solutions in our own day. 

For 60 years, federal politicians have played politics with pogey to the extent that the program scarcely resembles unemployment insurance, or even employment insurance (EI), as the Liberals have renamed it. In 1999, Canadian workers and employers paid almost $19-billion in EI contributions. Of that amount, only about $7-billion, or 37% of the total, was spent on regular benefits to unemployed workers. Where did the rest of the money go? 

The largest single fraction — $7.2-billion, about 38% of the whole — simply went into federal general revenue. Politicians speak metaphorically of the EI fund, but there is no fund set aside for a day when a new recession might raise unemployment rates. The ugly truth is that EI now serves mainly as a regressive, job-killing payroll tax to raise money for the federal government. 

The remaining 25% of the total, more than $4-billion, is spent on a variety of programs that may be worthy or unworthy, depending on your point of view, but are not unemployment insurance. They include maternity and parental benefits, income support for fishermen, job training and creation, and wage subsidies. 

At one level, this is a classic case of bureaucratic goal displacement, but it is also a front for a politically inspired system of regional transfers. Our own province of Alberta is a big loser — $360 per capita, more than $1-billion collectively in 1999; but Ontario was an even bigger loser that year — $411 per capita, more than $4-billion in the aggregate. The only “winners” were the four provinces of Atlantic Canada, especially Newfoundland ($927 per capita). 

“Winning” this game, however, is a dubious prize because dependency on unemployment benefits has so many perverse effects on the provincial economy. As the Fraser Institute’s Fred McMahon pointed out in a recent National Post column, in this context it really is better to give than to receive. But in fact, everyone loses, except the politicians who use pogey to buy votes. 

A Liberal government will never make fundamental reforms to this corrupt system. For too many years, paying people not to work has been the Liberals’ signature policy. It is so woven into their long-term political strategy for maintaining a majority in the House of Commons that they cannot give it up. After making some small improvements in the mid-1990s, the Liberals renounced them as soon as it became clear that even those modest reforms were costing them support in Atlantic Canada. In a parody of statesmanship, the Liberals are now using closure in the House of Commons to reverse their own amendments. 

Is the situation hopeless? Not necessarily. There is another way to get EI reform on to the agenda. Section 91.2A of the Constitution Act, 1867, gives Parliament jurisdiction over unemployment insurance, but unemployment insurance is only a secondary element of what now exists. Most of what is called EI is actually a revenue-raising payroll tax plus a motley array of other programs. Under the rule of law, Parliament is supposed to act within its constitutional authority. Payroll taxes, regional transfers, maternity benefits, and wage subsidies do not constitute unemployment insurance just because federal politicians decide to call them by that name. 

The vulnerable point in the armour of the federal scheme is the constitutional principle that one level of government cannot tax another. All provinces (and municipalities, which are creatures of the provinces) make large employer contributions to the EI scheme. But if the present EI system no longer constitutes unemployment insurance in the sense of section 91.2A, these payments should be seen not as contributions but as payroll taxes levied by the federal government upon provincial employers. 

One or more provinces could withhold their employer contributions, put the money in escrow, and dare the feds go to court to try to collect it. Then the Liberal government could not triumph by imposing closure; it would have to present reasoned arguments to persuade a court that EI as it exists really is unemployment insurance. A province following this strategy would have a decent chance of winning, and even a loss would furnish a relatively low-cost way of informing the public about how distorted EI has become. 

The time is propitious because only the four Atlantic provinces, representing less than 10% of the Canadian population, now get more out of EI than they pay in. Quebec used to be a net recipient, but Ottawa’s rapacious insistence on taking so much for itself has made even Quebec a net loser ($102 per capita in 1999). How about a common front of Ralph Klein, Mike Harris, and Bernard Landry? 

The next time the premiers get together, by all means let them play the obligatory round of golf; but let them also discuss how they can make creative use of the courts to start getting politics out of pogey. 

Idnumber: 200102160190 Edition: National Story Type: Opinion Note: Tom Flanagan is professor of political science at the   University of Calgary. Ken Boessenkool is a Calgary economist and a   former adviser to the Alberta Treasury. Both helped write the   Alberta Agenda, a recently published proposal for Alberta to make   maximum use of its constitutional powers. Length: 849 words 

 Alberta could be Hamm’s ally National Post Friday, February 9, 2001 Page: A15 Section: Editorials Byline: Ken Boessenkool and Brian Lee Crowley Source: National Post 

This week, Nova Scotia Premier John Hamm complained that it was high time his province got its fair share of revenue from its energy resources — just like Alberta. He went on to argue that Nova Scotia should get its fair share of money out of Canada — just like Alberta. 

Alberta, as Premier Ralph Klein retorted, pays roughly $3,000 more per capita than it receives from Ottawa. Nova Scotia is a net recipient of nearly $4,500 per capita. This difference is twice as large as the amount by which the federal equalization program — the constitutionally mandated program that tops up provincial revenue to a rough national average — calculates the difference in fiscal capacities between these two provinces. 

Dr. Hamm got off on the wrong foot. Had he stuck to his first point, about getting his fair share of energy revenue, he would surely have gotten a more friendly response from his Western colleague. In fact, when it comes to reaping the rewards of energy, Dr. Hamm should look to Alberta as an ally, not an adversary. 

Dr. Hamm’s legitimate complaint arises out of the workings of the equalization program, which treats revenue from natural resources the same as other sources of revenue. As a result, when Nova Scotia taxes its newly developed offshore oil and gas, it would normally effectively sacrifice a dollar in equalization for every dollar in resource revenue. Ottawa, though, has cushioned this punitive tax back by allowing Nova Scotia to keep 30 cents of every dollar in tax revenue from offshore revenue. 

Dr. Hamm’s central complaint is that this treatment of natural resource revenue is unfair. He has both the Constitution and economics on his side. 

Canada’s Constitution puts the ownership of, and the right to levy royalties on, natural resources squarely with the provinces. In the past, Ottawa skirted this constitutional rule using indirect means such as the National Energy Program (NEP). It also skirts these rules by including natural resources within equalization. To the extent that these revenues are provincially owned, they have no place in the calculations of equalization entitlements. 

Further, the case for redistributing energy revenue is weak on economic grounds. It makes sense to equalize personal income taxes across provinces, because such revenue is properly regarded as ordinary government income. In contrast, the exploitation of natural resources is really the sale of a capital asset. There is only so much oil or gas and the benefits should be spread over more than one year. To put it into accounting terms, natural resource revenue represents a sale of a capital asset rather than current income. 

(It is worth mentioning that Ottawa excludes Alberta from the calculation of fiscal capacities in equalization, thus lessening the impact of natural resources on equalization payments.) 

Treating natural resource revenue as a sale of a capital asset is one of the rationales for Alberta’s Heritage Savings Trust Fund — money saved from high natural resource revenue so future generations benefit from the depletion of a non-renewable asset. It is also why Alberta recently passed a law requiring 75% of unexpected surpluses in Alberta to be used to pay down debt. 

For the same reason, only a small portion, certainly much less than 70% and perhaps none, of Nova Scotia’s resource revenue should be deducted against its equalization entitlement. 

The second reason not to include natural resources in equalization is that the discovery and exploitation of natural resources affects the prices and values of things already included in equalization. For example, when the NEP reduced the effective price Alberta received for its oil, the value of houses plummeted and wages for Alberta employees followed right behind. Because property taxes and personal income taxes are included in equalization, there is effectively double counting. Equalization payments rise and fall with the price of natural resources, and then rise and fall further when prices in the broader economy react to this fact. 

Taking natural resource revenue out of the equalization formula will eliminate this double counting, improve incentives for Nova Scotia and other equalization-receiving provinces to develop their economy, and reduce dependency on federal transfers — a public policy hat trick that would benefit every part of the country. 

“It is imperative that I present this in a way that it is simply not a province looking for money” was Premier Hamm’s stated desire. Had he argued the constitutional and economic case for excluding natural resources from equalization, he would have come much closer to his goal. He might also have been more likely to find allies rather than adversaries in Alberta and the other Western provinces. 

Idnumber: 200102090168 Edition: National Story Type: Business; Opinion Note: Ken Boessenkool is one of six authors of the Alberta Agenda,   a recently published proposal for Alberta to make full use of its   constitutional jurisdiction. Brian Lee Crowley is the president of   the Atlantic Institute for Market Studies, a Halifax-based public   policy think tank. Length: 769 words 

 Some provinces are more equal than others Calgary Herald Friday, February 2, 2001 Page: A21 Section: Comment Byline: Ken Boessenkool and Stephen Harper, For the Calgary Herald Source:  

Albertans are getting a raw deal from Ottawa and Premier Ralph Klein needs to construct a “firewall” to protect against current and future raids on our treasury. This was the key suggestion that we, along with a number of other Albertans, made in an open letter to the premier last week. But just how raw a deal is Alberta getting? 

Any examination of Alberta’s contribution to Canada must begin with the equalization program. Through equalization, Ottawa tops up the revenues of Canada’s less well-off provinces so that all provinces have roughly the same amount of money to spend on each of their citizens. Looking back to 1997 (the latest year for which complete data is available), Ottawa sent Newfoundland $1,971 in equalization payments for every man woman and child. New Brunswick received $1,474 per person and $191 went to Saskatchewan. 

As a result, every provincial government in Canada had at least $5,516 in combined federal and provincial revenues to spend on each of their residents. 

Many analysts have suggested that equalization is flawed because it leads provinces to depend on Ottawa rather than strengthening their own economy. But because equalization is mentioned in the constitution, it could not be changed by Alberta alone. 

But for many Albertans, equalization itself is not the principal source of angst. Rather, the angst arises, or rises, because Ottawa regularly engages in “super-equalization” — it uses nearly every program at its disposal to tilt the fiscal balance away from Alberta, and toward regions more likely to provide votes for the incumbent party. 

The biggest offender is the unemployment insurance program. In 1997, according to the C. D. Howe Institute, families in Alberta were net payers to the tune of $1,000 for unemployment insurance, while families in Newfoundland were net recipients to the tune of $2,100. Families in the rest of Atlantic Canada were also net recipients of at least $416. Quebecers were net payers to the tune of $150. 

And it’s not just that they have higher unemployment rates. If you remove the impact of differing unemployment rates, Quebec and the Atlantic Provinces received between $50 and $405 per person while each Albertan paid $52. And it is worth noting that since 1997, Ottawa has relaxed the tighter eligibility rules so these disparities have widened. 

Ottawa distorts more than just the benefits portion of the program. Unemployment insurance premiums fund a myriad of labour-force programs that not only have a disastrous track record, but infringe on provincial jurisdiction. That they even exist is odd enough, given Jean Chretien’s 1995 promise to transfer labour force programs to the provinces. 

The expenditures for these labour-force programs follow a familiar pattern. In 1997, Albertans got an average of $23 per person while Quebec got $52 per person and Newfoundland got $140. (Incidentally, residents in Saskatchewan were net payers for benefits with $616 and received only $33 per capita in labour-force programs.) 

Ottawa also operates a number of “shared-cost” programs. These are special deals where Ottawa goes to provinces where it “prefers to do business” and agrees to fund a portion of a program in areas such as agriculture, culture, environment, health, housing and transportation — all are areas of provincial jurisdiction. These programs are buried deep in Ottawa’s public accounts, but a vigilant researcher at the C. D. Howe Institute reported that in 1996, Alberta received $44 per person in such programs, while Saskatchewan received $133 per person, Quebec $77 per person and Ontario $70 per person. P.E.I. and Newfoundland received about $250 per person. 

