How Ottawa Spends, 1995-96: Mid-life Crisis 9780773595880

Table of contents :
Cover
Title
Copyright
Table Of Contents
Preface
1. The Liberals' Mid-Life Crises: Aspirations versus Achievements
2. The Federal Debt
3 The National Unity Portfolio
4. "Job Ready, I Ready": Job Creation and Labour Market Reform in Canada
5. Canada Infrastructure Works: Between "Picks and Shovels" and the Information Highway
6. Prosperity Through Networks: The Bottom-Up Strategy That Might Have Been
7. Shifting the Burden: Liberal Policy for Post-Secondary Education
8. Redesigning Welfare: The Abandonment of a National Commitment
9. Aboriginal Social Assistance Expenditures
10. The Integrity Agenda: Lead Us Not into Temptation
11. Miniature Mila and Flying Geese: Government Advertising and Canadian Democracy
12. The "Liberal" Treatment of Violent Young Offenders
13. Warring Over Wheat: Managing Bilateral Trading Tensions
14. Federal Spending on the Atlantic Fisheries
Fiscal Facts and Trends
Resumes En Francais
Chapter Abstracts In English
Contributors

Citation preview

How Ottawa Spends 1995-96: Mid-Life Crises

How Ottawa Spends 1995-96: Mid-Life Crises

Edited by Susan D. Phillips

Carleton University Press

© Carleton University Press, Inc. 1995

Carleton Public Policy Series #16 Printed and bound in Canada

National Library of Canada cataloguing How Ottawa Spends 1983Annual. 1995-96 ed.: Mid-Life Crises Each vol. also has a distinctive title. Prepared at the School of Public Administration Carleton University Includes bibliographical references. ISSN 0822-0682 ISBN 0-88629-263-8 (1995-96 ed.) 1. Canada-Appropriations and expenditures-Periodicals. 1. Carleton University. School of Public Administration. HJ7663.S6

354.7100722

C84-030303-3

Carleton University Press gratefully acknowledges the support extended to its publishing program by the Canada Council and the Ontario Arts Council. The Press would also like to thank the Department of Canadian Heritage, Government of Canada, and the Government of Ontario through the Ministry of Culture, Tourism and Recreation, for their assistance.

TABLE OF CONTENTS

Preface

VII

The Liberals' Mid-Life Crises: Aspirations versus Achievements Susan D. Phillips 2

The Federal Debt James P. Feehan

31

3

The National Unity Portfolio Reg Whitaker

59

4

"Job Ready, I Ready": Job Creation and Labour Market Reform in Canada Char/aile Yates

5

6

7

8

Canada Infrastructure Works: Between "Pick and Shovels" and the Information Highway Caroline Andrew and Jeff Morrison Prosperity Through Networks: The Bottom-Up Strategy That Might Have Been Gilles Paquet and Jeffrey Roy

83

107

137

Shifting the Burden: Liberal Policy for Post-Secondary Education David M Cameron

159

Redesigning Welfare: The Abandonment ofa National Com mitment JamesJ Rice

185

9

Aborigina l Social Assistance Expenditures Allan Moscovitch and Andrew Webster

10

The Integrity Agenda: Lead Us Not into Temptation Michael MAtkinson

II

Miniature Mila and Flying Geese : Government Advertising and Canadian Democracy Phil Ryan

12

13

14

209

237

263

The "Liberal" Treatment ofYio lent Young Offenders Harvey Lithwick and Dahlia Lithwick

287

Warring Over Wheat: Managing Bilatera l Trading Tensions Grace Skogstad

323

Federal Spending on the Atlantic Fisheries Susan McCorquodale

349

.AP~/'" C APPOm IC85 Fiscal Fa.z: and Trends

-=#---'-

Resurn~ ltdya1S

C\mpteT Abstracts itrEn~h Contributors

375 395 403 411

PREFACE

This is the sixteenth edition of HolV Ol/alVa Spends. Our objective in producing thi s annual series is to provide t imely and constructive analysis offederal government spending and public policy, and to stimulate debate about policy options. This year's edition assesses how the Liberals are do ing at mid- life. To what extent ha ve they been able to live up to their e lecti on pro mises made in the Red Book? What are the poss ibi lities that they will be able to meet these commitments, given the serious economic and po litical constraints on govern ing? The Schoo l of Public Administration at Carleton Uni versity produces How Ol/awa Spends. Each edition depends on the contri butions and collaboration of many people. First, I am grateful tq all of the authors who worked under impossible deadlines and did so with integri ty and good cheer. As a peer-reviewed publication, we also rely heavily on the assistance of many other academ ic col leagues to provide comm ents, critic ism and advice to the contributors and to the editor. Th is year, particular thanks are due to Bruce Doern , Katherine Graham, Jane Jenson, Allan Maslove, Phil Ryan, Sa ul Schwartz, Gene Swimm er and Stan Winer, as well as to the indi viduals who prov ided helpfu l comments directly to the authors. Luc Ju illet provided superb research assistance for all of the authors and also com piled the tables and charts that appear as the appendix Fiscal Facts and Trends. We are indebted to the staff at the School of Public Ad m ini stration without whom thi s an nual publication wou ld not appear. In particular, Lauralee Raffelsieper did an excellent j ob in transforming the manuscripts into a pleasing text and the School's Administrator, Martha C lark, effective ly managed the process. Jo hn Flood and Dav id Lawrence of Carleton University Press extended inval uab le professiona l support. We are also gratefu l to Shelley Henderson and Shei la Protti for copy editing; and Sinclair Robinson and Nand in i Sarma for French translation and Chris FitzG ibbon for production of graphics. The faculty of the School of Public Administration and the editorial board of How Ol/awa Spends also extend our gratitude to the private secto r sponsors who have contri buted financia l support to this series.

VII

This is my third and last year as editor of How Ottawa Spends. I would like to express my special thanks to Katherine Graham, Director of the School of Public Administration, and Martha Clark for both their dedication to the endeavour and their personal support. Finally, I am grateful to my colleague, friend and husband, Brian Little, for his understanding and supportiveness throughout the "How Ottawa Spends project." Susan Phillips Ottawa April 1995

The opinions expressed by the contributors to this volume are the personal views of the authors of the individual chapters and do not reflect the views of the Editor or the School of Public Administration of Carleton University. .

viii

1 The Liberals' Mid-Life Crises: Aspirations versus Achievements

SUSAN D . PHI LL IP S

In

one respect, Jean Chretien's Liberal govern ment must be the envy of politicians everywhere. Si nce their election in 1993, the Liberals have consistently received high public approva l ratings and a major scandal has not yet discredi ted them seriously.' B ut in 1995, it is apparent that the Chretien governm ent is experi enci ng a series of midlife crises. The notion ofa "mid-l ife crisis" is fami liar to most of us: the seemingly successfu l individual who becomes overwhelmed w ith the poignant rea lization that his or her achievements have not been able to match original aspirations, that there has been a dri ft away from core va lues and that ti me is running out to change things. Often the reaction of middle-aged individuals is to flee from the real problems and fin d easy so lutions that superficially restore the meaning of li fe or outward populari ty-solutions like becoming a blonde, fi nding a younger man or wo man or buy ing a " hot" sports car.

2

H OW O T TAWA

SPENDS

Similarl y, the Liberals are faced with a variety of serious constraints that make it increasingly unli ke ly they will be able to live up to the commitments of their policy age nda before the run-u p to the next election, at which point most governments avoid making hard or un pop ular choices. The constra ints on implem enting their elect ion prom ises are enormous: the deficit and debt situation, wh ich puts the country under constant scrutiny from international agencies; the threat of Quebec separation; and growing pressure to reform some of Canada's maj or

programs, especially social programs. In addition, the govern ment increas ingly needs to fi nd a way to sell its sharp move away from tradit ional Libera l va lues and princip les to the caucus and party supporters.

