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This report by Judith Gibson, Jacek Warda and Janusz Zieminski analyzes Canada’s performance vis-à-vis innovation. The authors find that Canada ranks near the bottom of the G7 countries, and consider its overall performance to be poor. Stressing the fact that “innovation is a key driver of productivity gains and long-term economic growth,” Gibson, Warda and Zieminski argue that the federal government must improve its commitment to innovation while firms must improve practices and capabilities that foster innovation. Some of the factors denounced as impeding innovation at the government level include human resource development and regulation/taxation. It is the authors hope that this report can serve as a benchmark against which Canadian innovation efforts can be measured, and also as a conceptual framework to better enable understanding and analysis of innovation itself.

The Canadian Centre for Policy Alternative’s State of the Manitoba Economy: 2001-2002 examines Manitoba’s current and future economic outlook. Manitoba’s economy, the report notes, is highly dependent on the United States, with 21 percent of the Province’s GDP (Gross Domestic Product) derived from exports to the US. The US recession of 2001, in combination with the terrorist attacks of September 11th, have therefore had a negative effect on Manitoba’s economic growth. Still, the report finds the Manitoba economy to be relatively robust in 2002. Despite this robustness, the authors of the report highlight a number of concerns with Manitoba’s economy, the most pressing being the Province’s fiscal situation. The report concludes by suggesting that rather than reduce expenditures on social programs or infrastructure, the Government of Manitoba should suspend its balanced budget legislation and postpone proposed tax hikes.

The Canadian Centre for Policy Alternatives’ Nova Scotia Alternative Budget 2002-2003 provides a framework to deal with Nova Scotia’s financial difficulties. The response of the Government of Nova Scotia in confronting these issues, according to the authors, has been to cut funding to programs and services in the province. The authors take a different approach, asserting that the province does not spend sufficiently on programs and services; by contrast, in the authors view, it spends too little. Additionally, the authors cite figures to demonstrate that Nova Scotia generates far less of its own revenue than other provinces, an area where they see potential for vast improvement.

Three Nova Scotia Fiscal Myths, by John Jacobs and Larry Haiven of the Canadian Centre for Policy Alternatives, argues the Government of Nova Scotia justifies its fiscal planning based on politics rather than sound economics. The authors discuss what they believe are three myths the provincial government perpetuates: 1) Nova Scotia spends too much on programs and services; 2) Nova Scotia is overtaxed; and, 3) user fees ensure that all residents pay their share to balance the budget. According to Jacobs and Haiven, Nova Scotia’s fiscal problem does not necessitate a drastic cutting of programs and services as the myths claim. Instead, the authors conclude by calling for a long-term fiscal plan that invests in the future of the province.

The Canadian Centre for Policy Alternatives’ Manitoba Alternative Provincial Budget 2002-2003 makes community economic development its top priority. To this end, the Alternative Budget proposes a number of measures: making Manitoba less vulnerable to downturns in the US economy by putting more money into the provincial economy; investing in services rather than tax cuts; eliminating Manitoba’s balanced budget legislation; and, solving the structural fiscal deficit the authors label as Manitoba’s ‘revenue problem.’ Additionally, the Alternative Budget puts a special emphasis on health care, proposing a plan for what the authors term “a better and more sustainable health care system.”

In Ontario’s Phantom Fiscal Crisis, Hugh Mackenzie, of the Canadian Centre for Policy Alternatives, counters projected Government of Ontario deficit figures of $3 billion to $5 billion for 2002-03. Mackenzie asserts even the most pessimistic budget estimates put the deficit at nowhere near $5 billion. To the contrary, Mackenzie forecasts a deficit of $600 million for 2002-03, arguing it could be a $600 million surplus if the government suspended its planned corporate tax cuts. In conclusion, Mackenzie asserts there is clearly no evidence the Ontario government faces fiscal problems that would stop it from reinvesting in health care and education.

Following the 2002-03 Government of Ontario budget, the Canadian Centre for Policy Alternatives released its Ontario Alternative Budget. The Alternative Budget asserts public spending on programs and capital improvements has dropped 15.1 percent under seven years of Conservative governments in Ontario. In addition, it is suggested that the Government of Ontario has wiped out a “substantial portion” of its revenue base through tax cuts, choosing to reduce taxes before balancing the provincial budget.

According to Hugh Mackenize’s article The Money is There: Pre-budget Fiscal Update, 2001 claims of fiscal crisis by the Government of Ontario have no foundation in fact. Mackenzie cites revenue estimates by major Canadian banks to conclude Ontario has room to invest $2 billion in public services in 2002, and an additional $3 billion in 2003. These investments are sorely needed, he asserts, because of the impact of seven years of cutbacks to Ontario’s public services under the Conservative government.