And where did Ottawa get all this money to slush around the rest of the country? In 1997 Ottawa collected more than $10,000 per household from Alberta, but only $6,500 to $7,500 per household in the Atlantic Provinces and Quebec. 

So Alberta paid more and got back less — much less — even if you exempt the constitutionally protected equalization program. 

Nearly all of the super-equalization detailed here (and we have ignored disparities in farming bailouts, export development grants, Canada Health and Social Transfers and the Canada Pension Plan) arises because Ottawa has found ways to invade provincial jurisdiction. While Quebec grumbles about Ottawa sticking its hand where it does not belong, the other provinces too often ignore the constitution, grab the cash and run. 

This has to end. Alberta must forcefully reject the Orwellian notion that while all Canadians have to share equally, some have to share more equally than others. Alberta may well find allies among other “more equal” provinces as well as in Quebec, though for different reasons. And Ottawa must redirect its efforts at finding ways of buying off politically loyal regions (which is a major source of distortion in these regional economies) into an effort to boost growth in all regions of the country. If it did that, all Canadians would be better off. 

One more thing. Wasn’t 1997 an election year? 

Ken Boessenkool was a policy adviser to provincial treasurer Stockwell Day and has authored a number of commentaries on federal-provincial transfers for the C. D. Howe Institute. Stephen Harper is the president of the National Citizens’ Coalition. They are two of six signatories of a recent open letter to Ralph Klein promoting an “Alberta Agenda.” 

Idnumber: 200102020140 Edition: Final Story Type: Business; Opinion Length: 869 words Keywords: FEDERAL PROVINCIAL RELATIONS; FEDERAL PROVINCIAL FINANCES;   ALBERTA 

 Open letter to Ralph Klein National Post Friday, January 26, 2001 Page: A14 Section: Comment Byline: Stephen Harper, Tom Flanagan, Ted Morton, Rainer Knopff,   Andrew Crooks and Ken Boessenkool Source: National Post 

January 24, 2001 

Hon. Ralph Klein 

Premier of Alberta 

Dear Premier Klein: 

Re: The “Alberta Agenda” 

During and since the recent federal election, we have been among a large number of Albertans discussing the future of our province. We were not dismayed by the outcome of the election so much as by the strategy employed by the federal government to secure its re-election. In our view, the Chretien government undertook a series of attacks not merely designed to defeat its partisan opponents, but to marginalize Alberta and Albertans within Canada’s political system. 

One well-documented incident was the attack against Alberta’s health care system. To your credit, you vehemently protested the unprecedented attack ads the federal government launched against Alberta’s policies — policies the Prime Minister had previously found no fault with. 

However, while your protest was necessary and appreciated by Albertans, we believe it is not enough to respond only with protests. If the government in Ottawa concludes that Alberta is a soft target, we will be subjected to much worse than dishonest television ads. The Prime Minister has already signalled as much by announcing his so-called “tough love” campaign for the West. 

We believe the time has come for Albertans to take greater charge of our own future. This means resuming control of the powers that we possess under the Constitution of Canada but that we have allowed the federal government to exercise. Intelligent use of these powers will help Alberta build a prosperous future despite a misguided and increasingly hostile government in Ottawa. 

Under the heading of the “Alberta Agenda,” we propose our province move forward on the following fronts: 

1. Withdraw from the Canada Pension Plan to create an Alberta Pension Plan offering the same benefits at lower cost while giving Alberta control over the investment fund. Pensions are a provincial responsibility under Section 94A of the Constitution Act, 1867; and the legislation setting up the Canada Pension Plan permits a province to run its own plan, as Quebec has done from the beginning. If Quebec can do it, why not Alberta? 
2. Collect our own revenue from personal income tax, as we already do for corporate income tax. Now that your government has made the historic innovation of the single-rate personal income tax, there is no reason to have Ottawa collect our revenue. Any incremental cost of collecting our own personal income tax would be far outweighed by the policy flexibility Alberta would gain, as Quebec’s experience has shown. 
3. Start preparing to let the contract with the RCMP run out in 2012 and create an Alberta provincial police force. Alberta is a major province. Like the other major provinces of Ontario and Quebec, we should have our own provincial police force. We have no doubt Alberta can run a more efficient and effective police force than Ottawa can — one that will not be misused as a laboratory for experiments in social engineering. 
4. Resume provincial responsibility for health care policy. If Ottawa objects to provincial policy, fight in the courts. If we lose, we can afford the financial penalties Ottawa might try to impose under the Canada Health Act. Albertans deserve better than the long waiting periods and technological backwardness that are rapidly coming to characterize Canadian medicine. Alberta should also argue that each province should raise its own revenue for health care — i.e., replace Canada Health and Social Transfer cash with tax points, as Quebec has argued for many years. Poorer provinces would continue to rely on equalization to ensure they have adequate revenues. 
5. Use Section 88 of the Supreme Court’s decision in the Quebec Secession Reference to force Senate reform back on to the national agenda. Our reading of that decision is that the federal government and other provinces must seriously consider a proposal for constitutional reform endorsed by “a clear majority on a clear question” in a provincial referendum. You acted decisively once before to hold a senatorial election. Now is the time to drive the issue further. 

All these steps can be taken using the constitutional powers Alberta possesses. In addition, we believe it is imperative for you to take all possible political and legal measures to reduce the financial drain on Alberta caused by Canada’s tax and transfer system. The most recent Alberta Treasury estimates are that Albertans transfer $2,600 per capita annually to other Canadians, for a total outflow from our province approaching $8-billion a year. The same federal politicians who accuse us of not sharing their “Canadian values” have no compunction about appropriating our Canadian dollars to buy votes elsewhere in the country. 

Mr. Premier, we acknowledge the constructive reforms your government made in the 1990s — balancing the budget, paying down the provincial debt, privatizing government services, getting Albertans off welfare and into jobs, introducing a single-rate tax, pulling government out of the business of subsidizing business, and many other beneficial changes. But no government can rest on its laurels. As economic slowdown, and perhaps even recession, threatens North America, the government in Ottawa will be tempted to take advantage of Alberta’s prosperity, to redistribute income from Alberta to residents of other provinces in order to keep itself in power. It is imperative to take the initiative, to build firewalls around Alberta, to limit the extent to which an aggressive and hostile federal government can encroach upon legitimate provincial jurisdiction. 

Once Alberta’s position is secured, only our imagination will limit the prospects for extending the reform agenda your government undertook eight years ago. To cite only a few examples, lower taxes will unleash the energies of the private sector; easing conditions for charter schools will help individual freedom and initiative improve public education; and greater use of the referendum and initiative will bring Albertans into closer touch with their own government. 

The precondition for the success of this Alberta Agenda is the exercise of all our legitimate provincial jurisdictions under the Constitution of Canada. Starting to act now will secure the future for all Albertans. 

Sincerely yours, 

Stephen Harper, President, National Citizens’ Coalition; Tom Flanagan, Professor of Political Science and former Director of Research, Reform party of Canada, Ted Morton, Professor of Political Science and Alberta Senator-Elect; Rainer Knopff, Professor of Political Science; Andrew Crooks, Chairman, Canadian Taxpayers Federation; Ken Boessenkool, Former Policy Adviser to Stockwell Day, former Treasurer of Alberta. 

PS: This letter represents our personal views and not those of any organizations with which we are or have been connected. 

Idnumber: 200101260191 Edition: National Story Type: Letter Length: 1078 words 

 Shots from both sides in the Liberal `war on poverty’: No: Canada can’t afford huge cost The Ottawa Citizen Friday, December 15, 2000 Page: A17 Section: News Byline: Ken Boessenkool Source: Citizen Special Page Name: Argument & Observation 

When the Citizen asked me to write on the reported latest Liberal fancy — a guaranteed annual income program — I asked whether it wanted (a) a political rebuttal (b) a constitutional rebuttal (c) a purely economic rebuttal (d) a pragmatic rebuttal or (e) some combination. It was not hubris that prompted my question — Prime Minister Jean Chretien must answer many questions if a guaranteed income program is ever to fly. 

The attraction of the program is that it has a veneer of simplicity — get rid of all government transfers to individuals, and replace them with a single program that provides a set level of income to all Canadians, which is then clawed back as income from other sources rises. A guaranteed income of $10,000 with a claw back rate of 40 per cent would mean individuals earning nothing would get $10,000 from the government, whereas individuals earning more would see their government income fall by 40 cents for each dollar earned, and would stop receiving benefits when their income from other sources hit $25,000. 

In political terms, such a massive restructuring of government transfers to individuals surely requires a greater level of democratic consent than having it sprung on the public two weeks after an election campaign. Canada’s Constitution assigns responsibility for programs for the poor by age and employment status — the federal government is responsible for seniors and unemployed individuals, the provinces are responsible for the rest. A guaranteed income program would require the provinces to give up jurisdiction for welfare, childcare, programs for the disabled and student loan programs. 

Canada functions better because the ability to tailor programs allows provincial governments to better respond to the preferences of their own populations. An expanded number of Liberal MPs from Quebec will not reduce the desire of Quebec City to retain control over these programs, to say nothing of the West’s resistance to letting the federal government become a larger presence in their lives. One size does not fit all, which our Constitution recognizes, but which the guaranteed annual income program denies. 

Guaranteed income programs have been piloted in the U.S. and Canada, with at least three bad outcomes. First, guaranteed income programs reduce wages as employers get an effective subsidy for lower paid employees — income earned from employers is replaced by income from the government. 

Second, guaranteed income draws greater numbers of people onto assistance as individuals trade a life in gainful (or above the table) employment for a life with fewer hassles (and under-the-table paycheques). Third, guaranteed income results in higher divorce rates as spouses have a new reason to forsake the economic security of marriage for the economic security of the state. 

The second part of the economic rebuttal is that guaranteed income programs are hyper-efficient in the same way that catching fish by draining the lake is hyper-efficient. Under guaranteed income, some individuals get too much money while others get their money too easily. For example, students, who typically earn a large return from their education in the form of low future unemployment and higher future wages, should borrow to get through university — they should not get a free ride on the guaranteed income program. And we already know — at least those outside of a Liberal party trolling for votes in Atlantic Canada know — that unemployment insurance with fewer entry restrictions traps individuals in dependency; imagine what a guaranteed income with no restrictions would mean. No affordable version of a guaranteed income program has been found. Even Lloyd Axworthy conceded this point. 

And a final political/economic/pragmatic note — single seniors currently have a guaranteed after-tax annual income of about $15,000 and married seniors of about $24,000. These amounts cannot be made universal without a massive increase in taxes. Therefore, a guaranteed annual income program means either seniors benefits will be cut or taxes will be raised. Which one will it be, Mr. Chretien? 

Ken Boessenkool, an economist in Calgary, is a former policy adviser to the Reform party and to Stockwell Day. 

Idnumber: 200012150127 Edition: Final Story Type: Opinion Note: A debate on Guaranteed Annual Income Length: 674 words Illustration Type: Black & White Photo Illustration: Black & White Photo: Vancouver Sun / The poor need help, but   do we all need guaranteed income? 

Even the losers get lucky sometimes: As Liberal ballots were counted, an Alliance insider was counting his own party’s blessings. The Ottawa Citizen Thursday, November 30, 2000 Page: A21 Section: News Byline: Ken Boessenkool Source: The Ottawa Citizen Page Name: Argument & Observation 

Losing the federal election to the Chretien Liberals may, as Lady Churchill said to her husband following electoral defeat in 1945, “be a blessing in disguise” for the Canadian Alliance. For the prospects facing a third-term Chretien government hold the best chance for a lasting and convincing electoral victory for the Alliance. 

