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Published in The National Post on May 5, 2006

Harper's just getting started

As an exercise in public relations, it was a smashing success. But insofar as it will actually affect the lives of Canadians, this week's federal budget was one giant stalling tactic - its maze of tax credits a series of gimmicks designed to hold everyone at bay until Stephen Harper can get to the stuff he really wants to do.

Dropping a point off the GST or putting a few bucks back in the hands of people who ride public transit, buy computers or sign their kids up for hockey isn't exactly revolutionary stuff; for all the talk of promoting the Tories' social values, even the child care tax credit won't be big enough to actually affect the way most Canadians raise their kids. And if these policies do have some impact, it will largely be at odds with Mr. Harper's worldview - the attempts at social engineering through selective tax policy representing a more intrusive government, rather than a more hands-off one.

So how do we know that this isn't a newer, more pragmatic Mr. Harper, rather than one who's biding his time until a majority government lends him more leeway? Well, mostly because he was kind enough to tell us via a much more interesting document released the same day as the budget.

Its title, Restoring Fiscal Balance in Canada, suggests a boring think-piece about the equalization formula. What readers get instead is a lively paper that reminds us, albeit fairly subtly, of the Stephen Harper of old - the one who vociferously complained about Ottawa trampling on provincial jurisdiction.

Since federal deficits were replaced with surpluses in the late 1990s, the paper informs us, "the pattern of spending that emerged ... has often led to concerns about blurred accountability." It then proceeds to list off areas of federal responsibility on which Ottawa has placed "insufficient focus" (defence, border security, international assistance and several others) and areas of provincial responsibility in which federal intrusion has prompted "concern" - among them child care and public housing.

The message is clear: If given the chance, this government will get out of the social policy business, restricting most of its active policy-making decisions to matters strictly under its jurisdiction. Later, that approach is further fleshed out - the government stating that "excess federal revenues [will] be used primarily to reduce federal taxes rather than to launch new policies in areas where the federal government is not best placed to design or deliver programs."

Then the paper gets really ambitious. "There have been many calls over the years for structural realignments of tax policies that would have the effect of reducing or eliminating joint occupancy of particular tax fields," it proclaims, specifically citing the recommendation that Ottawa scrap the GST altogether, reduce transfer payments and leave sales tax entirely to the provinces. Similar measures, it suggests, could also be undertaken to some measure with income or corporate taxes.

Ultimately, of course, Canadians wouldn't be taxed less; they'd just be taxed differently. By collecting directly, instead of relying on the feds, the provinces would gain even more autonomy than they presently have.

Even if they don't go quite that far, the Conservatives' repeat references to getting federal transfers and investments onto a steady, "long-term track" suggest considerably less opportunity for Ottawa to attempt to influence social policy. Locked into long-term agreements and formulas, it would no longer have the flexibility to make funding decisions on a year-to-year basis; in turn, the carrot-and-stick approach to influencing provincial expenditures would no longer be useable.

Should the Tories begin advancing these approaches in their coming negotiations with the provinces, it will make for a compelling philosophical clash in the next election. With several of the Liberal leadership candidates already talking about "national projects," whoever wins that race will likely wind up advocating a more activist federal role than the present one. If that pitch fails, leaving Mr. Harper with a majority, the federal government will be a shell of its former self by the next time the Liberals get their hands on it.




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