Power Trip

In the heat of the equalization squabble climate change is a welcome topic as far as Newfoundland and Labrador is concerned. The Council of the Federation meeting tomorrow in Toronto will see premiers and territorial leaders discuss the now much criticized Canadian greenhouse-gas action plan. The plan is at best, getting mixed reviews. It seems to be generally supported by industry, but that's not necessarily a good thing. Outspoken and respected scientist David Suzuki, Inconvenient Truth's Al Gore, and now a UN official, Yvo de Boer, have condemned the plan. So there is a strong desire for a better plan, sooner rather than later.

Ontario's Premier Dalton McGuinty is also thirsty for some clean hydro energy. Ontario has reduced reliance on coal plants by one third and wants to do more.

Provincial leaders should also ponder the idea of a national power grid in much the same way as the trans-Canada railway helped knit the country together ... The great thing about hydroelectric capacity is that it's a great renewable resource and it doesn't contribute to climate change. (CTV)

Ontario wants it, Canada, the U.S. and the world needs cleaner energy, so it would seem that NL's hydro potential is only becoming more valuable.

We’ve already reduced our reliance on coal by one third, which is the equivalent of taking two million cars off the road. The previous government increased emissions from coal by 127% and slashed the Ministry of the Environment budget... The leader of the official opposition wants to wait 13 years before even beginning to reduce greenhouse gases, and we would then have to wait another 30 years for any other significant change.- Ms. Monique M. Smith (Nipissing), Apr. 26, 2007: Ontario Legislative Assembly Hansard

Danny Williams said that the meeting will not be a fed-bashing event. Perhaps it might even be a time of political climate changes where cooler heads prevail. Since clean energy is what provinces and the nation want, developing NL's hydro potential could also be an opportunity for Harper, though he won't be at this meeting, to try and redeem himself by at least offering assistance to our province in developing this, in such a way that Newfoundland and Labrador is favored similiar to the way Quebec was for the Upper Churchill project. That very scenario probably won't happen, but it could be a chance for the Government of Canada to step in to repair current and historical wounds. How to best develop Lower Churchill is not certain, but it would be good to see all possible options.

The Fiscal-Imbalance & Weapons of Mass Destruction - they didn't exist

For years we've heard the term "fiscal imbalance" used continually, especially by Ontario Premier Dalton McGuinty. He claimed that Ontario was getting short-changed in the federal transfers to his province. The sentiment was echoed by Quebec, the federal finance minister and the Prime Minister. Looking back, it is reminiscent of U.S. Secretary of Defense Donald Rumsfeld, and Vice President Dick Cheney, announcing over and over that "the whole world knows Iraq has weapons of mass destruction". It was a repeated sermon done with such conviction, that many felt foolish to question something "so obvious". In a different realm of the economy not war, Canadians were fed the whining "fiscal imbalance" line to make it appear that Ontario and Quebec were losing out in the whole deal. This line played well for Harper. Fix the "fiscal imbalance" in ON and PQ and fix the old minority government status with one stone.

Andrew Coyne writes that the whole thing was a myth. His "The 'Fiscal-Imbalance' Myth" is worth reading. Here are some excerpts from the March 24 article. (emphases are mine)

"It was always a sham, there was never anything to it, it was obvious to anyone who bothered to look. But this was the week when it became impossible to sustain even the pretense.

In essence, there never was a fiscal imbalance, even in the provinces' imaginations. There was Quebec's agenda, unchanging as ever, for more money, dressed up as a systemic federal-provincial thing to enlist the aid of other provinces. There was Ontario's quite different complaint, which was not that Ottawa was stiffing the provinces in general, but that it was being shortchanged relative to the others. And there was the ambition of the newly rich oil-producing provinces, Newfoundland, Nova Scotia and Saskatchewan, to get out from under the equalization clawback.

But the only way to deliver enough booty to Quebec to make a dent in its demands was to give it the lion's share of any increase in transfers, and the only way to do that was to smuggle it in via a "reformed" equalization program: Otherwise it would be too clear to all what was going on. But to deliver to Quebec, you had to include oil revenues in the equalization formula, and to deliver to Newfoundland and the others, you had to exclude them. And while both might have been satisfied simply by expanding the program, that ran you afoul of Ontario. Only two sides of this puzzle could be solved at once, and all of the budget's obfuscations couldn't conceal which two.

But if Charest's federally funded tax dodge did not give the game away, Ontario's budget did. Here's how hard done by Canada's largest province is: In the coming fiscal year, it will receive fully $16.1-billion in funding from Ottawa, or more than one-third of all federal transfers. That's up from $7.8-billion in fiscal 2002, just six years ago. Ontario's share has been rising, not just in absolute terms, but relative to the other provinces.

That at least clears up one puzzle: how the McGuinty government has been able to sustain such extraordinary levels of spending -- a 30% increase in just four years. In popular mythology, it's because Mr. McGuinty took the difficult but necessary step of raising taxes, even after promising he wouldn't. He had to, don't you know, after Mike Harris's heartless, ideological tax cuts had starved the government to the bone. Just one problem with that explanation: Tax revenues were higher under Harris than under Mr. McGuinty.

Look it up. Personal income tax revenues, on average, under the tax-cutting Mr. Harris: 4.3% of GDP. Under the tax-raising Mr. McGuinty: 4.2%. Total own-source revenues -- that is, exclusive of federal transfers -- are roughly the same under the two governments, at around 13% of GDP. Mr. McGuinty's four-year spending spree has been financed, not with his own tax hikes, but with a massive increase in federal transfers -- the very transfers he has spent the last four years complaining about.

Not that this is likely to shut him up, you understand, any more than Mr. Charest. I only say that it should."

Fed Money for Toronto Transit: More Tory Seats Down the Road?

Prime Minister Harper made Dalton McGuinty's day on Monday with a $1 Billion cheque for the Toronto GTA transit system, and another half billion for Ontario to help pay for an east-west transmission grid to Manitoba. The grid will allow Ontario to import cleaner electricity from Manitoba, thus help to clean up some of Ontario's worst polluters. This is all good. It must be a nightmare to experience those long clogged commutes into the populous Toronto. It's a big gift from the feds, which probably won't soon be forgotten, at least Harper hopes so. This transaction has a familiar ring - fix up the roads, some time before an election, and get some political payback. The CPC's really need to make some headway in Toronto, no seats in the last election. He'll pick up some seats there next election. That could neutralize the threats of Premier Williams to have the province vote for anyone else if the equalization deal doesn't go his way. But you still can't burn any bridges when you need every seat.