I am, readers should know, plagiarizing an idea (and the Lady Churchill quote) put forward by conservative commentator John O’Sullivan, who wrote recently that a Gore victory would be a blessing in disguise for U.S. Republicans. A divided Congress, a shaky electoral mandate and the likely prospect of a stock market correction and a recession are O’Sullivan’s reasons for taking “the long view” — that a Democrat victory today can profitably be traded for a Republican victory tomorrow. 

The situation is similar in Canada. Jean Chretien is faced with a Parliament as divided as the prospective U.S. Congress. The Canadian divisions are regional rather than partisan, but they present an equally formidable obstacle to effective governance. Mr. Chretien must govern a diverse country without the benefit of a diverse caucus — the Liberals lost one quarter of their seats in the West and the 101 Liberal Dalmations from Ontario may now number 100, but they are the critical bloc in the Liberal majority. 

But Ontario seems to have voted not for Mr. Chretien, but for the prospect of Paul Martin. And Mr. Chretien gave them a reason to do so by raising the prospect of an impending retirement. The combatants for the Chretien mantle — Paul Martin on the right, Brian Tobin on the left and Allen Rock in the middle — will therefore have no reason not to drag the ideological divisions within the Liberal party into the open. 

Mr. Chretien also faces a third strike: not having the support of a majority of Canadians. This appeared not to hamper him in his last term because he managed to stay ahead in the count — his caucus was slightly more regionally diverse, and the prime minister handled the Martin challenge with the blunt announcement that he wasn’t going anywhere. A weak electoral mandate, internal struggles and a regionally divided parliament are three pitches Mr. Chretien is unlikely to hit. 

The prime minister is likely to face a much more serious situation outside of Parliament and the Liberal party. Daniel Schwanen, senior economist at IRPP in Montreal, has written convincingly that the U.S. economy is headed for a serious slowdown in late 2001. And the C.D. Howe Institute has been warning for months that Canadian interest rates will have to rise to counter a growing inflationary threat. Both signal trouble for Mr. Chretien on the economic front. 

And what would a Chretien government do if faced with a serious reduction in revenues due to an economic slowdown? What will happen to those tax-cutting promises delivered by Mr. Martin in his pre-election economic update? The economic statement already delivered too much tax relief to fit comfortably in the 50-50 spending /debt and tax reduction ratio set out by Mr. Chretien during the campaign — meaning tax cuts are likely the first to go if the economy turns sour. Canadians may miss out on that pay raise they thought they voted for when they marked their ballot Liberal. 

The Alliance should count its blessings — history has not looked fondly on parties that preside over economic malaise. And parties that have presided over economic malaise and then decide to get a new leader have not fared well either — ask John Turner and Kim Campbell. In each case the party in waiting won a majority government and ruled for at least two terms. 

Stockwell Day should use the next few years to prepare for the next battle. Mr. Chretien cynically called the election in order to catch the rising Alliance off its footing, and to some degree he succeeded. But the Alliance has not been tripped up. It is further ahead in Ontario, Quebec and Atlantic Canada than the Reform party ever was, and has solidified and intensified its western base. The long view — however much it hurts in the short run — means that a Chretien victory today makes a strong Alliance victory more likely the next time around. 

Ken Boessenkool, an economist in Calgary, was a policy adviser to the Reform party from 1993-1996, and to Stockwell Day from 1998 to July, 2000. 

Idnumber: 200011300108 Edition: Final Story Type: Opinion Note: Federal Election 2000 Length: 736 words Illustration Type: Black & White Photo Illustration: Black & White Photo: Canadian Press / Alliance supporters   were anxious on election night, but in the long term the Liberal win   may be in the best interests of the Alliance. 

 Not just “single“-minded: the Canadian Alliance does propose a single-rate income tax, but that is just one component of its detailed fiscal plan Policy Options O’00 Page: 10-15 Byline: Mark Mullins; Kenneth J Boessenkool Source: The Canadian Index (Magazines) Volume: VOL. 21, NO. 8 

Idnumber: 200010019803 Subject: Flat rate income tax; Canada — Economic policy; Canada —   Finance; Canadian Reform Conservative Alliance Version: CBCA: Fulltext Reference; CBCA: Index Feature: Graphs 

 

Boessenkool and Mullins respond [to Neil Brooks’ article] 

Policy Options O’00 Page: 21-22 Byline: Mark Mullins; Kenneth J Boessenkool Source: The Canadian Index (Magazines) Volume: VOL. 21, NO. 8 

Idnumber: 200010019805 Subject: Flat rate income tax; Canadian Reform Conservative Alliance Name: Neil Brooks Version: CBCA: Fulltext Reference; CBCA: Index 

 Per-child tax deduction would be fairer: The bias shown by the federal taxation system in favour of two-income families over single-income families means the government believes some children are worth more than others. Kenneth Boessenkool and James Davies argue that it’s time to return fairness to families. Calgary Herald Friday, November 27, 1998 Page: A19 Section: Comment Byline: Kenneth J. Boessenkool and James B. Davies, For the Calgary   Herald Source:  

Are some families’ kids worth more than others’ kids? An innocuous question with, for most of us, an obvious answer. Yet if he were asked it in the House of Commons, Finance Minister Paul Martin might sense a setup and sidestep it. On the assumption that what you do means more than what you say, his instincts would be sound: the earnings status and income level of parents produce enormous differences in the amount Ottawa allows families with children to exempt from tax. 

This is a good basis for comparison since parents have an obligation to care for their children. The minimum money needed for this purpose should be excluded from tax for all families. Currently it is not. 

Consider two families, one with two income earners and the other with one, and both having two children aged three and five. 

Dual-earner families have high incomes: three-quarters of the top 40 per cent of families ranked by income, but only a quarter of the bottom 20 per cent, are dual earners, and their average family income is $71,100. With this average, they could exempt $14,000 from tax as a result of the child-care deduction and approximately $500 due to the refundable child tax benefit (the value of the child benefit received divided by the couple’s marginal tax rate) for a total of $14,500. 

Most families with a single breadwinner, on the other hand, earn low incomes — there are twice as many of them in the bottom 40 per cent as in the top 40 per cent of families ranked by income, and their average income is $52,500. At that level, they can exempt about $1,000 from tax due to the child tax benefit, or $13,500 less than the average, higher-earning, dual-income family can exempt. 

Statistics Canada’s large-city “low income cut-off” (LICO) for a family of four is $32,000. How do these two families’ tax burdens compare at that level? 

The dual-earner family (with two equal incomes) would be able to exempt about $2,200 as a result of the child tax benefit, $150 from the child portion of the refundable goods and services tax (GST) credit, and up to $14,000 for child-care expenses. As the family is unlikely to spend this much on child care, a more realistic amount would be half that, or $7,000. 

Thus, the family’s total amount of exempt income comes to $9,350. 

The single-earner family would be able to exempt about $2,100 as a result of the refundable child tax benefit — lower than for the dual-earner family because the taxback on federal refundable credits is based on net (after the child-care expense deduction) rather than gross income. The family receives no GST credit for the same reason. The shortfall for the single-earner family comes to $7,250. 

Ottawa does, then, seem to value some children more than others. A critic of this interpretation might point out that most of the difference is due to child care, which should be viewed as a cost of earning income rather than as evidence of Ottawa’s bias in favour of certain kinds of families. Our rejoinder would be merely to ask whether the disparities between single- and dual-earner families with children need to be so large. Even without child care, kids create big bills, a fact Ottawa ignores. 

What if Ottawa were to introduce a $2,000 per child deduction and reduce the maximum child-care deduction by the same amount? These changes would cost the federal treasury about $3 billion. At the middle to upper end of the family-income spectrum, this would reduce the discrepancy between single- and dual-earner families by $4,000. Dual-earner families would see no change — the reduction in child care expense deductions would be offset by the new deductions and single-earner families would exempt two per-child deduction amounts. 

Nearly all the families at the lower end of the family income spectrum would receive an additional $2,000 in tax-free income per child. Our dual-earner family at the LICO level would be unaffected by changes to the child-care deduction since it does not claim the maximum; it would therefore get $4,000 in additional tax-free income. Low-income single-earner families would get a $2,000 deduction for each child. 

This proposal would accomplish at least two things. First, for families with average or higher incomes, the discrepancy in tax-exempt income between single- and dual-earner families with children would fall. Second, it would recognize that the presence of every child should cause the taxable income of the parents to fall by a basic amount — an amount that would not differ across families. 

Are some families’ kids worth more than others’ kids? A new per-child tax deduction would allow the finance minister to give this question the straight answer it deserves. 

Idnumber: 199811270119 Edition: Final Story Type: Opinion Note: Kenneth J. Boessenkool is a policy analyst at the C.D. Howe   Institute   James B. Davies is professor of economics at the University of   Western Ontario and an adjunct scholar of the C.D. Howe Institute. Length: 788 words Keywords: FAMILIES; INCOME TAX; TAX CREDITS; TAXATION, FEDERAL; CANADA 

 Wrong move: Unless Bank of Canada reverses its interest-rate hike, a recession by 1999 is all but guaranteed Montreal Gazette Friday, August 28, 1998 Page: B3 Section: Editorial / Op-Ed Byline: KENNETH Boessenkool and WILLIAM ROBSON Column: KENNETH BOESSENKOOL and WILLIAM ROBSON Source: Freelance 

Until yesterday morning, the Bank of Canada appeared to be succeeding in the hard but necessary job of limiting the impact of the weak dollar on Canadian monetary policy.. 

The bank was focusing instead on the outlook for growth and inflation in the Canadian economy. The bank’s long-standing policy guide, an index of monetary conditions which made the exchange rate a key factor in interest rate policy, seemed at long last to have been buried. 

Yesterday, however, the one-percentage-point hike in the bank rate showed that the old policy rules from the grave. Worse, it threatens to drag the Canadian economy under with it. If not reversed shortly, this latest rate hike all but guarantees a recession by yearend. 

Even with the most enlightened monetary policy imaginable, the sliding dollar carries a somber message for Canadians. The deteriorating economic situation in Asia is weakening world demand for goods and services. As a result, commodity prices are falling, putting pressure on Canada’s resource sector. 

Russia’s economic crisis is further unsettling world financial markets – a difficult environment for Canada and other countries that tend to rely on foreign borrowing. The weak Canadian dollar, like the sagging currencies of Australia, New Zealand and Latin America, is the result of a normal reaction on the part of the world’s investors to changing economic fortunes. 

By reacting to the falling dollar with an interest-rate hike, the Bank of Canada has taken a symptom of economic troubles and turned it into a cause of worse ones. Canada, like other countries that are seeing their currencies fall against the U.S. dollar, will still lose international purchasing power. Instead of experiencing it mainly as a fall in the exchange rate, however, Canadians now risk suffering through a deflationary slump as well. 

Like the rate hike at the beginning of the year, this latest boost spells trouble for the economy. The earlier rate hike sharply narrowed the spread between short- and long-term interest rates, slowing growth from a healthy pace then to a crawl now. Today’s hike eliminates that interest-rate spread entirely, raising the probability of a recession by early 1999. 

The most frustrating thing about the bank’s misplaced focus is that the more it weakens the economy with its defence of the dollar, the worse the medium- and long-term outlook for the dollar gets. Economic strength buoys currencies up; weakness sinks them. 

As the economy flagged in the wake of the interest-rate increases of last December and January, the deteriorating outlook for investments in Canada helped reverse the dollar’s upward bounce in the weeks immediately following the hikes and accelerated its subsequent decline. This time, currency traders seem more aware of the ultimately self-defeating nature of a rate hike: the dollar’s bounce yesterday was measurable in minutes, not days. 

