Wednesday, August 15, 2007

It's Time to Curb the Federal Spending Power

Things have gotten a bit soft. Pith & Substance needs a cause, nay a crusade, to renew its vigor. Fortunately, the lazy centralist wetness of the Globe is always good for stiffening up the sinews and summonig up the blood.

From today's editorial condeming the attempts of the Charest and Harper governments to come to an agreement limiting the use of the federal spending power in areas of provincial jurisdiction, comes this teleological tale:

In 1867, Ottawa and the provinces tidily divided their 19th-century duties into distinct spheres that have long since overlapped as technology changed and the economy developed. In the mid-20th century, Ottawa began funding today's social programs, such as old-age pensions, even though it was spending in areas of provincial jurisdiction[...]

Now Quebec wants to draw Ottawa into a formal pact that would curb Ottawa's ability to spend in any area of provincial jurisdiction. The wonderful elasticity of the Constitution, which has accommodated 140 years of federal-provincial jostling, would be frozen in time while the demands on government evolved.

Every part of this is wrong. No one in 1867 thought the heads of power were "tidily divided." On the contrary, they were left vague so that the supporters of a legislative union and a more classic federal system could both see their reflections in the Confederation deal. It was over the subsequent decades that the Privy Council and the provinces tried to create a classic federation out of the original constitution. After World War II, this became unpopular in English Canada and the spending power (among other things) was used to confuse jurisdiction again.

The idea that "technology" and the development of the economy drove these developments is nonsense. In the nineteenth century, as in the mid-twentieth and today, there were differences of political opinion. If anything, the more the state does, the more necessary federalism is, and the more important it is that the functions of different levels of government be kept separate. In 1867, most of English Canada wanted a "legislative union" (i.e., all constitutional authority in the hands of the central government): now, even Ontarians know better. And the costlier government is, the worse it is when it overlaps.

It is also nonsense to distinguish the spending power from the power to legislate. In the British constitutional tradition, all spending must be authorized by statute -- the only difference is that a money bill must originate in the lower house, while a bill prohibiting or permitting something can come from either house. The Privy Council held that it was unconstitutional to spend money in areas outside legislative jurisdiction for this reason.

Moreover, this makes policy sense. Tax-and-spend and ban-or-require are substitutes: you can accomplish any policy goal either way, albeit not always with the same efficiency. If one level of government can accomplish political objectives using only one measure, then the disadvantages of concurrent jurisdiction are simply compounded by the disadvantages of picking a less efficient policy tool.

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