Decentralization Is Key to Canada's Health Care Reform

Despite high levels of public spending, Canada’s health-care system consistently perform more poorly than a number of peer jurisdictions with universal health-care systems. 

Governments across the country must address this policy challenge in a context of constrained resources, as the federal government and a number of provinces currently face increasing debt loads and other significant fiscal challenges. 

During the 1990s, the federal government transformed its approach to providing financial assistance to the provinces to support their welfare and social assistance programs. Specifically, the federal government reduced transfers to the provinces but, in exchange, removed a number of “strings” previously attached to federal funding that prohibited certain types of policy reform. 

For example, the provinces were permitted to create work requirements for receipt of welfare payments, which previously would have triggered the withholding of federal transfers. The reform of federal transfers to the provinces led immediately to a wave of policy innovation and reform at the provincial level, as governments across the country pursued various policy paths designed to improve their welfare programs, create solutions that actually addressed local problems, and reduce program costs. 

Many of these reforms had the intended effects, as there was a marked decline in welfare dependency and government spending on public assistance in subsequent years. However, no similar wave of policy innovation occurred following the 1990's transfer reforms in Canadian health care. This is largely because the government maintained the various “strings” that were attached to health spending transfers and, specifically, the terms and conditions of the Canada Health Act. 

As a result, health-care policy in the Canadian provinces has since the 1990's generally been largely characterized by policy inertia while spending on health care has increased considerably. 

Canada’s experience with welfare reform provides a model with important implications for how to begin reforming and improving Canadian health care. By reducing transfers in real terms while amending specific provisions of the Canada Health Act that inhibit reform, the federal government can partially address the fiscal challenges it faces today while providing provinces with the freedom to innovate and pursue policy reforms to improve their health-care systems. 

Such changes would allow for greater experimentation by each province as they seek out what policy arrangements have the best possibility of improving health-care performance. 

For instance, provinces would be well served to examine the introduction of cost-sharing arrangements (co-insurance, deductibles, and co-payments) used in most other universal health-care countries to ensure more efficient use of the health-care system by patients. 

Provinces might also look at removing regulations that currently prevent a greater supply of needed health-care professionals and investment within the health-care sector. 

It is uncertain exactly what reforms different provinces would choose and the paper does not weigh the advantages and risks of specific reform options in detail. Instead, based on Canada’s experience with welfare reform, this paper recommends a crucial change, the devolvement of decision-making powers to the provinces, with the federal government permitting each province maximum flexibility (within a portable and universal system) to provide and regulate health-care provision as they see fit.

Read full article by Ben Eisen, Bacchus Barua, Jason Clemens, and Steve Lafleur  @ https://www.fraserinstitute.org/sites/default/files/devolvement-initiative-post.pdf

Greater economic growth requires Productivity NOT political deficit financed public spending

As fall approaches, all levels of government will begin preparing their budgets. Expect the usual grandstanding by special interest groups seeking new spending and tax cuts. The one not at the table will be the Future Taxpayer who will be stuck with any debt piled up by today’s deficit-happy politicians. Our existing deficits already total three per cent of GDP for all levels of government.

Actually, more than public deficits are being called for. Politicians want to expand government in the belief that the biggest economic bang is through public spending. What’s not getting a big push is tax cuts, which can be quick to implement and create better incentives for the investment, work effort and risk-taking needed for growth.

I have been warning for some time of a coming Canadian debt bomb. All government debt is now over 110 per cent of GDP compared to 90 per cent in 2007 (although below a peak of 135 per cent in 1995). Household debt now exceeds GDP. Corporate indebtedness has been climbing since 2011.

Governments are fooling themselves that Canada has substantially more room for more debt by looking only at “net debt” figures. These underestimate the size of our debt bomb since pension assets (CPP, QPP and employee pensions) are subtracted from debt while future pension liabilities are ignored. If we add back these liabilities, then the all-government net debt is close to 70 per cent of GDP, far higher than the 44 per cent politicians tout to make Canada look prudent.

None of these calculations includes the tsunami of liabilities associated with unfunded health care and other age-related spending. Meanwhile, the unfunded liability from Old Age Security just got bigger, after the Trudeau government’s reversal of the eligibility age to 65 from 67 years.

Obviously, the current public debt is more tolerable at today’s ultra-low interest rates. Maybe these rates will continue for years, as we seem stuck in a Japan-like funk of low growth and low inflation. Nevertheless, even at today’s values, these low debt charges cost taxpayers considerably. Total public debt charges in Canada are over $60 billion (eight per cent of public spending), money that could be used for health care, education and a less onerous tax system. Interest costs will balloon if governments take their feet off the money-supply accelerator, as recently seen in the EU and U.S.

