This week the little sandbar on the East Coast, an equal partner in the Federation of Canadian Provinces, hosted the first ministers for their annual retreat. These meetings are not just for professional lobbyists and photo-ops, there is also the potential of coming up with meaningful consensus on significant national issues.
An area of focus for this conference is the economy and the fiscal capacity of the provinces in the face of predictably increasing demands. On Thursday, the report âA Difficult Road Ahead, Canadaâs Economic and Fiscal Prospectsâ was released, which cemented our first ministersâ position.
The report is very well done, certainly not drafted over the course of the conference but designed with singular precision: to extract more money from tax payers, namely federal government taxpayers while not constraining provincial budgets or local spending.
Several scenarios are evaluated, but reducing spending is not a serious option when there is a surplus in the system. How long can an entity live beyond its means? Quite awhile it seems as Prince Edward Island has only managed to balance its books twice in the past 15 years and the federal government has not balanced itâs books since 2007.
Structuring an argument for more money is akin to placing ad advertisement stating a position to increase taxation. I am sure none of our esteemed first ministers would be so bold as to place that ad. The approaches offered are always much more seditious.
The framework of the argument presented: a) we know we are going to need more money â we can forecast rising expenditures; b) the federal government has managed their fiscal affairs better than we have and will soon be in surplus; c) rather than see federal taxes reduced we respectfully request to absorb some of this revenue you have taken from our provincial citizens.
There is no creativity in the solution; it is a justified position to maintain punitive tax rates. An alternate approach might be to acknowledge the population is aging and to invest in system efficiencies and operational refinement. Or, due to the declining productive workforce, develop immigration strategies to stabilize the tax base while increasing the capacity to create output. Or, stimulate growth and the tax base by investing in business and entrepreneurs.
The report is well designed but the authors were given too narrow a mandate. âCreate an argument where we can get more money from the feds, rather than show the leadership necessary to fix our problems.â
Another tired rational presented is the hangover from the averted financial crisis of 2008. Yes, it was an unprecedented circumstance and this week Ben Bernanke revealed he considered the period to be worse than the Great Depression.
We did not survive this recession due to the stewardship of provincial finance ministers; it was primarily the aggressive and unproven policies of the Federal Reserve (many of which will have long-term consequences). The provinces have also benefited from artificially low interest rates on borrowed money as result of monetary policies beyond the control of the provincial ministers. It is time to start looking forward.
The report does offer a âwhatâs possibleâ option, but this is a half-hearted attempt to be creative. The scenario is padded with the threat of either getting more transfers or raising taxes as a solution, neither solution address the structural issues.
Another argument is the position to abandon the plan to raise the age of Old Age Pension eligibility from 65 to 67. The provinces want to leave the retirement age at 65 which is to the fiscal benefit of the provinces; but in complete contradiction to the needs of business. Business needs an active available workforce. People are living longer, with better health and wanting to contribute to the workforce. Sixty-five is no longer a viable retirement age and there is no defensible rational as to why this policy should not be allowed to evolve.
As an electorate consumer, we cannot expect service delivery as we have always received it. We need to encourage and embrace change, something not always welcome in Canadaâs smallest province. But change is coming, it canât be resisted, and thus should be expected.
There is no question governing is difficult and I am sure unrewarding but building a premise to address significant structural issues by grasping for tax revenue is shallow, short-sighted and beneath the office of those we have asked to represent us. A conference on our beautiful province should deliver leadership, vision and the inspiration that a poorly attended meeting in 1864 provided to an eventual nation.
Blake Doyle is The Guardianâs small business columnist. He can be reached at email@example.com.