The goal ofthi s sixteenth ann ual rev iew offederal govern ment spending and public policy is to assess how we ll the Liberal government is doing at mid-life. To what extent has it been able to li ve up to the election promises made in the Red Book? Will the governm ent be ab le to meet these commi tments given the serious economic and po litica l realities? The chapters revea l how the Liberals have shifted away from many of the fundamenta l values and principl es of the Red Book to an a ll-consumi ng focus on deficit red uction. Rat her than resolving some of the maj or issues, notably soc ial policy reform , the federa l government has fl ed fro m diffic ul t choices by pass ing them on to the provinces through mass ive cuts in transfer payments. TH E LI BE RA LS ' REC ORD

The Liberals' Red Book, released sholt ly before the 1993 federa l election, presented a compre hensive vision fo r getting the economy bac k on track, creating j obs for Canad ians and governing in a manner that promotes " Iulman dignity, j ustice, fairness, and opportunity.'" Thi s policy age nda is built on four pillars: econom ic, socia l, env ironmental and foreign policy reform .' For economic policy, the Red Book laid down two parallel tracks for promoting economic growth: o ne track was dedicated to j ob creati on, and the second to defi cit red uction w ith a very specific target of reducing the deficit to three percent of gross domestic product (GDP) by the fa ll of 1996. While the Red Book was strategically s ilent on the issue of income security and welfare refonn,

M I D - LI F E CRISES

it ta lked extensively abo ut " investing in people" and "strengthen ing the fa bric of Canad ian life" th rough a number of proposa ls re lated to train ing, hea lth, cul ture and justice issues. On po licies re lated to sustainab le development and the environment, the Red Book made some o f its most concrete and extensive commitments, includ ing targets fo r reducing greenhouse gas em issions and completion ofthe national parks system. Finally, the Red Book reaffirmed Canada's ro le in intenJationa I peace-keeping, support for human rights and stable fund ing for international aid programs. Maj or new initiatives could be undertaken and reform achieved in each of these areas, the Red Book argued, without a s igni fi cant infusion of new money. Rather, reform wou ld be achieved by innovation in the process of govern ing. First, the Libera ls proposed to "get government right" by working through partnershi ps with business, loca l communit ies and the prov inces. Second, the governm ent wo uld focus its efforts on " leverage poi nts" by strategically targeting resou rces (e.g. by concentrating reso urces on earl y childhood, cost savings in health care and social serv ices could be atta ined later on). Fi nally, eva luation of government operations undertaken by a renewed, more performanceoriented and effic ient pub lic service would be critical in ac hieving change and better government on all fro nts. G ive n th is far-reac hing agenda, it is not surpris ing that the first half of this mandate has been a ti me of considerable acti vity for the Chretien government. But, mere activity can be deceptive. Has the Liberal governm ent succeeded in meeting the commitments laid out so publicly in the Red Book? The chapters crit ica lly assess this question fo r some of the most important items on the Liberals' agenda. T here has been no attempt to encourage the authors to converge on their conclusions about the effectiveness or implications of the Libera ls' actio ns during their first 18 months in offi ce. Indeed, the contributors have q ui te va ried v iews on the successes and failures of Liberal po licies.

The Me /oprah/ems T he Liberals face two " meta problems" that infl uence their reaction to, and the possib il ities for dealing with, all other po licy matters: one overarchi ng issue is the deficit, and the other is the threat o f Quebec separation in the run-up to a sovere ignty referend um.

3

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HOW OTTAWA SPENDS

•

•

We begin our exploration with a discussion of the debt and deficit in an attempt to demystify some of the concepts, principles and language used by economists in debates over deficit financing. James Feehan lays out the facts. In 1995, the federal government's net debt is $546 billion, or 70 percent of GDP, and is still rising; the interest obligations on this debt consume $42 billion annually, roughly one third of all federal government revenue. In exploring options for bringing the deficit under control, Feehan argues that legislation requiring a balanced budget may be too facile a solution. As an alternative to a mandatory balanced budget, he proposes a policy rule based on microeconomic and macroeconomic fiscal discipline which would require governments to assess both the quality and level of spending better. Feehan is not optimistic that the Liberals will be able to meet their intermediate deficit target and impose sufficiently strict fiscal discipline on themselves over the longer term. Reg Whitaker's analysis of the national unity portfolio should create grave concern among Canadians about the long-term future of the federation. The need to direct a response to the 1995 referendum campaign is forcing Ottawa to redefme other issues and policy options in terms oftheir potential effect on a sovereignty vote. Whitaker argues that the constraints faced by the federalists in responding to a referendum in Quebec in 1995 are very different from those that existed prior to the 1980 referendum. Today, the promise of a "renewed federalism" as an alternative to sovereignty is not a credible option; increased federal spending cannot be used as a positive inducement; and, given the presence of Lucien Bouchard, Jean Chretien cannot claim to be the authentic voice of Quebec in Ottawa as Pierre Trudeau could. The role being played by Aboriginal peoples within Quebec is also phicing new constraints on the sovereignists. Whitaker concludes that even if the referendum fails, there is an unhappy future for federalism. Quebec is likely to be unco-operative and the other provinces may see this as licence to treat it like any other province, thus nourishing the sovereignist project for a future generation.

MID - LIFE CRISES

Economic Development What di stinguished the Liberals from the Conservative and Reform parties in the 1993 election was their vision that econom ic growth wo uld fo llow a two-track approach: while deficit reduction is important, it must be twinned with strategies For j ob creation and economi c development. The three chapters in this vo lum e that examine the Liberals ' record on economic development conclude that the latter engine of economic growth has been completely derai led by the everconsum ing emphasis on deficit reduction. Moreover, the Liberals have backed away from their Red Book philosophy that articu lated a ro le for the state as a positive force in economic development in favour of a more passive role.

•

•

C harlotte Yates argues thatthe Liberal policies pursued to date are not like ly to achieve their goa l of creating a highwage, high-skill economy. The Federal government's proposa ls for labour market reform- including trai ning, socia l po licy reform, "workfare" and building an "enterprise-oriented culture"-reflect a supply-side understanding of the economy in which the state's role is restricted to developing inputs into the economy and maki ng people job-ready, rather than providing or creatingjobs directly. Yates arg ues that these policies are merely producing low-wage jobs and sustainin g high unemployment. As an alternative strategy, she outl ines the poss ibil ities for building strong sub regional economies and sma ll business clusters, encouraging research and development activ ity, regulating the amo unt of overtime worked and offering continued support for the federa l government's infrastr ucture program. Canada Infrastructure Works, which is the Liberal government's flagship (and only) program of direct job creation, provides cost-shared funding for provincial and municipa l proj ects accord ing to a broad defi nition of infrastructure, ranging from roads and sewers to hi gh tech communications. Caroline Andrew concludes that the in Frastructure program is we ll on its way to meeting its targets in terms of the number of jobs created. But, in terms of types of in frastructure supported , the provincial and municipal governments have favoured

5

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HOW OTTAWA SPENDS

•

traditional infrastructure and mega-projects, thus creati ng jobs that involve " picks and shovels" mo re than the technologies of the in formation highway. Andrew argues that this is because "the infrastructure program has been captured by tradi tio na l mun ici pa l elites and the effect of the program is to give them money to pursue their drea ms." Andrew also notes, however, that the success of the program in politica l terms should not be discounted. It has helped to forge harmonious intergovernmental relations at a critical time in our history. G illes Paqu.et and Jeffrey Roy point out that the Liberals also proposed, as part of their approach to economic development, an in novative bottom-up strategy that would support small and med ium-sized busi ness thro ugh the creation of partnerships, bus iness c lusters and networks. Their assessment is that the Chretien govern ment has been very tim id in actua lly work ing in th is co-operative manner and has allowed the old centralized, top-down economic development polic ies to prevail. A more innovative strategy cou ld still be pursued, Paquet and Roy argue, by strengthening the existing business networking initiatives of the federal Department ofIndustry and by enhancing co-ordination among levels of government and with local commun ities.