With monetary policy failing to jolt economic growth, Keynesian economists argue for looser fiscal policy instead, meaning bigger deficits and public spending. Will fiscal expansion and deficits work? Japan’s recent, fruitless attempts suggest it won’t.

Governments are fooling themselves by thinking Canada has plenty of room for more debt

There may be a good reason for that. The Keynesian model assumes people are myopic, ignoring the consequences of deficits on future tax liabilities. It is hard to believe, though, that smart traders would ignore excessive debt build-ups that ultimately lead to economic stress, higher taxes and currency devaluations.

Nor does it seem that fiscal stimulus works well in open economies. An expansion of public deficits creates a capital inflow, pushing up the dollar, reducing international demand for exports and increasing domestic demand for cheaper imports. When the federal government announced $30 billion deficits last winter, the Canadian dollar rose despite a continuing decline in commodity prices.

But maybe I am wrong. People can be myopic and currency shifts can happen for a variety of reasons. So even if we believe that deficits can grow the economy, is it better to increase public spending or reduce taxes?

Keynesian's argue that spending increases are more powerful than tax cuts, which might be saved rather than spent. This assumes that the government spends only on consumption (which is never the case) while tax cuts create savings “leakage.”

However, tax cuts work through an economy faster in the short run compared to spending programs like infrastructure. Moreover, if the economy is to grow faster, we need higher productivity, since growth is simply the combined growth in the working population and growth in productivity (in Canada, the two are expected to be little better than 1.5 per cent). Infrastructure spending creates capacity for long-term growth but is a poor short-run stimulus, while tax cuts can generate growth both in the short and long run.

Currently, Canada’s reliance on income taxes impairs incentives for investment, entrepreneurship and the adoption of technology — all critical to growth. Some countries have clearly figured this out. The U.K. and Ireland, with low corporate taxes and some personal tax relief, have recently achieved better growth rates than the U.S., Canada and other European countries.

Canada has been doing the opposite. Federal and provincial governments have pushed up marginal income tax rates, whether at the top end or through higher claw-back rates for income-tested programs. Effective corporate tax rates on new investment have increased by almost 15 per cent through fewer incentives, higher transfer and property taxes, and increased tax rates in some provinces. Small businesses have gotten breaks, but they face a wall of taxes and regulations if they grow. 

If we want to see better economic growth, we need to get back to the productivity agenda — not the Keynesian agenda of deficit-financed public spending.

Jack M. Mintz | September 22, 2016 5:13 PM ET

Jack M. Mintz is the president’s fellow at the University of Calgary’s School of Public Policy.

Humanity EmptyTop Down to Bottom Up

Today's politicians and political parties are more corrupt than the citizens from the biblical city of Babylon days. (https://bible.org/seriespage/5-rise-and-fall-babylon)

We the people have allowed ourselves to be governed Not by “the people for the people”, but rather by political parties for political parties for Corporations, Bankers and Unions.

Our governments have become corrupt with absolute power by controlling the appointments of supreme court judges through the political party in power at the time such appointments are made solely based on political preference for the experience of a political ideology of the political party in power at the time of such appointment. 

They (Political Parties) further control who their people puppets shall be as their party's mouthpiece to be put forward for a political party for the voters to elect to represent them, NOT the voter, Rather the various political party these party agents truly represent and seek office under.

Global trade agreements do not benefit the middle class or poor within countries but rather the political elite and their money backers’; international corporations; bankers; labour unions and political party leaders.

Do not believe me? Then look at the facts over the past 30 or 50 years. What affects the cost of homes for example. Simply put it’s PLR. Products, Labour and Regulations. 

Products of course represent material, labour wages regulations government buildings fire codes etc. 

With all these regulations by the government, the people's (purchasers) cost for insurance has not decreased, but rather greatly increased. Multinational insurance companies, of course, control those costs. 

Products also, for the most part, are now under the control of large international corporations while labour costs are controlled by, you guessed it, international unions.

In Toronto, for example, the average house cost in 1985 was $109,094. The median family income at that time was $31,965.(http://business.financialpost.com/personal-finance/mortgages-real-estate/now-and-then-do-canadian-homes-really-cost-that-much-more-than-30-years-ago)

Representing a 3.4 times income in 1985. Today the Toronto median family income is $68,110 as per  Statistics Canada with the average house price in May 2016 within Toronto for all homes was $782,051 as per TREB.(http://www.citynews.ca/2016/06/03/average-house-price-in-toronto-continues-to-rise-to-1-28m-in-may/)

Today in 2016 this represents an 11.48 times income. Keep in mind that the family median income in 1985 adjusted for inflation today represents $65,091 or 12.01 times that 1985 income adjusted for today. Thus a family’s median income since 1985 has in fact DECREASED by $3,019.

So much for free trade, political parties and your elected party puppets looking after the interest of you the voter for these past 30-plus years!