McGuinty Rebrands Himself as an Ottawa-basher

ONTARIO PREMIER Dalton MCGUINTY knows better than most politicians that once an idea gets stuck in the public's mind, it's hard to dislodge.

McGuinty Rebrands Himself as an Ottawa-basher

ONTARIO PREMIER Dalton MCGUINTY knows better than most politicians that once an idea gets stuck in the public's mind, it's hard to dislodge. After winning the provincial election in the fall of 2003, he failed to keep a string of campaign promises, most notably by raising taxes in the following year's budget. The corrosive label "liar" got stuck to him. It took months of dogged, repetitive messaging to begin replacing the "L" word with another easy-to-grasp notion: the gap. All last winter and into the spring, McGuinty hammered home his point that Ontario gives $23 billion a year more to Ottawa than it gets back - way too much. Try as they might, his federal Liberal cousins haven't been able to persuade Ontario voters that McGuinty's gap isn't a problem.

It's been a rebranding coup for the premier. He's reinvented himself as his province's voice in the high-stakes game that is Canadian fiscal federalism. Back in early May, Paul MARTIN cut a deal to give Ontario $5.7 billion more over five years. But if the PM thought that would be enough to buy peace, he was wrong. McGuinty is now pressing his close-the-gap case even harder. Last week, he called for a national commission to study financial relations between Ottawa and the provinces, the first of its kind since the landmark Rowell-Sirois commission, whose 1940 report paved the way for a historic shift of power to Ottawa. "I believe in federalism," McGuinty said. "But I am equally convinced that the fiscal arrangements designed to support it are terribly outmoded."

McGuinty links his argument closely to education, his top policy priority, saying Ontario needs to keep more of its money to invest in a world-competitive workforce. For federal Liberals facing an election early in 2006 - with Ontario, as usual, shaping up as the most important battleground - an ongoing war of words with McGuinty's wing of their party is a disturbing prospect. Yet it is hard to see the conflict easing anytime soon. McGuinty's newly named point person on the file, Intergovernmental Affairs Minister Marie Bountrogianni, talks tough. "I'm fine with my federal colleagues, I respect them," Bountrogianni said. "I just wish they would return that respect, not to me, but to the people of Ontario."

She criticized Liberal MPs for voicing skepticism about a recent Ontario Chamber of Commerce report that warned Ontario might sink to have-not status if Ottawa keeps draining its wealth. That danger, she insists, is real. What would it take to halt the slide? McGuinty has resisted being pinned down on a figure, and Bountrogianni wouldn't be specific either. But she did offer this hint: of that $23 billion Ontario contributes over what it gets back from Ottawa, she said 60 per cent can be chalked up to the province's strong tax base, the remaining 40 per cent to "unfair" federal programs.

That measure of alleged unfairness amounts to a whopping $9.2 billion a year. Is it possible Ontario is being so grossly shortchanged? Depends which expert you ask. Sorting out how cash flows back and forth among Ottawa and the provinces rivals trying to understand the New Orleans system of levees, canals and pumps. McGuinty boils his complex case down to a few compelling examples: Ontario gets $857 per person from Ottawa in health and social transfers, while the other provinces get $941; federal infrastructure programs since 2000 funnelled $73 per person into Ontario, compared to $93 in the rest of the country.

In response, federal Citizenship and Immigration Minister Joe Volpe, a powerful Ontario voice at Martin's cabinet table, has said the province gets less and gives more because it's rich. But McGuinty's strategists have recently been compiling figures to highlight the poverty inside that prosperity. Among the statistics they cite: 771,535 people in Toronto lived below the low-income line according to 2001 census data, more than double the 370,395 in the four Atlantic provinces combined.

Still, Ontario's need to cope with social problems isn't McGuinty's main thrust. His argument rests on the notion that for Ontario's economy to stay competitive, his government needs to reinvest aggressively in education. And it is on this point that the politics of the gap turns into something much more than a debate about dollars. It's a struggle between Ottawa and the provinces over what politicians at both levels see as the policy files they hope to dominate in the future. The premiers made education their central theme of their recent Council of the Federation meeting in Banff, Alta., and they plan to stage an education summit in Ottawa in late October or early November. That's about the same time Martin's government is expected to release a pre-election economic policy statement - in which the federal focus on education is almost certain to feature as the major theme.

Tom Courchene, the Queen's University public policy professor and guru on the inner workings of Canadian federalism, sees all this as part of a wider federal-provincial struggle. According to Courchene, provinces hold the key constitutional responsibilities in the new global economy, especially over education. But Ottawa has more revenue-generating capacity, largely because it "got there first," by imposing taxes such as the cash-spinning GST, he says. So while provinces want to take the initiative in their jurisdictions, Ottawa uses spending power to elbow its way into a leadership role. "Human capital and education is now the cornerstone of competitiveness," he says. "Ottawa has to be there for nation-building purposes, but it doesn't have the jurisdiction, just the fiscal clout."

The upshot is that Ottawa's status on the hot policy files depends on its maintaining a financial edge over the provinces. Thus, McGuinty's demand for a shift of fiscal might back to Ontario amounts to challenging the federal government's vision of its own future. And Ontario is hardly alone in attacking the "fiscal imbalance," a major gripe of Quebec's Jean Charest, among other premiers. Their solidarity on the issue, though, depends on keeping Ottawa as the shared enemy. Any hint of making Alberta's soaring oil revenues a target for the less prosperous provinces - in other words, all of them - triggers angry defensive reaction in Alberta. Even an out-of-left-field proposal from Courchene last week that Alberta should voluntarily enter into a new interprovincial resource revenue-sharing pool met with a testy hands-off response. The flare-up prompted McGuinty to quickly assert that he doesn't covet Alberta's petro-dollars.

No sensible Ontario premier would bank on sustained support from other provinces in a political row; the ingrained anti-Central Canada instinct across the country is too strong. But McGuinty may not really need close allies. In the run-up to the federal vote expected early in 2006, Ontario's 106 seats, out of the 308 in the House, command plenty of attention. Polls last spring showed that nearly 60 per cent of Ontario voters bought McGuinty's case that Ottawa was treating their province unfairly.

Even worse from the federal Liberal perspective, the Ekos Research Associates polling firm found "the principal beneficiary of Premier McGuinty's campaign for a bigger share of federal revenues has been Stephen Harper and the Conservatives." With McGuinty's gap gaping as a fall political issue, Martin might have to find a way to make peace - or risk letting this rift between Liberals plague him in the biggest battleground of his coming re-election bid.

Maclean's September 12, 2005