Soc ial Policy Reform The need to reforn] Canada's soc ial programs has been w idely recogni zed, not onl y to cut costs, but also to remove disincent ives to work, to target benefits better and to promote a more active labour ma rket strategy. A Social Security Review was initiated by Human Resources Development Minister Lloyd Axworthy and his October 1994 Green Paper, entitled Improving Social Security in Canada, sketched out a number of options for reforming social assistance and Unemployment Insurance, supporting chi ld care and financ ing post-secondary education . It attracted heated debate and protests from students and others across the country. The House of Commons Standing Comm ittee o n Hum an Resources Deve lopment conducted nationw ide consultations in 1994 and early 1995, producing its fina l report in February 1995, albeit with dissenting opinions from the Bloc Quebecois and Reform Party members of the Committee. Ult imately, Finance M inister Paul

MID-LIFE CRISES

Martin hijacked the reform process when his February 1995 budget announced the replacement ofthe Canada Assistance Plan (CAP) wh ich cost-shares we lfare, and the block-funded Established Programs Financing (EPF), which covers health care and post-secondary education, with a new single block transfer. The new funding mechanism was origina lly called the Canada Social Transfer and has now been renamed the Canada Health and Soc ial Transfer (CHST).

•

•

•

David Camemn rev iews the implications of the Axworthy Green Paper proposals and the CHST for post-secondary educat ion. Hi s eval uation is that the Axworthy proposa ls were a clever pac kage that sought to reduce federal spending, but offered some compensation to students throug h an income contingent repayment student loan program. In contrast, the CHST imposes even more massive cuts without an enhanced student loan scheme. It will be left to individua l provinces to determine how they w ill absorb the cuts or pass them on to universities and colleges. Cameron explores some alternative scenarios, most of which will probably make university students and facu lty anxious about the future. James Rice assesses the potentia l impact of the C l-IST on social assistance. The new block tra nsfer will fu ndame ntall y alte r the we lfare system, because it not o nl y makes very deep cuts to expenditu res, but it forces the provinces to make choices between we lfare, health care and post-secondary education. Rice argues that the CHSTwi ll not promote greater stabi li ty offunding, flexib il ity or accountabi l ity on the part of provincial governments, as the federal government suggests. Rather, the most likely scenario is that the provi nces w il l choose to divert money from social assistance to other expenditures. There will be no incentive for the provinces to wo rk together to find co-operative solutions. Regional disparities will inevitab ly worsen, the national safety net will di sappear and low- income Canad ians wi ll face a greater risk ofl iving in poverty. Wh ile the Social Security Review did not address Aboriginal socia l assistance, the creation of the CHST is likely to force the federa l government to address much needed reform in th is

7

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HOW OTTAWA SPENDS

area. Allan Moscovitch and Andrew Webster examine the history, problems and prospects for reform of social assistance programs provided to Aboriginal peoples, both those living onreserve and those living off-reserve. Moscovitch and Webster explain how and why federal policy now requires on-reserve delivery of social assistance to mimic provincial practice. Both the rising rate of welfare dependency among the Aboriginal population and the politics of the CHST will compel the federal government to examine radical alternatives, including community-based delivery. The Integrity Agenda

The promise to restore Canadians' faith in government by governing with integrity and fairness was undoubtedly an important factor in the election victory of the Chretien Liberals. •

•

Michael Atkinson considers whether the Liberal government has, in fact, governed with greater integrity than its predecessor. He lays out three potential strategies through which integrity can be promoted: a virtue, a shrinkage and a rulesbased strategy. In the first year and a half the Liberals have been relatively successful, Atkinson asserts, because it was not difficult to improve on the performance of the Mulroney government. The Liberals have followed a combination of the three strategies and have taken concrete actions in appointing an Ethics Counsellor, tightening the regulations on lobbying and reducing the number of patronage appointments. Yet, when the first real test came with the Michel Dupuy affair, the Liberal government seemed "somewhat complacent about the requirements of integrity and the Prime Minister too eager to use his popularity to paper over problems." Phil Ryan evaluates government advertising as another dimension of integrity. When is advertising a legitimate attempt to inform and educate citizens about government policies, and when does it cross over the line to become unfair and potentially partisan, in other words, propaganda? In a 1987 study of 41 countries, Canada was the only one in which government was the top advertiser. Moreover, Ryan estimates that the

MID-LIFE CRISES

federal government's advertising expenditures grew by 665 percent in real terms between 1968 and 1992. He pro poses that safeguards, including the appointment of an Advertising Commissioner and laws requiring the immediate re lease of government-sponsored polls, be adopted to preserve the legitimate purposes of government advertisin g and to regul ate its questionable uses.

Justice Issues Justice Minister All an Rock has been one of the most popu lar and effective ministers in the Chretien government. In 1995, he followed through on the promi ses made in the Red Book to "get tough" on the wave of yo uth crime that Canadians fear is sweeping the country. His amendments to the Young Offenders Act will impose longer sentences and send violent youths to adult courts and adult prison facilities. •

Harvey Lithwick and Dahlia Lithwick cast a critical glance over the supposed crisis of youth crime in Canada and assess the probable effects of harsher penalties. A look at the facts, rather than the public' s fears, reveals that there has not been an increase in vio lent youth crim e in this nation and that the tough measures recently passed by the House of Commons are likely to be wholly ineffective, serving only to turn young offenders into better apprenticed crimina ls, more likely to commit future crimes. On thi s issue, the Liberal government has found itself caught in a classic policy dilemma, and it has taken the low road. In response to public opinion and in pursu it of pol itical popularity, they are attacking a problem that they know does not exist with a so lution that they know will not work . The Justice M ini ster and Canadians in general need to do considerable rethinking on the question of changing the Young Offenders Act.

The International Connection A number of international issues that the Liberals wou ld probably have preferred to avoid have been forced onto the agenda. The abi lity to handle international issues without sacrificing domestic interests is an important test for any government.

9

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HOW OTTAWA SPENDS

•

•

In spite of their vocal criticism and prom ises for renegotiation whi le in opposition, once in office the Liberals signed the North American Free Trade Agreement (NAFTA), even though they were unable to secure better dispute reso lution mechanisms. Grace Skogstad exp lores the conflict and reso lut ion of Canada's first major trade dispute with the Un ited States under the NAFTA: American complaints about record high shipments of Canad ian wheat into the United States. Skogstad remind s us that trade disputes must not on ly be handled and reso lved at the international level, but must also be managed at the domestic level to avoid aggravating regional or sectora l cleavages . Her assessment is that the Liberals were very successfu l at thi s two- level game because they prevented the Americans from linking the wheat controversy (which affects mainly prairie farme rs) with the dairy industry (which is highly concentrated in Quebec). The 1995 federal budget, however, may contribute to further agricultural trade disputes because the farm comm unity's goodwill towards the Liberals has been eroded and because dimini shed subsidies for Western grain transportation may encourage greater north-south trade flows. The headline-grabbing confrontation with the Spanish over fish ing on the " nose and tai l" of the Grand Banks-i ll ega lly and in excess of quotas in Canada's view-highlights a deepe r question . Why did Canada a llow the Atlantic fish stocks to deteriorate to the point that a moratorium on cod fis hing had to be im posed in 1992, and later extended to other stocks? Susa n McCorq uodale addresses this question and cons iders how Atlantic fi shery workers were able to get the levels of income support payments from the federal government that they did. The reasons for the co ll apse of the Atlantic fi shery are complex, incl udi ng overconfidence in fisheries science, the role played by strong regional ministers and foreign overfishing. But the most critical factor is that for years-in the face of strong advice to the contrary- the federal and provincial govern ments made employment in the fi shery a more impo rtant goa l than sustaining an important resource and a viable industry. As a resu lt of the co ll apse of the fishery, the federal

MID-LIFE CRISES

governm ent w ill spend $ 1.9 billion over five yea rs to compensate 30,000 Atlantic fishery workers for the loss of their li ve lihood. But it is probably im possible to compensate them for the loss of a way of life. MULTIPLE C RISES, COMMON REA CT ION S ?

