First reaction on the Throne Speech

It is hard to imagine the federal government falling on the basis of this Throne Speech. We’ll have to see what kind of chest-thumping this generates among the Opposition parties, but I do not think any of them wants an election, and my first pass at the text says Harper blinked. Plus since Newfoundland and Ontario just had elections with Saskatchewan gearing up, I pity the fool who would send us to the polls.

There is a lot that I find distasteful in this Throne Speech, but in minority fashion it is less egregious than I reckon Harper would be with a majority. The most controversial aspect is a suggestion that we could be in Afghanistan until 2011, but even that one is couched weakly:

In the coming session, members will be asked to vote on the future of the Canadian mission in Afghanistan. … Canada should build on its accomplishments and shift to accelerate the training of the Afghan army and police so that the Afghan government can defend its own sovereignty. This will not be completed by February 2009, but our Government believes this objective should be achievable by 2011, the end of the period covered by the Afghanistan Compact.

The first part of the speech spends much time talking about Arctic sovereignty. We then get some fluff about strengthening our democratic institutions, but nothing to too dramatic there either. And then we get a generic call for more tax cuts without any details save for the next GST cut that we already knew about. No news there. I suppose we will have to wait for November’s Economic and Fiscal Update for details on the tax cuts, and this could serve as a pre-election mini-budget.

Later in the speech, it declares Canada’s Kyoto commitment dead, then states the new and improved targets:

Our Government will implement our national strategy to reduce Canada’s total greenhouse gas emissions 60 to 70 percent by 2050. There will be a 20 percent reduction by 2020. Our Government will bring forward the elements from Canada’s Clean Air Act, which had all-party consensus, for parliamentary consideration.

On the federalism file, here’s a study in contrasts:

Our Government believes that the constitutional jurisdiction of each order of government should be respected. To this end, guided by our federalism of openness, our Government will introduce legislation to place formal limits on the use of the federal spending power for new shared-cost programs in areas of exclusive provincial jurisdiction. This legislation will allow provinces and territories to opt out with reasonable compensation if they offer compatible programs.

Our Government will also pursue the federal government’s rightful leadership in strengthening Canada’s economic union. Despite the globalization of markets, Canada still has a long way to go to establish free trade among our provinces. It is often harder to move goods and services across provincial boundaries than across our international borders. This hurts our competitive position but, more importantly, it is just not the way a country should work. Our Government will consider how to use the federal trade and commerce power to make our economic union work better for Canadians.

In the first instance, the government appeals to respecting provincial jurisdiction as a justification for restricting federal spending on social programs. This is pretty far from the firey, firewall rhetoric we used to get from Harper when he headed the National Citizens Coalition, and it is hard to read between the lines exactly what they mean. We will have to wait for the legislation.

In the second paragraph, based on the bogus claim about trade barriers – again, not a single example provided – provincial jurisdiction to meet local needs through public interest regulation is challenged. The Tories’ principles seem less about respecting federal and provincial jurisdiction and more about whatever measure will act to further reduce the size of government.

The line that really gets me is in the second paragraph, repeated so often it is conventional wisdom, that it is harder to trade among Canadian provinces than across the border with the US. Does anyone who knows anything about trade and investment really believe this to be true? A month ago, when I crossed the border I had to wait an hour in a line-up, something that imposed a real economic cost to me – and that costs billions of dollars a year when extrapolated to the export sector as a whole. I also had to change currency, which also costs me in transaction fees (and exchange rate risk with a rising loonie). But if I go to Alberta, I need not cross any border inspection station and can use my Canadian dollars.

I actually agree with the last sentence that the feds should use their powers to deal with any real interprovincial trade issues. But this is not going to be long exercise since there are essentially no barriers to real trade. The thorny part will be if the feds argue that differences in provincial regulations amount to trade barriers. These differences may pose some additional costs to business but are not barriers per se. In some cases, a high federal standard would make sense; in others, differences among the provinces are there for a reason (for example, stricter trucking regulations in BC due to its mountainous terrain). The worst outcome would be to impose some form of mutual recognition, where the lowest common denominator wins.


  • Marc, thanks for writing this excellent post. Now I do not have to.

    There is a striking contradiction between limiting federal powers and respecting provincial jurisdiction on social programs while bringing down the federal hammer to restrict provincial authority on economic and regulatory policy. As posted previously, it is unclear to me how the federal government can legally limit its spending power. I also do not understand why the federal government thinks it needs to invoke the trade and commerce power, given that Canadian courts have already struck down provincial laws that run afoul of federal jurisdiction in this area.