The rate hike raises the chances that the dollar will continue to weaken through to the yearend. 

By again putting the exchange rate front and centre in its policy-making, the Bank of Canada has made its job harder, not easier. This latest interest-rate hike has whetted the appetites of market players, who now expect another rate hike in the near future. 

If the bank gives in again, a recession next year becomes all but certain, and the prospects for developments – strong business investment, broad-based tax cuts – that would reverse the decade-long slide of the Canadian dollar against the U.S. dollar will fade to nothing. 

Far better would be for the Bank of Canada to put stewardship of the domestic economy back in its proper place at the top of its concerns and bring short-term interest rates down again. It is time to bury the old monetary policy for good. Better it than the Canadian economy. 

Idnumber: 199808280088 Edition: Final Story Type: COLUMN Note: Kenneth Boessenkool and William Robson are policy analysts   at the C.D. Howe Institute in Toronto. Length: 618 words Keywords: BANKS; CANADA; INTEREST RATES; ECONOMIC FORECASTS; ECONOMIC   CONDITIONS Company: BANK OF CANADA Illustration Type: Black & White Photo Illustration: Photo: FRANK GUNN, CP / A currency trader at CIBC Wood Gundy   in Toronto pauses for a moment of reflection as the Canadian dollar   continues its dive. 

 Rate hike leads us into recession The Ottawa Citizen Friday, August 28, 1998 Page: A13 Section: News Byline: Kenneth Boessenkool and William Robson Source: Citizen Special Page Name: Argument&Observation 

Until yesterday, the Bank of Canada appeared to be succeeding in the hard but necessary job of limiting the impact of the weak Canadian dollar on monetary policy, focusing instead on the outlook for growth and inflation in the Canadian economy. The bank’s long-standing but misleading policy guide, the monetary conditions index — which made the exchange rate a key determinant of interest rate policy — seemed finally to have been buried. 

Now, however, the one-percentage-point hike in the bank rate shows that the index still rules from the grave. Worse, it threatens to drag the Canadian economy under with it. If not reversed shortly, this latest rate hike all but guarantees a recession by year-end. 

Even with the most enlightened monetary policy imaginable, the sliding dollar carries a sombre message. Asia’s deteriorating economy is weakening world demand for goods and services. As a result, commodity prices are falling, putting pressure on Canada’s resources sector. 

Russia’s economic crisis is further unsettling world financial markets, a difficult environment for Canada and other countries that tend to rely on foreign borrowing. The weak Canadian dollar, like the sagging currencies of Australia, New Zealand and Latin America, is the result of a normal reaction on the part of the world’s investors to changing economic fortunes. 

By reacting to the falling dollar with an interest-rate hike, the Bank of Canada has taken a symptom of economic troubles and turned it into a cause of worse ones. Canada, like other countries that are seeing their currencies fall against the U.S. dollar, will still lose international purchasing power. Instead of experiencing it mainly as a fall in the exchange rate, however, Canadians now risk suffering through a deflationary slump as well. 

Like the rate hike earlier this year — which optimistic observers saw as the monetary conditions index’s last gasp — this latest boost spells trouble for the economy. The previous rate hike narrowed the spread between short- and long-term interest rates, a key link in transmitting monetary impulses to the economy, slowing growth from a healthy pace then to a crawl now. yesterday’s hike eliminates the interest rate spread entirely, flattening the yield curve and raising the probability of a recession by early 1999. 

The most frustrating thing about the bank’s misplaced focus is that the more it weakens the economy with its defence of the dollar, the worse the medium- and long-term outlook for the dollar gets. Economic strength buoys currencies up; weakness sinks them. As the economy flagged after the interest rate increases of December and January, the deteriorating outlook for investments in Canada helped reverse the dollar’s bounce in the weeks immediately following the hikes, and accelerated its decline. 

This time, currency traders seem more aware of the ultimately self-defeating nature of a rate hike: The dollar’s bounce was measurable in minutes, not days. Yesterday’s rate hike raises the chances that the dollar will continue to weaken through year-end. 

By again putting the exchange rate front and centre in its policymaking, the Bank of Canada has made its job harder, not easier. This latest interest-rate hike has whetted the appetites of market players, who now expect another rate hike in the near future. If the bank gives in again, a recession next year becomes all but certain, and the prospects for developments — strong business investment and broad-based tax cuts — that would reverse the decade-long slide of the Canadian dollar against the U.S. dollar will fade to nothing. 

It would be far better for the bank to put stewardship of the domestic economy back in its proper place at the top of its concerns and bring short-term interest rates down again. It is time to bury the monetary conditions index for good. Better it than the Canadian economy. 

Idnumber: 199808280127 Edition: Final Story Type: Business; Opinion Note: Kenneth Boessenkool and William Robson are policy analysts   at the C.D. Howe Institute. Length: 627 words 

 Let’s defend the dollar with lower interest rates The Ottawa Citizen Monday, August 10, 1998 Page: A11 Section: News Byline: Kenneth J. Boessenkool and William B.P. Robson Source: The Ottawa Citizen Page Name: Argument&Observation 

Once again, the Canadian dollar is hitting new lows against the US dollar. And once again, the currency’s slide is prompting calls for the Bank of Canada to defend it with higher interest rates. 

If this advice appears a bit suspect, it should. Only a few months ago, the Bank reacted to the declining dollar by hiking short-term interest rates. Now that the damaging effects of that rate hike on the economy are becoming clear, the currency looks feebler than ever. This time, we should try something different. What the plunging dollar really needs from the Bank is an interest rate cut. 

Conventional wisdom says that foreign ex-change traders would respond to an interest rate cut by hammering the dollar down. But the dollar’s movements are driven by a variety of forces. Longer-term trends are set by the rate of inflation in Canada relative to that in the United States and also by relative rates of productivity growth in the two countries. 

Over the shorter term, changes in Canada’s trade picture matter: The dollar moves up when foreign demand for Canada’s exports strengthens and their prices rise; it moves down when demand weakens and prices fall. The relative strength of the Canadian economy is also key over the shorter term: a stronger economy offers higher returns to holders of Canadian as-sets, increasing demand for the dollar; a weak economy has the opposite effect. 

Over the past several years, only one of these forces — low relative inflation — has worked in favor of a stronger dollar. The rest of them have pushed it down. 

Productivity growth in Canada has long been distinctly worse than that in the United States, under-mining the currency. More recently, Asia’s financial crisis has upset the outlook for Canadian exports and deflated key commodity prices, pushing the dollar lower. 

The latest drag on the dollar came, oddly, from the Bank of Canada’s attempts in mid-December 1997 and late January 1998 to stem the currency’s slide with higher short-term interest rates. Higher rates gave the dollar a temporary bounce, but the relief was short-lived. 

The more important result of tighter monetary policy was to slow the economic expansion from a healthy pace to a crawl. Now that the economy’s weakness is becoming visible in the form of flagging consumer spending and anemic job growth, Canada’s attractiveness as a place to invest has deteriorated further. The dollar’s slide resumed in the spring, and has since gathered pace. 

If Canadians really want to see their dollar return to a more respectable level against the US dollar, they need to get beyond a short-term preoccupation with where it will close tomorrow and the day after that. The impact of the Asian slump on Canada’s exports and on many key resource industries is not something Canadians can fix. But the long-term problems that have held Canada’s productivity growth persistently below that of the United States are another matter. 

In particular, alongside a credible multi-year program of debt reduction, next year’s federal budget should put forward a credible multiyear program of tax cuts. Personal in-come tax cuts would increase the rewards to Canadians who work and save, and reduce the incentive for many of Canada’s ablest citizens to seek a living south of the border. Business tax cuts would reduce the tilt of Canada’s corporate tax system against the leading-edge industries that hold the greatest promise for future economic growth. 

What Canadians definitely do not need is another misdirected attempt at a short-term fix in the form of higher interest rates. A hike in rates large enough and sustained enough to make any difference to the dollar’s performance over the next few weeks would probably also tip the Canadian economy into recession by year-end — further discouraging domestic and foreign investors, and increasing the chances that the dollar will enter 1999 even lower than it is today. 

Worse, a slumping economy would put a big hole in Ottawa’s looming fiscal surplus, dimming the prospect for the tax cuts that Canada needs to reverse its long-term relative economic decline. Much better would be for the Bank of Canada to reverse January’s rate hike. 

The dollar might well take a temporary hit. But, in parallel fashion to this spring’s brief jump, the dollar’s weakness would shortly be reversed, as a resurging economy lent the currency new strength. 

For the sake of the dollar and their own well-being, Canadians need a buoyant economy through the rest of this year, and tax cuts in the spring. So this time, let’s respond to a dip in the dollar with something other than hikes in interest rates. Let’s cut them instead. 

Idnumber: 199808100100 Edition: Final Story Type: Opinion Note: Kenneth J. Boessenkool is a Policy Analyst with the C.D.   Howe Institute and William B.P. Robson is a Senior Policy Analyst   with the Institute. Length: 773 words 

Sliding away from debt reduction The Ottawa Citizen Tuesday, March 3, 1998 Page: A15 Section: News Byline: Kenneth J. Boessenkool Source: Citizen Special Page Name: Argument&Observation 

The recent federal budget has properly been hailed as a landmark. It ends 30 years of profligate spending, irresponsible deficits, and rising interest costs. This is an achievement worth celebrating. We should not, however, let the celebrations of the present distracts us from setting a clear and prudent course for the future. 

The fiscal plan presented to Canadians on Feb. 24 promised a three-year string of balanced budgets. Bringing the budget finally into balance was indeed a laudable goal, but continuing with a string of zeros, rather than surpluses, is a missed opportunity to chart a prudent course for future debt reduction. 

One such strategy was outlined by William Robson and William Scarth in a C.D. Howe Institute commentary, Out Front on Federal Debt Reduction: Programs and Payoffs. They showed that debt reduction offered a key payoff — a fiscal dividend as lower interest payments make room for spending or tax cuts. That fiscal dividend would grow to $6,000 annually for a family of four if the debt were lowered from its current 70 per cent of gross domestic product to 20 per cent by 2021. 

The best route to such a target would be a front-loaded one, with significant surpluses paying down debt in the early years. Mr. Robson and Mr. Scarth proposed that the budget move within two years to surpluses of two per cent of GDP (about $15 billion in fiscal year 1999/2000) and maintain that level for six years. This plan would produce lower interest rates, higher economic growth, and more certain and lasting fiscal dividends than either a constant surplus or a back-loaded plan. 

Finance Minister Paul Martin’s budget, by failing to present some modest future surpluses, did not give him an opportunity to present, explain, and defend sizable annual debt paydowns as a prudent fiscal strategy. The budget is silent about the importance of running consecutive surpluses to reduce the debt burden and bring future fiscal dividends. 

The absolute minimum that the budget pledges for debt reduction is the annual contingency reserve. This means that, instead of budget balances, Canada will experience $3-billion surpluses for the next two years — clearly not enough to execute a desirable front-loaded strategy. 

The point is not to quarrel with the presence of the contingency reserve itself; it has a defensible purpose and is part of any prudent fiscal play. But the budget guarantees surpluses that only amount to one-third of one per cent of GDP for the next few years. Of course, nearly everyone can see through the budgetary plastic surgery — a little padding here, a little tuck there — all designed to make the fiscal situation appear worse than it really is. 

The padding in the budget comes from prudent assumptions. How much is this worth? If one assumes that the consensus forecast turns out to be right and applies the sensitivity tables in the budget, this padding amounts to $1.5 billion in fiscal year 1998/99 and $5.3 billion in 1999/2000. The tuck is some strange projections for employment insurance benefits: They are projected to grow by $1.2 billion by 1999/2000 despite falling unemployment levels and positive growth. 