A number of themes emerge from the chapters. It is ev ident that the constrai nts on govern ment have turned out to be more restrictive than the Liberals had anti cipated and consequently, their agenda has been modified in severa l ways. First, deficit red uction has consu med the enti re po litical age nda. The previous Conservative govern ment succeeded in creating a strong domestic constituency for debt red uction and the present government is, to some extent, constra ined by this pressure. In addition, the persistent threat by the internationa l bond rating agencies to downgrade Canada' s credit rating if the federa l deficit is not reduced-a threat actua lly carried out by one agency in April I 995-has removed considerable latitude for auto nomous domestic policy-making. As a result, the four pill ars of the Red Book have been co llapsed into one as the imperative of deficit reduct ion has pushed as ide plans for j ob creation, soc ial security reform and child care. Second, thi s narrow focus on the deficit has precipitated a shi ft in core Libera l va lues, at least by the Cabinet. Seldom in 1995 does the Canadian public hear a Liberal cabinet mini ster argue in favour of a positive, moderately interventionist ro le for the state in the econo my, as was expounded in the Red Book . In addi tion, as Yates and as Paquet and Roy note, the Chretien govern ment has not fo llowed through on its innovative strategy of working through partnerships and local networks, thus prescribing an even more limited ro le for the state in the economy. The ph ilosophy of individual responsibility-taking and the exigenc ies of expend iture reduction have also diminished trad itional Liberal support for the socia l safety net. The Liberals won the election in part on the fact that they laid out a comprehensive vis ion for the future based on a relatively coherent political phi losophy. Wi ll the Canad ian public know what values Liberals stand for in the next election campaign? A third, related outcome is the decentralization of decis ion-mak ing to the provinces through the federal government' s retraction of its spending power. Thi s decentralization has not been the result of a clearly

JJ

12

HOW OTTAWA SPENDS

articulated vision offederalism on the part ofthe Chretien government; rather, it has been the product of the desire to cut spending. Because transfers to the provinces are "big ticket" items, they have been prime targets for cost-cutting. In reducing the use of its spending power, however, the federal government has given up-probably irretrievably-some of its levers for influencing provincial policy. This is most evident in the area of social policy, where the CHST will reduce the federal government's already limited role in shaping provincial programs in welfare, health care and post-secondary education and where we are likely to see devolution ofjurisdiction over labour market training to the provinces in the near future. Innovation, the Red Book declared, would be accomplished through the strategic use of leverage, yet the federal government has reduced its leverage in significant ways. Fourth, in its drive to control spending, policy problems have not been fixed. Axworthy's original vision of the review of social policy, for instance, was that costs would ultimately be reduced if the dysfunctions of various programs were removed, but reform of the programs was an end in itself. 4 After a long consultation and review process carried out by the Standing Committee on Human Resources Development, the reform process was put on hold by the Department of Finance. Given the number of interests aroused, comprehensive reform of social policy is a very messy business and perhaps would have been doomed to failure anyway.5 But the Liberals, having made the case for it, will need to take up the task again, if in a less allencompassing manner. Another issue that has virtually disappeared from the Liberals' agenda is sustainable development and environmental policy. The $2.5 billion Green Plan that was supposed to make Canada a world leader in sustainable development is dead, although its termination has not been officially announced. Some components of the Green Plan have been integrated into the operations of various departments, but no further progress reports on Green Plan targets will be issued. 6 Finally, the desire to respond to public opinion has put some issues, such as the hard-line approach on young offenders, on the political agenda that might have been better left untouched or resolved through other more effective, but less popular, solutions. If the federal government has given up some scope for leverage and has not fully embraced partnerships, the remaining route for policy

MID - LIFE CRISES

innovation is the evaluation of whether existing programs work. This depends, in part, on creating a more efficient, performance-oriented publi c service. The Program Review, announced in the 1994 budget, has been a major initiative in thi s respect. It studied the programs of federal departments, assessed whether the federa.1government shou Id be providing the program in question at all and exp lored ways in which des ired programs could be del ivered more effic iently.' But the loss of 45,000 positions in the public serv ice over the next three years, announced in the 1995 budget, means that morale is at an a ll-tim e low.' Thus, if the public service is, in fact, going to be an effective means for realizing the government's policy goals, public service rejuvenation must remain a high priority. THE

1995

BUDGET

Finance Minister Martin 's second budget is the most far-reaching of any presented in Canada during the post-war period. As the Minister observed in his budget speech, "Relative to the size of our economy, program spending will be lower in 1996-97 than al any lime s ince 1951 .'" Many journa lists and scholars have proclaimed that this budget marks the end of Canadian federalism as we have known it and begins a fundamental restructuring of the role of the state.'o Others see it as a Tory budget under a Liberal labe l, although it has gone much further in shrinking the state and cutting spending than any budget did during the Mulroney years. There were no surprises in thi s budgetother than the pleasant one of no increase in personal income taxesbecause most of the budget measures had already been fl oated in trial balloons and quite openly d iscussed by the Fi nance and other ministers. The remarkable aspect is how we ll the Budget has been received. A lthough Preston Manning sputtered about its inadequacy and social policy groups expressed deep concern over its spending cuts, the bus iness community and internationa l bond rating age ncies initially gave it favourab le grades. The po lls also showed that among the general public, 69 percent thought it was "on the right track" and it actually improved the Libera ls' overa ll pub lic approval ratings." Six weeks after the Budget was de livered, however, the New York-based Moody's, which had put the federal government on a credit watch before the

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HOW OT TAWA S PEND S

Budget, followed through with a downgrade of Canada's credit rating, thereby signalling its scepticism that the government will not waver in its comm itment to deficit reduction once popular programs and projects must be axed." In thi s section, we present an overview of the 1995 budget and discuss its implications. The depth of cuts in the 1995 budget is impressive to the international agencies for whom this budget was written and allows Martin to meet his overall deficit targets of $32. 7 billion in 1995-96 and $24.3 billion, or three percent of GOP, in 1996-97. " These deficit reduction targets will be met mainly through spending cuts rather than through tax increases: in fact, there are $7 in cuts for every $1 in new tax revenues. The Budget will have a cumulative impact (including expenditure cuts and tax increases) of $29 billion over the next three fi sca l years; total expend iture reductions amount to $25.3 billion. As in hi s first budget, Martin attempts to restore people's faith in the budgeting process by making very conservative assumptions about economic growth and interest rates. In addition, s izeab le contingency reserves are incl uded as protection in case the forecasts widely miss the mark, as they so often did during the Mulroney years. The Budget is extremely politically astute in staging the cuts over three years, with much smaller reductions in programs and provincial transfers slated in 1995-96 than in subsequent years. In fact, for mer deputy minister Arthur Kroeger has referred to this as the "ContactC" budget because it is designed to be delivered in a "time re leased" manner. While the overall numbers have pleased internationa l markets, Canad ians w ill not face a severe shock in the immediate tenn. The politics of negative redistribution (who loses what), described by Whitaker in Chapter 3, is also played brilli antly. The pain is spread across regions--e.g. when Quebec takes a hit on dairy subsid ies, Western grain farmers take a bigger hit-a nd across virtually all federal government departments and sectors of the economy. The Budget also attempts to provide at least some symbolic fairness of making the rich share the pain by closing a few loopholes in the tax system. Finally, the Budget is very crafty in leading Canadians to bel ieve that the cuts to socia l program s are proportionately less than they are. Thi s is accomplished by a clever use of the "B ig Lie" of federalism, discussed by Cameron in Chapter 7. In reality, as we will see, the cuts in transfers to

MID-LIFE CR I SES

the provinces covering social assistance, health care and post-secondary education are much bigger than they appear in the budget documents.