Each year a coalition of community, social advocacy and labour organizations work together to produce the Canadian Centre for Policy Alternative’s Alternative Federal Budget. The 2003 version argues that the federal government’s fiscal situation is much more positive than suggested by federal officials and private sector forecasters. The Alternative Federal Budget claims the federal surplus for 2003 is in excess of $10 billion, and calls into question the credibility of other projections for what the report contends to be a consistent underestimation of this figure. Additionally, the publication claims federal fiscal capacity, represented by revenues as a share of GDP (Gross Domestic Product), has declined due to reduced taxation levels. The Alternative Federal Budget 2003 concludes by calling for the immediate halt and reversal of federal government tax cuts.

Annette Ryan’s paper Equalization: Neither Welfare Trap or Helping Hand was prepared in response to a 2001 conference entitled Equalization: Welfare Trap or Helping Hand? Ryan rejects the assumptions in the conference title, arguing equalization is instead a reasonable approach for delivering public services in a widely dispersed country. Equalization is not, she asserts, an economic development program meant to eliminate differences in production or opportunity across provinces. It is simply meant to deliver reasonably comparable services at comparable levels of taxation.

Kenneth Boessenkool’s paper Taxing Incentives: How equalization distorts tax policy in recipient provinces argues there is strong evidence that Canada’s equalization payments system encourages poorer provinces to overtax their populations. Boessenkool claims economic theorists have long discussed the idea that poorer provinces can increase the size of their equalization payment by manipulating their tax rates. With this paper, he argues, evidence now exists to prove this true.

Bev Dahlby’s paper The Incentive Effects of Fiscal Equalization Grants contends that the inclusion of taxation and expenditures in Canada’s equalization funding formula can distort the fiscal policies of provincial governments that receive equalization funds. Dahlby uses a generic equalization grant funding formula to determine whether the tax and expenditure choices of governments are affected by equalization funds. He finds recipient governments change their fiscal policies to receive higher equalization grants. Most notably, Dahlby asserts that grants (based on his formula) result in higher taxes, excessive spending on consumptive public services, and an under-provision of tax base-enhancing expenditures such as education and infrastructure. Drawing upon his results, Dahlby concludes that equalization builds an inherent bias into provincial fiscal decisions.

In Toronto's Revenue Crisis: A Made at Queen's Park Problem That's Only Going to Get Worse, Hugh Mackenzie, of the Canadian Centre for Policy Alternatives, argues that Toronto’s budget problems are a direct result of actions taken by the Ontario government. According to Mackenzie, the provincial government’s municipal tax policy essentially freezes Toronto’s revenue, causing the City to lose access to 63 percent of its available tax base. The problem, as detailed by Mackenzie, is Bill 140, which defines a ‘tax ratio’ for municipal properties, in turn affecting the tax returns of municipalities. Cities such as Toronto, Mackenzie concludes, must fight the issue vociferously with the Government of Ontario in order to regain their revenue powers and avoid cutting crucial programs and services.

This Communiqué includes a look at the Table of Contents, Foreword, and Introduction to the book Canadian Conundrums, edited by Robert Brown. In his introduction, Brown explains that the purpose of the book is to bring the insights of past Clifford Clark Visiting Economists to a broader audience. Topics included in the volume range from fiscal balance to taxation.

Brian Ferguson’s paper Expenditure on Medical Care in Canada: Looking at the Numbers, argues the only option to afford the level of health services Canadians have become accustomed to is to allow greater private spending. Ferguson asserts the way Canadians pay for health care has changed. In the past, governments had “the luxury” of running deficits and Medicare was financed based on borrowing. Today, however, Ferguson points out health care must be paid out of current revenues. These higher costs leave governments with the option of raising taxes, reducing services, or turning to private funds.

This article, written by William B.P. Robson, analyzes the oft-discussed issue of Canada’s ageing population and its effects on the country’s ability to fund the public health care system. Robson points out (using demographic projections) that the twin phenomena of a retiring baby boom generation and a shrinking tax base are sure to affect the ability to raise the revenue needed to fund the system in the future.

This article by Grant L. Reuber and Finn Poschmann analyzes the costs of public health care in Canada and the means of reform. The authors believe incorporating direct financial incentives into the system would “temper growth in demand for health services and place market pressure on providers to improve their efficiency and reduce costs” while still respecting the Canada Health Act. Reuber and Poschmann believe the best way of operationalizing the aforementioned financial incentives is through a provincial tax credit which would be tied to usage of the health care system.

