The topic of this talk is one that is of considerable interest to the community of Canadians - the reform of social policy and the role of the federal government in that process. Interest in it is reflected in a recent survey reported in the Globe and Mail that showed that the average Canadian feels quite strongly that governments have an important and indispensable role to play in the achievement of social justice. However, they also think that governments are not delivering. There is obviously much scope for reform. The issue to be addressed is how the federal government can and should participate in that process, especially in light of current fiscal realities.
Let me start by stating what aspects of social policy I do not intend to address. The talk is not about the appropriate design of social programs. That is, it is not about how unemployment insurance should be reformed, whether it should be two-tiered, whether it should have a training component, and so on. It is not about how the welfare system should be changed to address the problem of child poverty or of the working poor. It is not about whether public pensions should be targeted to those in need, or whether they should be funded according to actuarial principles. Nor is it about whether the state should have a role in the delivery and financing of child care. It is also not about whether principles of pricing and privatization should be applied to health care, or whether students should bear a greater burden of the financing of post-secondary education. More generally, it is not about the relative role of cash transfers versus tax preferences versus the in-kind provision of goods and services as components of social policy. Finally, it is not about the implications of the current fiscal (debt) crisis for the funding of social programs, though all of these are important and relevant issues.
Rather, it is about the nature of decision-making over social policy issues in a federation such as Canada's, one which is highly decentralized by international standards. As the title suggests, it asks 'Can the Federal Government Deliver?' rather than 'What Can the Federal Government Deliver?' or 'What Should the Federal Government Deliver?' It is about the way that the responsibility for achieving social policy objectives is divided between (and shared by) the federal and provincial levels of government, and how this might be reflected in the policy instruments available to these governments. Obviously, this is not unrelated to the above questions about the design of social policy. Indeed, one of the themes of my talk is that the social policy reform can be greatly constrained by a failure of the federal system to condone policy instruments commensurate with responsibilities at the two levels of government.
Briefly speaking, my main thesis can be summarized in the following line of reasoning:
(1) We take it as a major premise that the federal government has a legitimate role to play in pursuing national standards of redistributive equity or social justice, as well as national efficiency objectives where:
(a) national equity includes horizontal and vertical equity applied on a national basis, which implies citizens are treated equivalently independent of province of residence; and equality of opportunity;
(b) national efficiency includes preservation and enhancement of the efficient operation of the internal economic union, or common market; The issue is what implications for social policy reform follow from that major premise.
(2) Social policies (a) are integral components of national equity policies and (b) can have implications for national efficiency; social policies include a wide array of policies and comprise much of what governments do.
(3) Some social policy instruments are federal (especially unemployment insurance, largely pensions), some are jointly occupied (taxes and transfers), while others are 'exclusive' provincial responsibilities (health, education and welfare);
(4) While there are very good economic reasons for decentralizing the delivery and financing of social programs, such decentralization can lead to violations of national efficiency and equity norms:
(a) lack of coordination among policy instruments and among provinces can lead to inefficiencies in the national economy (the internal common market);
(b) beggar-thy-neighbour policies of provinces can lead to adverse redistribution consequences (the 'race to the bottom');
(c) fiscal decentralization leads to fiscal (horizontal) inequities among provinces, and to inconsistent standards of vertical equity; For these and other reasons, the system of fiscal arrangements between the federal government and the provinces is an integral part of the social policy arsenal of the federal government; indeed, it is the major source of federal influence. …