The impact of "Gelling Government Right" The Soc ial Security Review was to have been the centre-piece of this budget: based on its recommendat ions, program cuts wou ld be made in a surgical fashion to the expensive items of transfers to ind iv iduals and prov inces . Its compan ion, the Program Review was intended to allow departmental operations to be trimmed strategically. When the Social Security Review ran into political troub le, however, the Program Review supplanted it as the underlying log ic of this budget. And who could be aga inst greater efficiency in government? The Program Review has exami ned the operations of most federa l government departments and programs to determine how programs might be delivered in a more efficient manner. In each case, a critical question asked under the Program Review was whether the program should be provided at all by the federal government. Thus, the Program Rev iew does not tinker with program details but will produce a sweep ing restructuring of government. The budget measures that result from the Program Review have both structural implications (what government does and how it does it) and financial ones (how much it spends). Program spending will be cut by $3 .9 billion in 1995-96, $5 .9 b ill ion in 1996-97 and $7.2 bi lli on in 1997-98. On ly t he Department of Indian Affairs and Northern Development has been spared reductions in program spending; the most deepl y affected departments (in terms of proportional reductions) are Transport, Industry and the Regional Development Agencies, and Natura l Resources. Table I. I indicates the budget sav ings on a departmental basis that w ill accrue from the Program Review. But the implications of the review cannot be understood by looking merely at levels of spending cuts; rather, the nature \lfthe structural changes also needs to be considered. Public Service Downsizing: The intended el im ination of 45 ,000 position s ( 14 percent of the enti re public service) over three years represents the largest reduction ever made to the federa l pub lic service. Of these job cuts, 33,000 will come from the departments under the aegis of the Treasury Board as employer, and the remainder from crown corporations and the military; 20,000 are expected to be lost by the

15

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HOW OTTAWA SPENDS

Table 1.2 Federal Department Spending Implications of the Program Review Spending Levels 1994-95 1997-98

Natural Resource Sector Agriculture Fisheries and Oceans ~aturalFtesources

Environment Transport IndustriallRegional/ Scientific Industry Science and l Technology Agencies Ftegional Agencies Justice and Legal ",, n ...,

-82,436

-46,590

-40,737

-39,260

0

Total expected benefit, present

value Net present va lu e

0

en

'"'" w w

304

HOW OTTAWA SPEND S

There is, however, a possibility that his place will be fill ed by others who assume the same role or pos ition, whether as a gang member, a drug dealer or an agent of organ ized crime. It is precisely because of the leniency of sentenc ing for youth crimes that you ths are employed for a number of criminal acts. The costs to them are quite low, so crim e pays and there wi ll be no shortage of replacements to step forward. Expect ing the supply to be almost unlimited is not terribly unrealistic, w ith the resu ltthat extending the incarceration of a yo uth who is apprehended may not lead to a s ignificant reduction in the number of acts of crime in general. On the other hand, it has been found that most violent crimes, especia lly homicides, are committed byacquaintances of the victims. As a result, the replacement or substitution effect w ill be less than one for one, and we assume it w ill be SO percent. That means that the li kelihood of a specific violent crime being committed when an offender is in jail wi ll be reduced by half. It can be expected that rather tha n sentenc ing young offenders to ad ul t facilities,judges would be inclined to drop charges, actually reducing the volume of incarcerated offenders and hence opening the door to an increase in crime. U.S. experience suggests tllat repeat youth offenders who get waived to adu lt courts tend to be perceived by that system as relatively ben ign, compared with hardened adult offenders. They therefore get treated more leniently than injuvenile COllltS." There are no data on the average length of stay in pri son for vio lent yo uth offenders. We therefore assume that the proposed changes would lead to an ave rage period of incarceration of fi ve years for violent youth offenders. That is less than the maximum proposed, both because it is a maximum, not an average, and because of the sentenc ing leniency issue. F inally, we must deal w ith the frequency issue. We need to know how many violent acts would be com mitted by the offender if he were not in ja il , in order to assess how many are likely to have been prevented via incarceratio n. In the abse nce of any hard ev idence, we assume he wo uld have committed one such act per year. Much more important to the strategy of tougher puni shment is its alleged deterrent effect. It is arg ued that harsher sentences will prevent future crimes on the part of the one being punished (specific deterrence) and, th rough the demonstration effect, on the part of others (genera l dete rrence). The key variable here is the recidivism rate. If

CHANG I NG HIE YOUNG OFFENDERS ACT

that rate were reduced to zero after incarceration, it would mean that the effect of the poli cy was max imum, in that no future crimes would be perpetrated by the offender. But there is little evidence of reduced recidi vism resulting from the pri son experience." Several U.S. studies show the oppos ite-that longer sentencing actua lly increased rec idivism and that policies offering less harsh treatment do not increase recidivism.36 We could find no direct Canadian evidence on rates of recidivism for violent yo uths and have been advised that none exists. The data we do have, however, show that 36 percent of the vio lent offence cases referred to youth courts in 1990-9 1 alone had one or more prior charges that had resulted in a findin g of guilt." In one of the few U.S. stud ies on this subject, it was found that 76 percent of youths who were confined in secure facilities were reconvicted during the first year after their re lease." Thi s statistic lumps all crimes together which exaggerates the rate. More important, it omits the very large number of crim es that were perpetrated for which the offender was not caught. Our suggestion is that the true probability of committing a violent crime in the year after incarceration is closer to I 00 percent. And, of course, there will be subsequent crimina l acts in future years. After being incarcerated w ith adult offenders, and for longer terms, young offenders upon release will have become well schooled in violent crim inal behav iour; both the severi ty and frequency of their likely criminal activities wo uld be accentuated. Based on these scanty data, we w ill assume that the probability of a crime being committed after an offender's release from adult facilities is 90 percent in that year and in each of the 15 fo llow ing years. After 15 years, the probabili ty w ill fall , and the effect of discounting will eliminate most of the present value of the sav ings. As for the demonstration effect, we could find no evidence to support the view that tougher sentences are a serious deterrent to others. There is extensive aggregati ve evidence to demonstrate that incarceration has failed to reduce crim e rates in the United States. The reason is that the probability of app rehension is very low. Policies that do not address this vita l component will have little deterrence va lue. Based on these findin gs, we may proceed to estimate the benefits from the YOA package. We begin with our estimate that the probabi lity of a vi olent crime be ing committed after incarcerati on wo uld be reduced to 90 percent as a result of tougher policies. We must first

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calculate the probability of different types ofviolent crimes being committed. We then estimate the cost of those various types of crimes. The benefit of incarceration would be the reduction of such costs. Table 12.2 shows the distribution of violent offences heard by youth courts in 1992-93. We assume that any reduction in violent crime as a result of the proposed policies wiil be distributed proportionally. We calculate the cost savings to the victims and their immediate families; those to society at large; and those to the offender and his family.