This survey, authored by Liv Fredricksen, presents a “report card” to governments regarding their mining policies. It takes into account several public policy factors, including taxation, regulation, labour issues and political stability, and then measures the effect of these factors on “attracting and winning investments.” The survey covers 45 jurisdictions, including all of Canada, numerous US states, as well as several other countries. Several Canadian jurisdictions finished near the top of the index, with Alberta taking the highest ranking. British Columbia finished last within Canadian jurisdictions, tying Russia with a score of 23 out of a possible 100.

In Reckless and Unnecessary: CCPA's Analysis, Facts and Figures for Understanding and Challenging BC's January 17 Budget and Job Cuts, Seth Klein of the Canadian Centre for Policy Alternatives argues the Government of British Columbia’s 2002 spending cuts will cripple BC’s ability to provide public services. Klein claims the Government’s rational for spending cuts – a ‘structural deficit’ in the province’s economy – is “ideological fabrication” and “nonsense.” His discussion focuses on the so-called structural deficit, the impact of cuts on employment, welfare cuts, and his belief that such cuts will cost money rather than save it. Klein concludes that the numbers reveal spending cuts are the Government’s way of paying for its previous tax cuts, and that cutting programs in tandem with taxes is tantamount to transferring money directly from British Columbia’s poorest residents to its wealthiest.

Published by the Atlantic Institute for Market Studies, John Philippe’s report What’s A Degree Worth?: Who Pays and Who Benefits at Atlantic Canada’s Universities? argues for market-based reforms to Atlantic Canada’s post-secondary education system. Philippe believes it is important to ask what value taxpayers receive from growing post-secondary commitments by governments in the region. His conclusion is that they do not receive sufficient benefits for the dollars they invest.

This article by Jason Clemens, Joel Emes and Nadeem Esmail examines the challenges faced by Saskatchewan, offering both short- and long-term policy recommendations. Their main short-term recommendations are to privatize government business enterprises (GBEs, which are akin to Crown Corporations), use the proceeds from these privatizations to reduce the debt, and then to use the accumulated savings to finance the lowering of business taxes. Among their longer-term recommendations: shrinking the size of Saskatchewan’s government, and the continuing privatization of government business enterprises.

This article by Jacek Warda looks at Canada’s tax system in relation to innovation. He argues that the Government of Canada could foster innovation by reaching beyond its customary commitment to research and development (R&D).

Brian Lee Crowley’s paper Rags to Riches: How “the regions” can and should be leading Canada’s productivity push, argues that federal government policies hinder the economic convergence between less-developed provinces and the rest of Canada. Crowley claims Canada’s economy is defined by tools of government spending, transfers and “activist” economic development policy. Originally assuming unemployment is the primary policy problem in less-developed provinces, Crowley continues, these tools are no longer applicable in an economy where labour shortages and skill gaps are the new challenges.

Towards a Solutions Budget for BC calls for the 2002 British Columbia budget to avoid proposed tax and spending cuts and, instead, investments in provincial social programs and long-term future. The authors assert the Government of British Columbia’s plan to cut taxes and spending is flawed because: 1) the “fiscal crisis” experienced by the Province is the result of the Government’s massive tax cuts; 2) the decrease in both tax cuts and spending at the same time increases inequality by disproportionately affecting low-income residents; 3) the timing of the cuts is awful because the BC economy is in recession; and, 4) the Government’s plan is “a high-stakes gamble” with unsure results. The paper contends that if the Government follows through on its proposal the result will be a reduced standard of living for British Columbians. Finally, the paper concludes with a series of budgetary proposals – including investment in the resource sector, greater funding for social services, and democratization of the public sector – prescriptions to overcome the recession and improving the standard of living for all British Columbians.

Steve Kerstetter’s report Rags and Riches: Wealth Inequality in Canada analyzes Statistics Canada data on the net worth (total assets minus total debts) of Canadians. Kerstetter’s report concludes that Canada has a deeply unequal distribution of personal wealth. His analysis compares personal wealth according to a number of different factors, including region, age, housing status, and education. Kerstetter finds that in 1999 the wealthiest 10 percent of Canadian family units had a combined 53 percent of the wealth, while the poorest 10 percent had negative average wealth. Perhaps more shocking, Kerstetter maintains, in the same year the wealthiest 50 percent of family units had 94.4 percent of Canadian personal wealth.