As well, the sensitivity tables mysteriously exclude employment insurance operations. These two factors mean additional surpluses of about $700 million in 1998/99 and $1.4 billion in 1999/2000. All of these together provide “prudence factors” of $2 billion next year and $7 billion the year after. 

With the contingency reserves (which also reduce interest costs in 1999/2000 over the budget baseline), the budget produces underlying surpluses of about $5 billion next year and $10 billion the following year, or about 0.5 per cent of GDP next year and one per cent of GDP the year after. These do not quite reach the levels for a prudent out-front strategy, but they do signal important possibilities. Will these possibilities become realities? 

There are three reasons for concern. The first, noted above, is the budget’s failure to present, explain, and defend surpluses as a crucial strategy to retire debt. The second comes from the budget itself: Last year’s budget projected a $17-billion deficit, while the 1998 budget shows that revenues came in $9.7 billion above, spending $3 billion below, and interest costs $4.5 billion below 1997 forecasts. These three items produced a balanced budget. 

What happened to the contingency fund that still must be accounted for? New spending and tax cuts of $3.2 billion in the 1998 budget took care of that — last year’s “prudence factor” — but did not reduce debt in 1998. This is a worrying example for the future. Will next year’s $2-billion “prudence factor” be added to the $3 billion in contingency to reduce the debt? The budget does not say explicitly, but it sets a poor example. 

A final reason for concern has to do with the strength of the economy. Canada is currently enjoying tremendously strong economic growth, which ought to translate into some reduction in social program costs, such as for employment insurance. 

Yet total spending for fiscal year 1997/98 is increasing. In a period of strong growth, spending should be going down, not up. Holding the line on spending during a period of strong growth is not something to celebrate; it is, in fact, worryingly reminiscent of an era we supposedly left behind with this budget. 

In defending his budget, Mr. Martin would do well to emphasize that better-than-anticipated results in coming years will not be used to finance spending. Prudence in economic assumptions is not a good idea if it merely gives the government an annual slush fund from which to dole out tax cuts and new spending. 

This prudence worked in the past because everyone knew that the proceeds would be used to lower deficits. The same must now happen with debt. This year’s budget is truly historic. But Canadians can afford to dwell on the present for only so long. To repeat the success of the past few years, future efforts should aim for a prudent, out-front strategy on debt reduction. 

Idnumber: 199803030115 Edition: Final Story Type: Opinion Note: Kenneth J. Boessenkool is a policy analyst at the C.D. Howe   Institute. Length: 1002 words 

 EI-kes!: Federal-provincial job-training tangles are denting our paycheques The Ottawa Citizen Wednesday, February 5, 1997 Page: A13 Section: News Byline: Kenneth Boessenkool and William Robson Source: Special to the Citizen Page Name: Insight 

Many working Canadians are getting an unpleasant surprise with their first paycheques of 1997 — higher employment insurance (EI) deductions, and lower take-home pay. 

What happened? Didn’t the July 1996 reforms to the old UI program (which also changed its name to EI) spark a raucous debate over benefit cuts and tighter eligibility requirements? Didn’t the ceiling for insurable earnings drop? Didn’t the human resources and finance ministers announce a premium cut? 

The headline story behind EI’s bigger bite in January 1997 was the federal government’s decision to stop limiting premiums only to a weekly maximum of $750 in earnings. Now, the full 6.96-per-cent premium (2.90 from the employee; 4.06 from the employer) is payable on all weekly earnings before reaching the annual maximum of $39,000. (Those with very low incomes will receive relief at tax time.) 

There is, however, another more important story in the background. Over the years, the federal government has diverted a growing share of UI/EI premiums away from insurance purposes — regular initial benefits to laid-off workers — and toward a variety of non-insurance programs, such as regional extended and fishing benefits. Such programs now make up nearly half of EI expenditures, putting huge upward pressure on premiums. 

The latest non-insurance growth area is joint federal-provincial training programs. Last year’s EI reforms proposed a sizeable ramping up of federal spending on training to fund $2 billion in new joint programs. 

The federal government has correctly concluded that the results of its own training efforts have been poor. The past decade or so has seen a steady stream of new federal programs, each springing up with a new name and great hopes, only to succumb after sharp criticism from parliamentary committees, the auditor general, business and labor advocates, and so on. 

Although the provinces’ record is far from unblemished, the case for provincial action in training is stronger. Training programs that have succeeded have tended to be tightly focused on local employers and specific skills, factors that provincial governments are clearly better placed to consider. The provinces also control programs such as education and welfare that are closely related to training, and whose failures training often tries to make good. 

Does superior capacity for training at the provincial level justify joint federal-provincial management? The past record of shared-cost programs is not promising. And neither are the EI proposals, which require the provinces to deliver five specific programs hedged about with seven federal conditions. The sort of flexibility and accountability needed for training programs will be ill-served by federal and provincial bureaucrats stumbling along together in a three-legged race. 

Labor market policy is an area where Canada needs less federal-provincial entanglement, not more. 

There are better ways. If high national unemployment — not to mention an upcoming election — makes continued involvement in training appear irresistible to federal officials, direct grants or loans to individuals or employers are superior to new programs run jointly with the provinces. 

Any such payments should be funded from the regular federal budget: Diverting EI premiums from insurance to sundry other programs makes a mockery of accountability. 

Even better would be for the federal government to follow the lead of numerous proposals for reduced federal-provincial entanglement, including its own, and withdraw from training altogether. Accountability and flexibility will be better served if the provinces design, fund and run these programs on their own. 

For its part, the federal government should refocus on its constitutional mandate of insuring workers at risk of being laid off. Eliminating spending on training and scrapping the proposed joint programs would allow EI premiums to be at least a percentage point lower than they are now. 

Provinces might react by boosting their own training programs. Lower EI premiums would even give them some room if they needed additional revenue to fund them. Or, recognizing that even provincial training programs have had mixed results, the provinces could simply allow a growing economy and a smaller EI-premium wedge between what employers pay and what workers take home to improve the prospects for job-seekers. Either way, unemployed Canadians — not to mention the cause of federal-provincial harmony — would benefit. 

With a little courage and imagination, the beginning of 1998 could be a different story. Responsibility for labor market policy could be more clearly located at the provincial/local level, where it belongs. Canadians seeking training could benefit from programs more closely tailored to local conditions than joint federal-provincial administration can provide. And lower EI premiums would lower the barriers that payroll taxes put in the way of less skilled Canadians seeking work. 

All this, and higher take-home pay to boot — now that would be a pleasant surprise! 

Kenneth Boessenkool and William Robson are with the C.D. Howe Institute in Toronto. They are authors of Ending the Training Tangle: The Case Against Federal-Provincial Programs under EI (C.D. Howe Institute, 1997). 

Idnumber: 199702050063 Edition: Final Story Type: Opinion Length: 809 words Illustration Type: Cartoon 

 How Ottawa will stiff every B.C. man, woman and child: The C.D. Howe Institute sees less money for our province, and others, and more for Quebec under a new federal transfer program. Vancouver Sun Friday, June 14, 1996 Page: A19 Section: Editorial Byline: Kenneth Boessenkool Source: VANSUN 

The principle of equality has received growing attention in Canada. Particularly important in those discussion is how Ottawa treats citizens in different parts of the country. Most Canadians accept, and support, the principle that richer regions should pr 

vide some level of support to less fortunate regions. Indeed, this principle is embodied in the federal equalization program, a program that boosts the revenues of less fortunate provinces to a representative average. 

Beyond equalization, however, and perhaps as a condition for its continued support, Canadians’ sense of fairness is increasingly embodied in the principle of equal treatment. Ottawa has taken tentative steps in this direction, by scaling down regional development programs and making modest changes in unemployment insurance. 

Even the new Canada Health and Social Transfer, the CHST, was sold as increasing fairness and equality among Canadians. The 1996 budget proposed to move the transfer towards an equal-per-capita system over five years. Unfortunately, the federal proposal presents only the illusion of equality, for beneath the rhetoric and some complex formulas, the playing field under the new CHST continues to be tilted. 

The federal government’s new CHST channels block funding to the provinces for health, education and welfare. It was created in the 1995 budget by rolling together the former federal transfers under Established Programs Financing and the Canada Assistance Plan . 

The calculation of provincial CHST shares is the same as that of the former EPF grants. The total provincial entitlement is a per capita amount, set by Ottawa. This total entitlement is made up of three components: first, the theoretical yield of tax room given the provinces in 1977; second an equalization amount that raises the value of that tax yield to a five-province average; and third, a cash residual to meet the total entitlement. In this process, the actual cash payment made by Ottawa is a residual. The practical result of this is that the transfer’s cash payment discriminates against provinces with richer tax bases. 

To make a long story short, under the new transfer, it is the cash that matters. 

The initial 1996/97 provincial CHST allocation merely wrapped together payments from the previous two programs and as a result is heavily biased against Alberta, British Colombia and Ontario. Initially, Quebec and Newfoundland are the big winners. 

The 1996 federal budget proposal will eliminate half the per capita disparities in the total entitlement of the CHST over the next six years. If, as I have argued, it is the cash that matters, the CHST should be evaluated based on its cash allocations, not allocations in the total entitlement. Looking at cash-only shows that the federal proposal presents only the illusion of equality. 

Comparing Ottawa’s proposal to an equal per capita transfer shows that in five years, Ontario will receive roughly $116 less per resident for health care, post secondary education and welfare than Quebec; Alberta, $114 less; and British Columbia, $85. 

Compared to an equal per capita cash payment, Ottawa’s plan means Ontario will get $500 million less than an equal share would imply, while Quebec will receive $500 million more. Alberta will receive $123 million less; British Columbia, $53 million. 

The easiest way to remove these cash disparities would be to change the program to a cash-only transfer, equal per capita across the country. 

I have proposed that Ottawa eliminate half of the present per capita cash disparities by 2002/03, to ease the transition for Quebec and the other Atlantic provinces. Under this plan, some provinces – especially Quebec, Newfoundland and Nova Scotia – would have to adjust to significant reductions in cash payments (mitigated somewhat by planned increases in equalization payments), while others – especially Ontario and Alberta – would still be receiving less than an equal per capita share. 

The greater equality would moderate an important source of friction in federal-provincial fiscal relations because it would embody the important principle of fiscal equality outside of the federal equalization program. 

Idnumber: 199606140050 Edition: Final Story Type: OPINION; STATISTICS Note: . . . a C.D. Howe Institute policy analyst and author of a   new institute publication, The Illusion of Equality: Provincial   Distribution of the Canada Health and Social Transfer Length: 652 words Keywords: GOVERNMENT OF CANADA; FEDERAL PROVINCIAL RELATIONS 

 

 

*Provinces* *must* *win* *health* *care* PR battle National Post Saturday, July 20, 2002 Page: A19 Section: Editorials Byline: Ken Boessenkool Source: National Post

The release of a number of reports by the federal Romanow Commission has exposed its two-pronged public relations strategy: First, deny that there is a problem. Second, tag the provinces (especially Alberta) as the bad guys in health care reform. This strategy adds urgency to health reforms now being considered in Alberta.

The first report released by the commission provided the outcome of 12 focus groups conducted by the Canadian Policy Research Network, a think-tank that gets millions of dollars in funding from the federal government. According to the commission’s press release, the conclusions reached by the focus groups were “consistent across all 12 sessions.” Their surprising unanimity can be summarized as follows — raise taxes to pay for a health care system that is little changed from today.