Cost Savings/or the Victims and Their Families: The direct cost savings are those that result from preventing the death or injury of a potential victim. The cost of death is often calculated as the loss of the victim's "human capital," his or her lifetime earning potential, which has been estimated recently in a U.S. study to be $2.4 million. 39 Independent Canadian estimates give much higher valuations. In one study, Ronald Meng estimates the value of a life in Canada to be $3.2 million in 1983 dollars.40 In a later study, using a different and better database, a range from $0.9 million to $7.3 million was estimated.41 We would estimate $6.0 million to be a fair valuation in current prices. Not all violent crimes end in death. A U.S. study estimates the economic cost from a rape to average about $60,000 and robbery or assault to be over $20,000. Because of the great er:notional and psychological impact of such events, however, there is a strong reaction to placing a value on them. Since individuals do make such calculations implicitly when deciding how much to spend on personal security, for example, we are doing nothing more than trying to obtain an objective measure of those personal valuations when making such calculations. In addition to the emotional costs, we assume these figures include direct medical and hospital care, as well as losses from periods of unemployment, which may be rather extensive. In the absence of Canadian data, we shall assume that the same amounts hold, but in Canadian dollars. It is probably unnecessary to adjust these figures upward to account for the lower value of the Canadian dollar, as the values of both human capital, and employment income and health-care , charges are less in Canada. Applying these costs to the distribution of probabilities of occurrence in Canada from Table 12.2 gives us expected cost savings to the victim ofjust under $60,000 from preventing a violent crime.

C H ANGING THE YOUNG OFFENDERS ACT

Table 12.2 Frequency and Cost of Various Offences Heard by Youth Courts, by Principal Violent Offence Charge, in Canada, 1992-93 Offence

Number of Cases

Percentage of eases

Est imated Cost to

Victim

Expected Cost (do ll ars)

(do ll ars) Murder Manslaughter Attempted murder Murder Total Aggravated sexual assault Sex ua l assault with weapon

Sexual assau It Rapel indecent assault Other sexual offences Sexual offences tota l Aggravated assau lt Assault with weapon Causing bodily

harm/intent Other assau lts' Assaults tota l Robbery b Weapons In fa nt icide Kidnapping/hostage

taking Extortio n Crimin al negli gence Others total Total

42 10 74 126

0. 19 0.05 0.34 0.58

5

0.02

97 1,644 39 373

0.45 7.62 0.18 1.73

2,153 3 11 3,699

9.98 1.44 17.14

14 10, 180 14,204 2.377 2,57 1 4

0.06 47. 17 65.8 1 11.0 I 11.9 1 0.02

40 90 43 5,125 21 ,583

0.19 0.42 0.20 23.75 100.00

6,000,000

35,028

60,000

5,985

20,000

13,162

20,000

4,749 58,924

Source: Based on Canadian Cen tre fo r Ju stice Statistics, Youth Court Stati stics 1992-93 (Ottawa: Statistics Canada) table 3. Notes: I. Includes minor assaults, un lawfu ll y causing bodily harm, assaulting peace officcr,and other assua lts.

2. Includes dangerous use of a weapon, possess ion of a weapon. and other weapons offences. A discount rate of 10 percent is used

II

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In addition, there are indirect costs to families of victims when breadwinners, spouses, parents or children are killed or maimed. In other words, the cost of a typica l violent act to the victim and his o r her fami ly is no doubt underestimated. Lacking any hard data and wishing to be conservative, we assume these additional cost savings to be equa l to one-quarter the victi m cost, or $ 15,000.

Cost Savings for Society: Beyond saving on victim costs, there are broader cost savings that shou ld be cons idered. Perhaps the most important derive from reducing the fear engendered by crime, a fear that leads to a wi llingness of members of soc iety to pay large sums for protective devices, ranging from home and office securi ty systems to guns. Furthermore, people may feel obliged to relocate from violence prone areas. The cost of relocation and the external costs imposed on the violent zones through the decl ine in its stable population and commercial base can be enorm ous, as has been the case in the inner c ities of the United States. Ifin the extreme, Canadians acquire guns to a llay their fears, these then become the instruments of increased violent crime, as has been well established by all serious studies of the problem of gun control. While these are indeed serious costs of violent crime, the proportion of such crimes committed by you ng offenders is rather small in Canada. As we have seen, yo uths acco unted for only 13 .7 percent of all persons charged w ith committing a vio lent crime in 1992. And at least ha lf of these were rather minor offences. Under the c ircumstances, it is unlikely that even a policy that contributes to a sign ificant reduction of violent youth crime in this country will allay these more genera l fears about violence and, hence, we do not feel it is necessary to inc lude their impact. Cost Savingsfor the Offender: Policies that reduce violent youth crime also reduce the enormous waste of the human potential of the perpetrators themselves. This waste includes the loss of the productive potential of the c riminal for mu ch, if not all, of hi s re ma in ing (post-punishment) life, often ended abruptly as a victim of someone else 's violent act or the desperate act of suicide. To this shou ld be added the costs to the offender's immediate family and neighbourhood. The fi rst costs can be approximated by the opportunity cost of being

CHANGING THE YOUNG OFFENDERS ACT

apprehended and incarcerated in the future, which would be the earned income foregone over the period in prison. We estimate that an nual income to be the minimum wage, or some $ 15,000 per year in cu rrent prices. The cost to the immediate family is much harder to estim ate, and we assume it would be $2,000. Thus, for each criminal who does "go straight," the savings would be $ 17,000 for each year that he wo uld otherwise have been back in prison. Our assumed recidivism rate of90 percent that results from the recent changes to the YOA means that 10 percent fewer crim es would be committed by any released offender. Since there is no certainty of apprehension, we w ill a lso assu me that only half ofthe post-incarceration crimes would be solved and result in a return to prison, so that on ly half the above cost sav ings would result. The lower half of Table 12.1 conta ins the benefits ca lcu lat ion . Part A is a calcu lation of benefits to society while the perpetrator is incarcerated, for the assumed five years. On ly 50 percent ofthe benefits are rea lized, due to what we called the substitution effect. Part B contains an estimate of the various benefits for the IS years after he is released. The benefits are reduced due to the high rate of recidivism (90 percent) and to the failure to appre hend criminals (50 percent).

Costs versus Benefits o/Changes to the YOA Table 12.1 prov ides a summary of the expected costs and benefits that we have identified and estimated. We have computed the costs from the outlays that wi ll have to be made to incarcerate a young offender for a period offive years in an adu lt fac ility. We have also computed the benefits from the expected reduction in the costs that w ill res ult from the lower incidence of crime by the offender during and after completing his sentence. Co lumn A gives the base line estim ates. The present va lue ofthe benefits under these assumptions is $180,267, and the present va lue of the costs is $262,703, leavi ng a net benefit of -$82,436. That means that for each yo ung offender affected by the changes to the YOA, the costs to society w ill exceed the expected benefits by that amount. One way of seeing if our many assumptions seri ously distort outcomes is to conduct sensitivity analyses. We do so by changing several of the key assumptions. In Version B, summarized in Column B in Ihe table, we assume that recidivism is reduced to 75 percent, so that the

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benefit (the reduction of costs to society) are much greater. Under that changed assumption, the net benefit improves to only -$46,590. In Version C, we assume lower prison costs, of only $30,000 per year, and this further improves the net benefit to -$40,737. And in Version D, we assume a reduced period of incarceration of three years instead of five, which yields a net benefit of -$39,260. This result is consistent with evidence from the United States which indicates that such a change will not affect recidivism, indicating that leniency, not harshness, is in fact socially beneficial. The numbers we have used all err on the conservative side. We have omitted social costs of prison; we have used prison and other judicial costs at the low end of the range of evidence we have; we have used high values for the savings from the prevention of violent crimes; and we have ignored the potential costs of expanding prison facilities. On the other hand, we are aware of the many unproven assumptions we have made, so these findings remain tentative. In particular, one of the benefits we may have seriously understated is the vengeance or retribution factor. There is no doubt that victims or their families derive great comfort from punishing perpetrators of violent acts. Evaluating such benefits, however, is beyond our abilities. A well-known problem with the cost-benefit approach is that it tends to ignore income distribution considerations. If a policy benefits the rich more than the poor, it would be regressive, and some would argue that those maldistribution costs would have to be included. In the case of youth violence, there is a positive association between low income and violent crime rates, so that tougher punishments will be borne by relatively poorer young Canadians. Since some of the victims who will purportedly benefit from such punishments may be better off than the perpetrators, the proposed approach is probably regressive and the costs are accordingly understated. Non-punitive measures, which impose fewer costs and yield greater benefits to young offenders, would work in the opposite direction with regard to distributional consequences. An Evaluation ofAlternatives

There are alternative approaches to youth violence that have been introduced in the United States, notably in Massachusetts and Utah. These

C HA NG I NG TH E YOUNG OFFEN D E R S AC T

experiences provide a comparison with the proposa ls for changing the YOA. We have identified three alternative approaches:

• •

•

custodial care in youth faci lities; custodial care with rehabilitation; community-based solutions.

