McGuinty's risky stand on fiscal imbalance a lot like Mike Harris

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Osprey, Monday, January 29, 2007

Jean Charest and Dalton McGuinty are on a collision course over fiscal federalism, which looms as an important issue in this year of provincial elections in both Quebec and Ontario.

Charest and McGuinty agree there is a vertical fiscal imbalance - the perceived gap between Ottawa's capacity to fund services such as health care, and the ability of the provinces to provide them. But they disagree on the means that Prime Minister Stephen Harper is choosing to address it - through equalization payments, of which Quebec is the largest of six recipient provinces, and which Ontario has never received. McGuinty would obviously prefer an increase to Ottawa's general transfer payments to the provinces, which would cut Ontario in on the surplus cash.

So, exceptionally, Charest is running with Ottawa, and McGuinty is running against it. Charest wants to make the case that federalism works. McGuinty is making a case of fairness for Ontario. They are very likely to go their separate ways at a meeting of the Council of the Federation on Feb. 6.

The first shoe dropped on equalization last week, with Quebec due to receive another $1 billion under the existing formula, while British Columbia and Saskatchewan have joined Alberta and Ontario in the ranks of the have-provinces. The second shoe will drop in the federal budget, now expected in March, when Ottawa is expected to top up equalization according to the recommendations of the task force named by the Martin government and chaired by Al O'Brien, a former deputy minister of finance in Alberta. Quebec is expected to receive another $500 million for a total of $1.5 billion.

That's a number Charest and Harper can defend, saying they delivered the goods for Quebec on the fiscal imbalance. It's a number Charest will defend in a spring election against Andre Boisclair and the Parti Quebecois. Like Gilles Duceppe in Ottawa, who has posted a preposterous fiscal imblance claim of $3.9 billion, Boisclair will denounce the deal as inadequate but will be hard- pressed to oppose more money for Quebec.

Trailing badly in the polls for most of his first term in office, Charest is on the rebound and thought to be pulling ahead of Boisclair, particularly on character issues such as judgment and maturity, as well as on the critical question of defending Quebec's interests.

An agreement with Harper on the fiscal imbalance will help Charest make a strong case for federalism in the campaign.

Normally, the premier of Ontario would be on the same page as a federalist premier of Quebec, where provincial elections uniquely involve the future of the country.

But McGuinty clearly rejects Ontario's historic role as the honest broker of Confederation. He declines the mantle of John Robarts, Bill Davis, David Peterson and Bob Rae. In sounding the alarm of fairness for Ontario, he's much more in the mould of Mike Harris.

He's sounding that alarm at a website set up by the Ontario government, where voters are being urged to contact their federal MPs and "say that you expect Ontario to be treated fairly."

So writes McGuinty himself in an opinion piece posted to the Ontario fairness web site.

"I don't believe Ontarians are worth less than other Canadians," McGuinty writes, "and neither should the federal government."

There's nothing very subtle about that.

He maintains: "We're not asking for someone else's money. We're asking to keep a fair share of your money here in Ontario."

But his case becomes problematic when he points out that "Ontarians will provide nearly $5 billion to support the equalization program - that's $1,554 on average for an Ontario family of four. We're proud to do so - it's the Canadian way."

That's Ontarians, not Ontario; the people, not the government, of Ontario. The money doesn't come from Ontario, it comes from Ottawa.

McGuinty's default position on this inconvenient fact is that there's only one taxpayer, and that Ontario is being shortchanged on transfer payments for health care, post-secondary education and infrastructure.

In all, McGuinty claims Ottawa "is shortchanging Ontarians by about $1.1 billion a year" in health care and higher education and another "$1.2 billion less than our fair share for roads, bridges and water treatment over the life of existing programs." For good measure, he claims another $314 million shortfall for re-training unemployed Ontarians "than if our workers were treated the same as workers in the rest of Canada."

McGuinty has clearly decided that fairness for Ontario is a resonant theme for his fixed election date in early October. But in abandoning Ontario's honest broker role, he opens the possibility that mantle will be claimed by Conservative leader John Tory.

Meantime, McGuinty would be well advised to stay out of Charest's way.

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