  • as Michael Geist points out, it looks like we will see a Canadian DMCA this session. I hope the government falls, if only to prevent such legislation.

  • Furthermore, it is interesting that the throne speech does not mention the federal government’s only concrete “economic union” proposal: a national securities regulator.

  • The Speech is most notable for not saying anything on our issues.

    Nothing here re bankruptcy/wage and pension protection for workers; child care and early learning; pharmacare and the future of public health care; worker training; municipal infrastructure; Part III of the Canada Labour Code.

    On the jobs issue, there is a short reference to the need to “stand up for Canada’s traditional industries” and to continue to “support workers in transition.”

    On poverty/ the prosperity gap, there is a hint that the Working Income Tax Benefit (a tiny income supplement for the working poor) could be increased.

    On EI, “the government will take measures to improve the governance and management of the EI Account.” This likely means that the EI account moving forward will be separated from the public accounts. Surpluses of over $2 Billion have been accumulated (on top of the earlier accumulated surplus of about $50 billion) under the new rate-setting process which was suppose to balance revenues and expenditures. Obviously, governance of the EI Fund will be a key issue.

    On the federal spending power, “the government will introduce legislation to place formal limits on the use of the federal spending power for new cost-shared programs in areas of exclusive provincial jurisdiction. This legislation will allow provinces and territories to opt out with reasonable compensation if they offer comparable programs.” This likely amounts to a relatively modest shift away from the status quo. The social union framework agreement now in place allows provinces to opt out with compensation if they offer a program which meets Canada-wide objectives, and if they are prepared to report on how transferred funds are spent.

    On Kyoto/Climate Change – the government will not reintroduce the heavily amended Clean Air Act, but will proceed with greenhouse gas emissions caps on large industrial emitters and its own target for emissions reductions (which do not meet the Kyoto commitment.) They probably do not intend to live up to Kyoto’s alternative ways of being compliant (through the purchase of international credits, or taking on additional commitments down the road.)

    On taxes – they promise broad based tax relief for business and individuals, plus another 1% reduction of the GST (which eats up a lot of tax revenue.)

    Andrew Jackson
    National Director
    Social and Economic Policy
    Tel. 613 526 7445

  • Thanks for rounding out my first impressions with those excellent additions, everyone. On copyright, I missed this in my scan:

    “Our government will improve the protection of cultural and intellectual property rights in Canada, including copyright reform.”

    We’ve commented on this development before on this blog. It is a pure capitulation to the big entertainment and software companies, who are not making enough money in the opinion of the government.

  • Matthew Bergbusch

    First, thank you very much for your great comments, and let me say how much I learn from all you progressive economists. I really appreciate the valuable insights I always get from Messrs Dufour, Lee, Stanford, Jackson, Weir, and Dubois.

    I have question for Andrew Jackson, however: you write “This likely amounts to a relatively modest shift away from the status quo. The social union framework agreement now in place allows provinces to opt out with compensation if they offer a program which meets Canada-wide objectives, and if they are prepared to report on how transferred funds are spent.”

    Isn’t what is being suggested by Harper fundamentally different for a couple of reasons?

    1) Unlike with the social union framework, Harper doesn’t seem to care whether or not a provincial program must meet Canada wide objectives or report on how funds are spent;

    2) He appears to propose giving something approaching constitutional permanency to the status quo, to in effect for ever prevent a situation where the federal government might choose to use its spending power to prevent a particular regional injustice or in certain cases provide a national program which it can provide itself more efficiently than through delegation to ten provinces?

  • Thursday’s National Post reported that the Government of Quebec is seeking to opt-out of the opt-out: “we intend to negotiate a bilateral agreement on the federal spending powers.” The whole debate is pretty academic given that the federal government has not tried to introduce substantial “new shared-cost programs in areas of exclusive provincial jurisdiction” for decades. The early learning and child care program was, of course, a series of bilateral agreements with provincial governments.

    Thursday’s Financial Post featured a story on the proposal to invoke the federal trade and commerce power. The premise was that the Conservatives are contemplating using this power to establish a national securities regulator. If so, one wonders why the throne speech made the baseless claim that it is harder to move goods and services across provincial borders than across national borders, instead of the plausible claim that multiple securities regulators cause problems for Canada’s financial market. In any case, the legal experts quoted seemed divided on the scope of this constitutional power.

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