Youth Facilities: [n 1978, under the Juvenile Offender Law, New York State-which has the toughest juvenile laws in the Un ited Statesordered mandatory confinement, whereby children were placed in correctional facilities. But the law was far from effective because, in practice, very few juvenile offender cases were tried in adult courts; most were transferred to family courts or dismissed altogether. [n family courts, there is individual assessment of a child's need for supervi sion prior to trial. This safeguard, of both the community and the child, is unavailable in the adu lt courts. Iftried in adult courts, the courts generally release the chi ld on bail. The YOA amendments imply that placing violent young offenders in adult facilities will so lve the problem of youth crime somehow. Not surprisingly, in the United States the cond itions of imprisonment for juveniles were found to be much harsher for those serving time in state prisons than for a comparable group serv ing time in juvenile correctional institutions. In the prison system, experiences tended to be more punitive and less helpful. There was less effort made to help yo ung offenders control their violent behaviour or improve their interpersonal ski lls, and to prepare them with j ob skills for their return to the community. As a result, youths in prison became more vio lent as part of their adjustment to the generally violent envi ronment in prison, while comparab le youths in training schools tended to select different, less violent modes of adaptation ." Canada has very limited information on youth experiences in adu lt faci lities, but there are data on costs of alternative faci lities for youths. There is great variabi lity, depending on size of institution, location (urban versus rural), specific facilities and year under consideration . Data for Ontario reveal that the larger, primarily ad ult, urban institutions tend to have the lowest cost per diem. The four exclusively youth faci lities in Ontario are about the same size and have comparable costs. For 1992-93, their average cost per diem was $276, compared with

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$ 124 for ad ult faci lities. These higher costs probably reflect the higher treatment/training service levels for youths, but we were unable to obtain detailed cost breakdowns to confi rm this fact. "

Rehabilitation: Early attempts at rehabi litation were deemed to be ineffective. In large part, this fai lure was due to an inabi lity to build functional links between the courts and those delivering treatment. Rehabilitation systems are more complex than merely warehousing offenders, and unless the components wo rk together, such so lutions wi ll not be effective. Although the whole effort did not produce the expected benefits, some elements did work. In particular, the presence of benign institutio ns with supportive staff proved much more effective in mou lding pos itive attitudes in chi ldren than did custod ial institutions and punitive staff. Rehabil itation efforts work particularl y well when juveniles are assigned to program and treatment staff according to their specific needs." More recently, a review by Ted Pa lmer of 400 studies wo rldwide concluded that re habilitation programs do a better job than traditional prison does of keeping young offenders from breaking the law again ." Community-Based Solutions: Community-based solutions enta il keeping the yo ung offender out of an institution and treating him in the communi ty instead. A key vehicle in all such so lutions is probation. The Massachusetts model opts for rehabi litation and returning children to the community. Emphasis is on smaller, more secure fac ilities for violent juven ile offenders, with close contact between the staff and the offenders. The largest Department of Youth Services centre has onl y 36 beds with the correspond ingly positive attitud inal clim ate that only small centres can foster. The Massachusetts resu lts indicate that a large majority ofjuveniles complete probation without further incident and go on to lead crime-free ad ult lives. Recid ivism rates fell to the lowest in the nation. Si mil ar resu lts were experienced in other states-Pennsy lvania, Maryland and Utah-that opted for the Massachusetts model " Moreover, in terms of deterrence, the system led to a lower incarceration rate among adults who were previous clients of the juvenile system. A study of700 yo ung offenders under the California Youth Authority revealed that those placed in community treatment had only a 28 percent failure rate, whereas those sentenced to

CHANG ING THE YOUNG O FF ENDERS ACT

pri son had a 62 percent failure rate. In Michigan, youths on work probation had on ly half the recidivism rate of those on regular probation." A 1986 study in Utah found that 73 percent ofjuveniles placed in communi ty programs remained free of criminal convictions for 12 months fo llowing release, while 76 percent of those confined in secure facilities reoffended within a year of release." One add itiona l effect observed in Utah was that, even among those who were reconvicted during the first year after release, their offences were of a much less se ri o us nat ure. In th e initial years, the cost of a syste m of community-based treatment programs was slightly higher than the cost of custodial solutions. As the new system settled in, however, the cost of the former fell , to about $23,000 in the late I 980s, compared w ith initial costs of $35,000 to $40,000 per child .

Cost-Benefit Comparisons with the YOA Approach There are virtua lly no data ava ilab le in Canada on costs for any of the above alternative solutions, and certainly no data on comparative costs. What we do have are comparative costs based on Massachusetts for 1985. The cost estimates were:

•

$5 1,000 per youth to maintain chi ldren in secure treatment program s;

• • •

•

$32,000 in group homes; $19,000 in a youth tracking program; $10,500 in privately contracted foster care; $4,300 in Department of Youth Services foster care"

The costs for secure treatment are roughly comparable with our estimated costs of incarceration in adult faci lities and are commensurate with the Ontario data noted above. The benefits from being kept out of adu lt facilities relate prim arily to avoiding increased criminalization. It is the provision of treatment during incarceration that has been fou nd to be particu larly effective '· A cost-benefi t ca lcu lation clearl y makes j uvenile facilities with treatment a s ignificantly better solution than adult prisons. Turning to comm unity-based so lutions, the costs are signi fica ntly below the costs of incarceration, especially after the start-up period. We do not have data to measure the relative effectiveness of group

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homes versus managed facilities, nor public versus private care, so we cannot make ajudgement at this time about which a lternative is preferable. But any of these alternatives would appear to be more costeffective and more socially desirable than the harsher measures being proposed under the changes to the YOA. One final issue requires comment, however. There is great opposition to community-based solutions--especia lly group homes-reflecting a genuine fear of " hoodlums in my backyard." On this issue as well, there is a profound divide between opinion and fact. It has been found "that there is no evidence the public is in any greater danger from juveniles who participate in community-based programs.""