Two weeks later, the commission released a study with the garrulously written conclusion that “the evidence of a fiscal crisis in health care in Canada is not evident” and further stated that there is “no empirical evidence” that Canadians are over-taxed.

These commission commissioned studies, while they do accord with commissioner Roy Romanow’s earlier comments that he is “not convinced” that there is a fiscal crisis in health care, fly in the face of nearly every other government commissioned report on health care — from Quebec’s Claire Report, to Alberta’s Mazankowski report and even federal Liberal Senator Michael Kirby’s recent examination of health care.

It was hardly a surprise, then, that the commission released another study with the following, equally garrulously written, conclusion: “The alternatives proposed by Quebec and Alberta target the methodical dismantling of the most important public services accomplishment in Canada.” This conclusion was reached by invoking a false dichotomy between Ottawa’s Canada Health Act which ensures “that all citizens have the same right to access health care based on need” on the one hand, and Quebec and Alberta’s so-called goal of “erecting conditions favourable to the delivery and funding of services by private enterprise” on the other.

It must have just slipped the author’s attention that a large part of the current medicare system is delivered and funded by doctors who operate on a “for profit” basis, or that Alberta has sworn full allegiance to the Canada Health Act, going so far as to entrench it into provincial legislation.

The commission’s approach can therefore be summarized as: Status quo good, provinces bad.

This approach lends additional urgency to reform efforts underway in provinces — especially those in Alberta. The final Romanow report is not due until November of this year. That gives Alberta a very small window — only four months — to entrench its reforms, to lead rather than to follow, and to provide all Canadians with hope that health care will be available and sustainable as our population begins to age.

Alberta has a blueprint for reform in its Mazankowski report. The provincial government has accepted all its recommendations “in principle,” though all it has really done so far is to raise health care premiums (something the Romanow studies should be applauding — higher taxes for health care).

Alberta should therefore announce, and soon, that it will implement the most important reform in the Mazankowski report — the establishment of some sort of co-payment system for health services, utilizing the dollars that citizens already pay in health premiums.

The changes are easy enough to implement. Albertans already pay health premiums to the provincial government (poorer Albertans have their premiums fully or partially subsidized). Instead of merely dumping these premiums into general revenues, a simple accounting change should be made so that the money remains in an account for each Albertan.

The next step would be to outline a list of services for which there would be a basic charge that would come from the account. This should probably include all routine costs such as doctor visits as well as emergency ward trips, minor surgeries, etc. The initial charges do not necessarily need to match the exact costs of these services (which, in truth, we do not know, as there are no prices to convey this information), but will come to do so over time.

The critical change is to get Albertans to start seeing the financial impact of their use of the health care system. And all of this can be done without increasing the “private delivery or funding” that exists today — Albertans already pay health care premiums, the only difference is that they will see how this money is spent.

There are some wrinkles to iron out. For example, how to deal with any unused funds in the account; whether Albertans should pay the full cost of services over a small range if their account becomes depleted, after which full provincial funding takes over; and the list of which services are to be charged against the account. But none of these wrinkles should prevent Alberta from introducing such accounts before Romanow’s November deadline.

For that is the critical political objective. Following Romanow’s report in November, Ottawa’s public relations machine will be whipped up to hammer home their “Don’t worry, be happy” mantra about health care sustainability along with the simultaneous “Be worried, don’t be happy” mantra about provincial efforts at real reform of health care.

Only if the provinces can get out ahead of this public relations effort (the groundwork of which is being flawlessly and marvelously laid by Romanow), will they retain the initiative on health care reform. And that is the only real hope for health care reform in Canada. 

Idnumber: 200207200196 Edition: National Story Type: Opinion Note: Ken Boessenkool heads up a Calgary-based economic and public   policy consulting firm and is an adjunct research fellow with the CD   Howe Institute. Length: 917 words Keywords: FEDERAL PROVINCIAL RELATIONS; HEALTH CARE; GOVERNMENT   SPENDING; REFORM; PUBLIC RELATIONS; ROYAL COMMISSIONS; REPORTS;   CANADA Company: Commission on the Future of Health Care in Canada

The Globe and Mail

Friday April 11, 1997     A15

Has Alberta found a key to the youth employment puzzle? WORK / Alberta’s tougher rules on welfare eligibility and reforms to the incentive structure of welfare benefits appear to have encouraged more Albertans under 25 to find jobs.

KENNETH J. BOESSENKOOL

Toronto ONT

BY KENNETH J. BOESSENKOOL

Toronto

ONE of the most pressing policy puzzles of the mid-1990s is why it is so difficult for young Canadians to find jobs. Employment growth for those under 25 has been positive in only five of the past 15 years, and in only two of the past 10.

The positive job-growth numbers released last week were no exception: Those under 25 accounted for only 3,000 of the 61,000 jobs created. One reason is that more young people are staying in school longer. But youth unemployment, as measured against the labour force as a whole, has also been steadily increasing. And since the labour force does not include students, increased schooling reveals just a piece of the puzzle.

Thanks in part to recent welfare reforms in Alberta, we may have another clue. Both the easy availability of welfare and the incentive structure of welfare benefits may play a role in keeping Canadian youth from finding jobs.

Until 1993, Alberta’s youth-employment picture was similar to that of the country as a whole. In the decade ending in that year, positive job growth for those under age 25 occurred only once, in 1988, and even then youth employment grew by less than 1 per cent in an economy that expanded by more than 7 per cent. Youth unemployment also increased substantially in the early 1980s; despite falling late in that decade, the rate in 1993 was still nearly twice that of the pre-1980s recession experience.

Then, in 1993, Alberta began a radical overhaul of its welfare system, to make welfare a program of last resort. It did so by making welfare benefits extremely difficult to get for first-time, able-bodied applicants, and by reducing benefits to bring them in line with wages earned by low-income Albertans.

This tough-love approach worked. In the three years after the reforms, the province’s welfare caseload fell by nearly half. The proportion of Albertans dependent on welfare is now at a level not seen since before the recession in the early 1980s, and less than half that found in Quebec, Ontario or British Columbia.

Alberta succeeded primarily by slowing the inflow of new individuals onto the welfare rolls. In 1992, the last pre-reform year, more than 14,000 people with no history of welfare use came onto the rolls each quarter. By 1996, that number had stabilized at 3,500. And young, single and employable people made up a large portion of the consequent reductions: Nearly 16,000 fewer people under age 25 were on welfare, a decline of 64 per cent in three years.

Analysts have usually cited two factors to explain this reduction in Alberta’s welfare rolls: strong economic growth, and the migration of many of those refused welfare to B.C. to take advantage of that province’s more generous welfare programs.

The case for economic growth is suspect, however. During the 1980s, Alberta experienced longer and stronger periods of economic growth than it has since 1993, yet there was no effect on welfare use. True, welfare use fell in Quebec and B.C. during periods of economic growth in the 1980s; but it rose in Ontario, and it rose in all these provinces after the 1990s recession. Economic growth alone cannot provide a consistent story for these varied experiences.

The thesis that needy Albertans migrated to B.C. is also weak. Data on the province of origin of welfare recipients in B.C. fail to reveal a change in the proportion from Alberta, despite massive swings in Alberta’s welfare rolls. Indeed, both the level and the proportion of Albertans on welfare in B.C. seem remarkably impervious to changes in Alberta welfare use.

Where, then, did all those prospective welfare recipients go?

Many cycled through provincial and federal training and education programs, most of which (employment searches, three-month work terms, job placement programs, training in basic skills) are short-term. Since welfare use continued to decline through 1996, however, these short-term programs could not have been the sole reason for the decline in caseloads.

The more likely explanation is that would-be welfare recipients found work.

In 1994 and 1995, total employment growth in Alberta was the strongest that province had seen in more than 10 years. More important, employment growth for Albertans under 25 in each of those two years exceeded that of any year in the previous decade. Youth employment actually grew faster than the economy in 1994, and remained positive in 1995, with a total of 9,000 jobs created over the two years. Indeed, two-thirds of all new jobs created for Canadian youth in 1994 and 1995 were in Alberta, even though that province accounts for just 10 per cent of the youth labour force.

In Alberta, tougher rules on welfare eligibility and reforms to the incentive structure of welfare benefits appear to have helped remove a significant barrier to youth employment. In short, Alberta may have discovered a key clue to the youth employment mystery. Other provinces and their youths would benefit from a closer look at these reforms. Kenneth J. Boessenkool is a policy analyst at the C.D. Howe Institute. He is the author of Back to Work: Learning from the Alberta Welfare Experiment, released this week by the C.D. Howe Institute.

LENGTH: Long

CLASS: Features

GEOGRAPHICAL: Canada; Alberta

SUBJECT: economy; youth; unemployment; social services; welfare; reform; employment; statistics

ACCESSION NUMBER: 971010146

DOCUMENT NUMBER: 970411GM143

The Globe and Mail

Features  Friday , August 28, 1998   A17

 

Buried by a falling dollar

With its interest-rate hike, the Bank of Canada has turned a symptom of economic troubles into a cause of worse ones

Kenneth J. Boessenkool; William B.P. Robson

 

TORONTO ONT – Until yesterday morning, the Bank of Canada appeared to be succeeding in the hard but necessary job of limiting the impact of the weak Canadian dollar on monetary policy, focusing instead on the outlook for growth and inflation in the Canadian economy. The Bank’s long-standing but misleading policy guide, the monetary conditions index — which made the exchange rate a key determinant of interest-rate policy — seemed at long last to have been buried.

 

Now, however, the one-percentage-point hike in the bank rate shows that the index still rules from the grave. Worse, it threatens to drag the Canadian economy under with it. If not reversed shortly, this latest rate hike all but guarantees a recession by year-end.

 

Even with the most enlightened monetary policy imaginable, the sliding dollar carries a sombre message for Canadians. The deteriorating economic situation in Asia is weakening world demand for good and services. As a result, commodity prices are falling, putting pressure on Canada’s resources sector. Russia’s economic crisis is further unsettling world financial markets, a difficult environment for Canada and other countries that tend to rely on foreign borrowing. The weak Canadian dollar, like the sagging currencies of Australia, New Zealand and Latin America, is the result of a normal reaction on the part of the world’s investors to changing economic fortunes.

 

By reacting to the falling dollar with an interest-rate hike, the Bank of Canada has taken a symptom of economic troubles and turned it into a cause of worse ones. Canada, like other countries that are seeing their currencies fall against the U.S. dollar, will still lose international purchasing power. Instead of experiencing it mainly as a fall in the exchange rate, however, Canadians now risk suffering through a deflationary slump as well.

 

Like the rate hike at the beginning of the year, which optimistic observers saw as the monetary conditions index’s last gasp, this latest boost spells trouble for the economy. The earlier rate hike sharply narrowed the spread between short-term and long-term interest rates, a key link in the transmission of monetary impulses to the economy, slowing growth from a healthy pace then to a crawl now. Yesterday’s hike eliminates that interest-rate spread entirely, flattening the yield curve and raising the probability of a recession by early 1999.

 

The most frustrating thing about the Bank’s misplaced focus is that the more it weakens the economy with its defence of the dollar, the worse the medium and long-term outlook for the dollar gets. Economic strength buoys currencies up; weakness sinks them. As the economy flagged in the wake of the interest-rate increases of last December and January, the deteriorating outlook for investments in Canada helped reverse the dollar’s bounce in the weeks immediately after the hikes, and accelerated its subsequent decline. This time, currency traders seem more aware of the ultimately self-defeating nature of a rate hike: The dollar’s bounce was measurable in minutes, not days. Yesterday’s increase raises the chances that the dollar will continue to weaken through year-end.

