Executive Summary -- The Art of the Impossible: Fiscal Federalism and Fiscal Balance in Canada

july 20 0 6 executive summary The Art of the Impossible Fiscal Federalism and Fiscal Balance in Canada By Hugh Mackenzie If Its fIrst sIx months are any indica- which the fiscal imbalance issue may be one of tion, 2006 will turn out to be the year of fiscal the keys to the additional seats it needs to win imbalance in Canada. [...] The Canadian Council of Chief Ex- critical misconceptions about the development of ecutives, the Council of the Federation and the the Canadian public economy — misconceptions Expert Panel on Equalization and Territorial that are leading us to avoid the real issues. [...] The report of the Advisory Panel pared by the Finance Canada in 2002 and in to the Council of the Federation acknowledges a recent report analysis by the BC office of the the problem of interprovincial tax competition, Canadian Centre for Policy Alternatives. [...] primarily responsible for the fiscal pressures that Third, addressing the weaknesses in the fis- have given rise to the debate over fiscal imbal- cal equalization program — a federal program for ance does not, however, mean that the federal which the federal government has a constitutional government has no role to play in addressing the responsibility — will be critical to any solution to problem. [...] First, by setting in motion the fiscal pres- Finally, to the extent that provincial fiscal sures that led provincial governments to take capacity problems undermine the ability of pro- the path of least resistance and cut their trans- vincial governments to deliver services that are fer payments to local governments, the federal central to national political projects, federal gov- government is in.