 

By again putting the exchange rate front and centre in its policy-making, the Bank of Canada has made its job harder, not easier. This latest interest-rate hike has whetted the appetites of market players, who now expect another rate hike in the near future. If the Bank gives in again, a recession next year becomes all but certain, and the prospects for developments — strong business investment, broad-based tax cuts — that would reverse the decade-long slide of the Canadian dollar against the U.S. dollar will fade to nothing.

 

Far better would be for the Bank to put stewardship of the domestic economy back in its proper place at the top of its concerns and bring short-term interest rates down again. It is time to bury the monetary conditions index for good. Better it than the Canadian economy.

Kenneth J. Boessenkool is a policy analyst and William B.P. Robson is a senior policy analyst at the C.D. Howe Institute. This piece is reprinted with permission from a Backgrounder issued yesterday by the institute.

 

LENGTH: Long

CLASS: feat

GEOGRAPHICAL: Canada

ORGANIZATION: Bank of Canada

SUBJECT: Currency; Dollar; Interest rates; Economy; Monetary policy

 

ACCESSION NUMBER: GAM.19980828.7bank

DOCUMENT NUMBER: 980828GM3441

 

La Presse

Forum, Jeudi 22 novembre 2001, p. A17

Santé: le reste du Canada se rallie peu à peu au point de vue du Québec

Boessenkool, Ken

LE GOUVERNEMENT fédéral a-t-il un rôle à jouer dans le développement des soins de santé au Canada? Selon Jean Charest, la réponse à cette question est non. Et c’est la réponse que l’on entend de plus en plus souvent dans tout le pays.

Ottawa a une double influence sur le développement des soins de santé- par sa tribune qui est basée sur son interprétation des cinq principes de la Loi canadienne sur la santé, et par les pénalités imposées aux provinces conformément au Transfert canadien en matière de santé et de programmes sociaux (TCSPS), lorsque les provinces contreviennent, selon Ottawa, aux dispositions de la Loi canadienne sur la santé.

Charest suggérait récemment de remplacer les transferts en espèces en matière de santé par des points d’impôt. En d’autres mots, Ottawa soustrairait de l’impôt fédéral la somme présentement transférée en espèces dans le cadre du TCSPS. Les provinces pourraient alors utiliser cet allègement fiscal pour augmenter leur propre contribution aux soins de santé. Le Parti québécois est bien sûr en faveur de cette politique. La conversion des transferts en espèces du TCSPS en points d’impôt priverait Ottawa de sa capacité de soutenir par des pénalités les sermons prononcés du haut de sa chaire, ce qui mettrait fin à son rôle dans le développement des soins de santé. Ce serait une excellente chose puisqu’il est logique à tous les niveaux d’éliminer le rôle d’Ottawa dans le système de santé.

Ottawa ne gère pas les soins

Premièrement, ce sont les provinces, et non le gouvernement fédéral, qui gèrent les programmes de soins de santé au Canada. De manière générale, ce n’est pas Ottawa qui dirige les hôpitaux, qui paie le personnel infirmier ou qui négocie avec les médecins. Ce n’est pas Ottawa qui conçoit les mécanismes de paiement ou qui décide des services nécessitant un financement.

Deuxièmement, Ottawa se sert de sa tribune et de ses pénalités à des fins politiques. Le résultat en est que nul ne sait quel est le gouvernement responsable des soins de santé. Cette confusion fournit aux provinces l’occasion de rejeter le blâme sur Ottawa pour leurs propres erreurs et permet au gouvernement fédéral de s’attribuer le mérite de réformes avec lesquelles il n’a rien à voir.

Troisièmement, grâce aux transferts en espèces qu’elles reçoivent d’Ottawa, les provinces n’ont pas à assumer le coût total en impôt des dépenses reliées aux soins de santé. L’envers de la médaille, c’est que les contribuables ignorent tout du rapport qui existe entre l’impôt qu’ils paient et les services de santé auxquels ils ont accès.

Quatrièmement, d’un point de vue économique, il n’existe aucun débordement entre les provinces dans le domaine de la santé qui puisse justifier une surveillance au niveau national. Les frais modérateurs auxquels faisait récemment allusion l’Ontario n’auront aucun effet sur la santé des Québécois. Les ententes existant entre les provinces abordent la question des patients “transfrontaliers”, ceux qui, en présentant une carte d’assurance-maladie de l’Ontario dans un hôpital du Québec, déclenchent le mécanisme de paiement entre les deux gouvernements.

Enfin, il existe de réels avantages à permettre aux provinces de mettre en place des systèmes de soins de santé qui seraient différents d’une province à l’autre. Tout comme la concurrence qui, dans le secteur privé, mène à l’innovation et à des produits mieux adaptés aux besoins de la clientèle, ainsi la concurrence entre les provinces laissera plus de place à l’expérimentation et permettra de mieux cadrer les soins de santé avec les désirs de l’électorat provincial.

Seules la tribune et les pénalités d’Ottawa font obstacle à l’expérimentation. Par exemple, si la population ontarienne veut exiger des frais modérateurs pour les consultations médicales et les services d’urgence, elle devrait avoir le droit de le faire. Si le Québec souhaite suivre les recommandations de la commission Clair et instaurer un programme d’assurance accessoire pour les soins de longue durée, il devrait être en mesure de le faire. Si l’Alberta veut mettre en place la coparticipation au paiement de certains services au moyen d’une caisse santé financée par les primes d’assurance-maladie, elle devrait pouvoir le faire. Tout comme pour les produits mis sur le marché, les autres provinces pourraient alors étudier ces expériences et décider du modèle qu’elles souhaitent “acheter” ou imiter. Ailleurs au pays, les provinces sont de plus en plus en faveur d’une diminution du rôle d’Ottawa et de la possibilité de diversifier les soins de santé. Ce mouvement puise sa force dans une économie en perte de vitesse qui annonce la fin des surplus fiscaux annuels. L’époque récente des surplus fiscaux a eu un effet débilitant sur les débats sur les soins de santé. La grande préoccupation était de trouver un moyen de verser encore de l’argent dans les soins de santé. Et cet argent n’a pas servi à améliorer la prestation des soins de santé ou à revoir le système de prestation à payeur unique.

Avec le retour des déficits, la réforme est revenue avec vigueur au premier plan. Et il semble bien que sa première victime sera le rôle d’Ottawa dans le développement des soins de santé. La Colombie-Britannique, l’Alberta et l’Ontario ont déjà manifesté leur intention de défier Ottawa, au besoin, sur la question des soins de santé plutôt que de laisser la hausse fulgurante des coûts des soins de santé les entraîner vers un déficit. Et chacune de ces provinces a mis sur pied un comité très puissant pour étudier certaines réformes qui iront probablement à l’encontre de la Loi canadienne sur la santé. Le rapport de la commission Clair et sa demande à l’effet qu’Ottawa convertisse ses transferts en espèces en points d’impôt placeront le Québec au centre du débat. Cette coalition provinciale mettra enfin un terme à la tribune d’Ottawa et aux pénalités qui en découlent qui ont entravé pendant si longtemps la réforme rationnelle des soins de santé.

L’auteur est chercheur adjoint attaché au C. D. Howe Institute Ken Boessenkool et président de Sidicus Consulting Ltd. une société- conseil en politique publique et économique.

Illustration(s) :

Lemée, Rémi

Les contribuables ignorent tout du rapport entre l’impôt qu’ils paient et les services de santé auxquels ils ont accès.

Catégorie : Éditorial et opinions

Sujet(s) uniforme(s) : Administration et finances publiques; Hôpitaux, soins hospitaliers et urgences; Médecins et professionnels de la santé; Relations intergouvernementales

Taille : Long, 757 mots

© 2001 La Presse. Tous droits réservés.

Doc. : 20011122LA0037

FRA

 

La Presse

Forum, Mercredi 21 février 2001, p. A19

La grogne de l’Ouest

Un “Programme pour l’Alberta”

Harper, Stephen; Flanagan, Tom; Morton, Ted; Knopff, Rainer; Crooks, Andrew; Boessenkool, Ken

Alors que l’échec de l’Alliance canadienne, lors des dernières élections fédérales, n’a toujours pas été digéré dans l’Ouest canadien, le sentiment de mécontentement prend de l’ampleur. Que se passe-t-il, particulièrement en Alberta?

Cher premier ministre Klein

Pendant et après les récentes élections fédérales nous avons débattu tout comme de nombreux Albertains de l’avenir de notre province. Nous avons été moins consternés par le résultat du scrutin que par la stratégie que le gouvernement fédéral a utilisée afin d’assurer sa réélection. Selon nous le gouvernement Chrétien s’est livré à une série d’attaques destinées non seulement à défaire l’opposition partisane mais aussi à marginaliser l’Alberta et les Albertains au sein du système politique canadien.

L’attaque menée contre le système de santé albertain en constitue l’incident le plus solidement documenté. Vous avez- et cela est tout à votre honneur- vigoureusement condamné la campagne de propagande sans précédent lancée par le gouvernement fédéral contre des politiques de l’Alberta- politiques auxquelles le premier ministre n’avait trouvé jusque là rien à redire.

Même si vos protestations étaient nécessaires et furent appréciées par les Albertains nous croyons cependant que notre réponse ne doit pas se limiter à cela. Si Ottawa en conclut que l’Alberta est une proie facile, nous serons bientôt la cible d’attaques bien plus graves que des pubs télévisées malhonnêtes. Le premier ministre en a déjà donné des indices en annonçant une “réaction musclée” à l’égard de l’Ouest.

Nous croyons qu’il est temps pour les Albertains de prendre en charge leur propre destinée. Cela veut dire récupérer des pouvoirs qui nous appartiennent selon la Constitution du Canada mais que nous avons laissé le gouvernement fédéral exercer. Un usage intelligent de ces pouvoirs aidera l’Alberta à bâtir un avenir prospère malgré la présence à Ottawa d’un gouvernement malavisé et de plus en plus hostile.

Sous le titre de “Programme pour l’Alberta”, nous proposons que notre province agisse sur les fronts suivants:

– Qu’elle se retire du Régime de pension du Canada et crée un Régime de pension de l’Alberta offrant les mêmes avantages à un coût moindre, tout en donnant à la province le contrôle des fonds de placement. Les rentes sont de compétence provinciale selon la section 94A de la Constitution; et la loi créant le Régime de pension du Canada permet à une province de mettre en place son propre régime, ainsi que le Québec l’a fait depuis le début. Si le Québec le peut, pourquoi pas l’Alberta?

– Qu’elle collecte elle-même les recettes provenant de l’impôt sur le revenu des particuliers comme elle le fait déjà pour celui des sociétés. Depuis la décision historique prise par votre gouvernement d’instaurer un taux d’imposition personnelle unique, il n’y a plus de raison qu’Ottawa collecte nos impôts. Tout coût marginal résultant de la perception de notre propre impôt sur le revenu des particuliers serait largement compensé par la souplesse de gestion que l’Alberta en retirerait, comme l’expérience du Québec l’a démontré.

– Qu’elle se prépare dès maintenant à ne pas renouveler le contrat avec la GRC, qui vient à échéance en 2012, et à créer une police provinciale de l’Alberta. L’Alberta est une grande province. Tout comme les grandes provinces de l’Ontario et du Québec, nous devons avoir notre propre police provinciale. Nous sommes certains que l’Alberta peut gérer sa police plus efficacement qu’Ottawa – une police qui ne servira pas de laboratoire d’expériences en ingénierie sociale.

– Qu’elle assume toutes ses responsabilités en matière de santé. Si Ottawa conteste nos politiques provinciales, combattons-le devant les tribunaux. Si nous perdons, nous pouvons assumer le coût des amendes qu’Ottawa pourrait nous imposer selon la Loi canadienne sur la santé. Les Albertains méritent mieux que les longues listes d’attente et le retard technologique qui caractérisent de plus en plus les soins de santé au Canada. L’Alberta devrait aussi réclamer que chaque province puisse financer elle-même son système de santé, par exemple en remplaçant les paiements en espèces d’Ottawa pour les programmes sociaux et de santé par des points d’impôt, ainsi que le Québec le réclame depuis des années. Les provinces plus pauvres, quant à elles, pourraient toujours compter sur la péréquation pour obtenir un financement adéquat.

– Qu’elle se serve de la section 88 du jugement de la Cour suprême sur le droit du Québec à la sécession pour remettre la réforme du Sénat à l’ordre du jour national. Selon la lecture que nous faisons de cette décision, le gouvernement fédéral et les autres provinces doivent considérer sérieusement toute proposition de réforme constitutionnelle appuyée par “une majorité claire sur une question claire” lors d’un référendum provincial. Vous avez déjà agi avec fermeté en organisant une élection sénatoriale. Il est maintenant temps de pousser cette question plus loin.

Toutes ces démarches peuvent être réalisées en utilisant les pouvoirs constitutionnels dont l’Alberta dispose déjà. De plus, nous croyons qu’il est impératif que vous usiez de tous les moyens politiques et légaux pour réduire la ponction financière subie par l’Alberta en vertu du système fiscal et de transfert du Canada. Selon les plus récentes estimations du Trésor de notre province, chaque Albertain transfère annuellement 2600 $ aux autres Canadiens, soit une sortie totale de près de 8 milliards par an. Les mêmes hommes politiques fédéraux qui nous accusent de ne pas partager leurs “valeurs canadiennes” n’éprouvent aucun scrupule à s’approprier nos dollars canadiens pour acheter des votes ailleurs dans le pays.

Monsieur le premier ministre, nous reconnaissons que votre gouvernement a mené à bien des réformes constructives au cours des années 90 – en équilibrant le budget, en réduisant la dette provinciale, en privatisant des services gouvernementaux, en sortant les Albertains du bien-être social par la création d’emplois, en introduisant un taux d’imposition unique, en coupant les subventions de l’État aux entreprises, sans oublier de nombreux autres changements bénéfiques. Mais aucun gouvernement ne peut se reposer sur ses lauriers. Alors qu’un ralentissement économique, voire même une récession, menace l’Amérique du Nord, Ottawa sera tenté de profiter de la prospérité de l’Alberta pour redistribuer les revenus de notre province aux résidants d’autres provinces afin de rester au pouvoir. Il est impératif de prendre l’initiative, d’installer des coupe-feu autour de l’Alberta, de limiter l’étendue des empiétements d’un gouvernement fédéral hostile dans des champs légitimes de compétence provinciale.

Une fois assurées ainsi les positions de l’Alberta, il sera possible d’élargir jusqu’aux limites de notre imagination le programme de réformes que votre gouvernement a lancé il y a huit ans. Pour n’en donner que quelques exemples, des impôts moins élevés libéreront les énergies du secteur privé, des conditions moins strictes pour les écoles à charte favoriseront l’initiative et la liberté individuelles et amélioreront l’éducation publique, un recours plus grand au référendum et à l’initiative rapprochera les Albertains de leur propre gouvernement.

La condition préalable au succès de ce “Programme pour l’Alberta” réside dans l’exercice de toutes nos juridictions provinciales légitimes garanties par la Constitution du Canada. En agissant dès maintenant, nous assurerons l’avenir de tous les Albertains.

Nous publions ici le texte d’une lettre qu’une brochette de personnalités de l’Ouest canadien a fait parvenir récemment au premier ministre albertain Ralph Klein. Les cosignataires sont: Stephen Harper président de la Coalition nationale des citoyens (National Citizen’s Coalition) Tom Flanagan professeur de sciences politiques et ancien directeur de la recherche au Parti réformiste Ted Morton professeur de sciences politiques et sénateur élu de l’Alberta Rainer Knopff professeur de sciences politiques Andrew Crooks président de la Fédération canadienne des contribuables (Canadian Taxpayers Federation) et Ken Boessenkool ancien conseiller politique de Stockwell Day et Trésorier de l’Alberta.

Illustration(s) :

Stephen Harper

Catégorie : Éditorial et opinions

Sujet(s) uniforme(s) : Relations intergouvernementales

Lieu(x) géographique(s) – La Presse : Alberta

Type(s) d’article : Illustration, photo, etc.; Opinion

Taille : Long, 966 mots

© 2001 La Presse. Tous droits réservés.

Doc. : 20010221LA0046

FRA

Section: Comment
Byline: Ken Boessenkool
Outlet: National Post
Title: Albertans are moving beyond alienation
Page: A18
Date: 2003-11-18
Dateline: EDMONTON
Source: National Post 

 

EDMONTON – The end of Alberta alienation may be at hand. 

At its core, Alberta alienation has a provincial and a national component. Provincially, alienation is tied to the willingness and ability of the provincial government to assert Alberta’s interests. Nationally, alienation is tied to a meaningful and effective role for Alberta’s views within a national governing coalition. 

In both respects, 1993 was a watershed year. 

At the provincial level, eight years of consecutive deficits plus the effects of a national recession had seriously eroded Alberta’s energy. Alberta’s deficits were larger and growing faster than those in most other provincial capitals, and the provincial government of the day seemed unable to get things back on track. 

Albertans wanted their government to get its spending under control. They wanted the deficit eliminated, the debt paid down, and their taxes reduced. Into this breach stepped Ralph Klein. He slashed provincial spending, eliminating its deficit in three years. He then moved to pay down the debt. Having paid down the debt, the province introduced a 10% flat tax on personal income, which worked out to a 20% reduction in personal taxes. And then the province cut its corporate income taxes in half. 

The payoff has been impressive. Its population is working hard — Alberta has the highest proportion of people working of any province in Canada. Its income distribution is fair — Alberta has the smallest gap in Canada between the market earnings of the top fifth and the bottom fifth of earners. It is an outward looking province — Alberta’s exports have been growing 20% faster than the Canadian average. Finally, it is a rich province — Alberta’s economy produces almost 50% more goods and services per person than the Canadian average. 

By the turn of the century Ralph’s fiscal revolution restored Alberta’s ability to assert its interests. 

At the national level, 1993 represented a peak in Alberta’s alienation from Ottawa. 

The West had considerable representation in the Progressive Conservative government of the early 1990s. Despite this representation, however, a long string of deficits and constitutional approaches of that government increasingly alienated Albertans. 

In reaction, Alberta spawned a dynamic political movement that forever changed the nature of our national political debate. 

It began when the Reform Party brought Alberta-based leadership that played a significant role in turning public opinion against the Charlottetown Accord. This new voice cemented its place in 1993 with its electoral sweep of Alberta, along with much of British Columbia, Saskatchewan and parts of Manitoba. 

Since then the Reform Party, and its successor the Canadian Alliance, has been a critical force in national politics. It played a key role in the return to fiscal sanity in Ottawa. It brought a new and successful approach to national unity by giving birth to what ultimately became the federal Clarity Act. It raised the profile of democratic reforms on the national agenda, and gave a home to social conservatives who were increasingly uneasy with the direction of the federal Liberals. 

These parties made Alberta’s issues part of the national discourse and they did so in spite of the fact they never did form a part of a national governing coalition in Ottawa. 

That is now set to change. Alberta is about to become a key anchor for a new political force in Canada — the conservative party of Canada. Never again will a national conservative government take the western portion of its coalition for granted. That new party will be a home for fiscal sanity, lower taxes, democratic reform and moderate social conservatism. Indeed, there is a reasonable prospect that the next non-Liberal prime minister will come from the province of Alberta. 

The creation of this new party provides an avenue to address Alberta’s well-worn expressions of alienation with Ottawa. That list of grievances includes a federal government that fails to fund, yet proclaims to be the saviour of, health care; Western farmers who are forced to sell their wheat through the Canadian Wheat Board; the gun registry; the failure of Ottawa to appoint Alberta’s elected senators; and social policy that is out of step with mainstream views in Alberta. 

In short, the new conservative party will provide a meaningful and effective role for Alberta’s views within a national governing coalition. 

Alberta’s ability to assert its interest, along with its anticipated role in the conservative party, provide an important backdrop to developments at an Alberta Progressive Conservative policy conference that took place in Edmonton over the weekend. 

Delegate Sabine Brasok, a young mother attending her first political convention, captured the tone of many delegates when she urged the Alberta government to “do whatever we can to control our own destiny.” 

It was an eloquent summary of the object of discussion for the day, namely, a letter sent to the Premier two years ago. Published in the National Post by a group of Calgary activists, the letter urged the province to implement an “Alberta Agenda.” 

Specifically, the Alberta Agenda urged Ralph Klein to address Alberta alienation by asserting greater provincial control over pensions, police, income tax, Senate reform and health care. It urged the province to opt out of the Canada Pension Plan (CPP) to establish its own provincial pension plan (as Quebec has done). 

It urged Alberta to establish its own provincial police force (like the Ontario Provincial Police and the Surete du Quebec). It suggested Alberta should collect its own provincial income tax (as Quebec does and Ontario has considered doing). It pointed out that Alberta could force Senate reform onto the national agenda by holding a provincial referendum on the topic. Finally, it promoted greater provincial responsibility for health care by urging the province to more aggressively defend its own interpretations of the Canada Health Act. 

In short, the Alberta Agenda is a recipe for Alberta to assert its place as a leading province in Confederation by taking full responsibility for policy areas in its own jurisdiction. 

Premier Klein was decidedly cool to the Alberta Agenda letter when he first received it in January 2001, and his comments over the weekend continued to express reservations. Many delegates were therefore surprised when the Premier used his policy conference speech to unleash an MLA committee, under the direction of the Minster of Intergovernmental Affairs, to take a closer look at the Alberta Agenda. 

The Premier squared this circle by admitting that the Alberta Agenda had captured the imagination of a sizeable chunk of those within his party, as well as many within the broader public. And Ralph rarely misreads the mood of his party or his province. 

Within the broader public, there are increasing signs that the Alberta Agenda is not going away any time soon. Town halls are being organized by non-partisan groups, regularly attracting two to three hundred people to meetings held mostly in rural areas and smaller towns — the heart of Ralph Klein country. There are various publications expanding on the ideas contained in the Alberta Agenda that have circulated widely among political activists in the province. 

On a more substantive front, the Alberta office of the Fraser Institute has recently published a series of papers laying out the benefits of some of the ideas in the Alberta Agenda. One shows that if Alberta opted out of the CPP, it could offer the same benefits in a provincial plan with premiums as low as 8.1%, compared to 9.9% for the CPP, saving Albertans well over half a billion dollars per year. Another demonstrates that Alberta could resurrect its own provincial police force at a substantial savings compared to the cost of the current RCMP contract. 

As these ideas continue to capture the imagination of the broader public — and there are admittedly skeptics both within the PC party and among the wider public — then Alberta will have found a way to redirect its newfound energy towards strengthening Alberta’s place in Confederation. 

And so, at both the provincial and national level, Albertans are moving beyond alienation. At the provincial level, the Alberta Agenda will be a platform for asserting Alberta’s interest. At the national level Albertans will play a meaningful and effective role in a new national governing coalition — the conservative party of Canada. 

The era of alienation is over. Let the era of assertiveness begin.