Preventive Alternatives All the "so lutions" disc ussed so far are after-the-fact responses. The need for such sol utions is clear, yet virtually no policies are being framed that address the longer term, and much more profound, matter of trying to alleviate future youth crime by dealing with its causes and correlates. Admitted ly, this is a softer area, as there is much debate about causes with precious little evidence. We mention a few factors here, to underscore the importance of developing policies that are proactive and have a longer term perspective, to complement the need for more immediate, reactive policies. The correlations between yo uth crime, poverty, ch ild abuse and unemployment are well established, in both the United States and Canada. The high incidence of chi ld poverty and the extremely high rates of youth unemployment among disadvantaged racial groups contribute in no small way to the pressures on youth to engage in criminal activity. In 1991 ,42 percent of those accused of homicide were unemployed at the time of the homicide and 26 percent were "out of the labour fo rce" (e.g. homemakers, retired or students ofless than 15 years)." A recent estimate indicates that one Canad ian child in five lives in poverty-bearing the prospect of major increases in youth violence in the very near future. Paradoxically, and perhaps hypocritically, funds cannot be found to provide front-end support for poor youths, but are being found to incarcerate them after they get into trouble. Race is highly correlated with other factors, such as poverty and unemployment. Whereas 18 percent of all American chi ldren under 18 lived in poverty in 1993 , 39 percent of African American and Native

CHANG I NG THE YOUNG OFFENDERS ACT

American children, and 32 percent of Hispanic American children were poor" The racial variables are quite di fferent in the United States and Canada, however. In 1986 in the United States, Africa n Americans committed 48 percent of all homicides and violent cri me, and Hispanic Americans almost 16 percent, but they represented, respectively, onl y 12 and 6 percent of the population .54 Aboriginal Canadians, who compose 2 percent of the Canad ian population, accounted for 21 percent of Canadi an murders. The reasons for these high incidences among di sadvantaged groups are extremely complex, although it should be noted that se lective enforcement of criminaljustice impacts detrimentally on them, distorting the reported crime rates. The connection between drugs and youth violence is critical. In Canada, the prevalence of drug ab use in genera l is much lower, and the link to juven ile crime is similarl y much weaker. In 199 1, on ly 4 percent of Canadians com mitting homicides had take n drugs just prior to the commission ofthe crime, and 13 percent had taken some comb ination of alcohol and drugs." Guns are closely associated with violent yo uth offences. In 1992, nearly one in five Canadian youths involved in such offences was charged with assau lt with a weapon." This figure, though high, is significantly lower than that of the United States, due to our 1978 firearm legislation. When youths are members of a gang, their propensity to com mit violent acts is increased. One policy solution is a crackdown on gangs and the prevention of gang formation. Our evidence, therefore, confirms what most studies have already suggested : that the amendments to the YOA with regard to violent young offenders are wrong-headed, and that they are the worst of all possible known alternatives . We doubt that any improved data or reasonable alternative ass umptions w ill alter that conclusion. Further, we be lieve that if government money is to be spent to combat youth v iolence, it shou ld be spent on treatment and prevention, which are far more cost-effective strategies in both the long and short terms.

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THE POLICY DILEMMA O F THE LIBER AL PARTY

Based on the above ev idence, it is clear that the Liberals have gotten themselves into a classic policy dilemma: in the pursuit ofa popular agenda, they are attacking a problem that they know does not ex ist, w ith a solution that they know will not work. A charitable explanation is thatthey do not believe that they can change the public's perception of the problem; therefore, they pretend to act tough wh ile introd ucing rather soft reform s. Nothing we have seen suggests th is is the operat ive scenario. It is also dangerous, as U.S. President C linton discove red whe n he tried to wa lk the same tightrope with hi s crim e bill- he came out looking indec isive and untrustworthy to liberals and conservatives alike. The marketing of the policy has been clever. Justice Minister A llan Rock stresses that these get tough reform s are meant to address the problem of viole nt youth crime, and that other reforms are being offered to get non- vio lent youths out of that envelope. Th is notion of a balanced approach is misleading because the promi se to wa re house the former group cannot be defe nded by reference to any ev idence. To pretend otherwise is to impose unjust burdens on a group for whom better soluti ons are available. The M inister has promised to provide treatme nt services for these incarcerated yo uths, but we have been unable to fin d a concrete proposal to that effect. Indeed, the hi gh cost of such treatment inside ad ult faci lities would virtually guarantee that it wou ld not be im plemented even if passed. The alternative-and less palatable-explanation is that getting to ugh w ith violent yo uths pays po litically. That appears to be the lesson from the 1988 Bush-Dukakis pres idential election campaign confrontation where Bush accused Dukakis of being soft on crim e (the Willie H0I10n issue). Dukakis, as Governor of Massachusetts, was indeed responsible for the "sof1" solutions being implemented by the Department of Youth Serv ices. Ironically, those solutions were already proving to be vastly superior to the costly get tough alternatives. But the get tough message resonated well with the American public and led to an upsurge in the popu larity of that approach . The reasons behind Canad ians' fixation on a mythical youth crim e wave are com plicated. Having been planted and hav ing taken root in the national psyche, the myth has forced the Liberals to react as though

CHANGING THE YOUNG OFFENDERS ACT

it were genuine. Moderates feel that they cannot afford to appear soft on a crisis for which the public is demanding a macho so lution. A second, more complex exp lanation has to do with a general public loss offaith in our leaders-politicians, the media, the experts. What peop le feel in their guts is believed to be no less " true" than facts provided by those leaders. Add to thatthe potent brew offear and uncertainty brought on by an extensive period of unemployment, with its social costs, and the upheaval in traditional structures offam ily, community and religion. The now familiar cry of "I am fed up and I am not going to take it any more" seems to capture the present mood. The crime issue encapsu lates many fears includi ng the cha llenge to home and famil y; to parenthood, which is supposed to protect youth; and of a you ng, unruly generation which in large part has been shaped by the search for greater personal freedom and the underm ining of traditional authority that characterized their parents ' generation. It is eas ier to blame o ur youth than to accept responsibility for whatthey have become and w ill continue to become. On one issue, however, the public is accurate. The kind of leadership needed to allay public fear through education and example, and to counter its thirst for retribution is indeed sad ly lacking in most Western societies. The Liberals have learned an important lesson from their predecessors: heed the public 's wishes, even if wrong, because failure to do so is political suic ide. We have no way of knowing how much these and other factors contributed to the Liberals' decision to opt for a get tough app roach with violent youth offenders. We do know their so lution is based on few if any facts, an emotional response to a frustrating problem, little appreciation of wide experience e lsewhere, a short-term fix ation that wi ll have long-term negative consequences and the need to fi x blame on a convenient culpril. It is ad hoc and self-serv ing, the very behaviour characteri stics that we criticize in our delinquent youth. CONCLUS ION

On the basis of the material we have reviewed and our own calculations, we fee l confident in asserting that, however many votes it might garner, the solution that the Liberals have adopted wi ll not so lve the problem they are add ress ing. The deterrent effect of stiffer punishments is negligible, and young offenders wi ll leave pri son more inclined

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to commit violent acts than before. The enormous resources required to imprison them could finance less costly, more humane and more effective long-term solutions. Today's imagined explosion in youth crime is virtually certain to become tomorrow's real one under the recent changes to the YOA. Canadians ought to be crafting policy based on what is appropriate and what will work, as opposed to what makes us feel better-or, even more perversely, imitating that which makes American politicians feel better. This issue, therefore, is a rather dangerous tiger and having chosen to ride it, the Liberals will find it difficult to get off. The recently released data for 1993 should unnerve them further. They show:

• • •

the crime rate fell by 5 percent, the largest decline in more than 30 years and down 27 percent from its peak in 1975 (the year before capital punishment was abolished); the overall level of violent crime fell for the first time in a decade; the number of youths aged 12 to 17 actually convicted of a crime dropped 6 percent. 57

There are abundant models of more successful policies to deal with violent youth crime, and we have referred to a number of them. The Liberal government would be well advised to rethink its present course, which appears to be the worst of all available alternatives. NOTES

We would like to acknowledge the kind assistance of Kathy Underhill, Research Services, Ministry of the Solicitor General and Correctional Services of Ontario, for providing useful data; and of Luc Juillet, School of Public Administration, Carleton University, for research assistance. Helpful comments and suggestions were offered by Robert Weisberg and David Rosenhan of Stanford University Law School, as well as by Robert Friedman, Susan Phillips and our co-contributors to this volume.

2

Kevin Marron, Apprenticed in Crime: Young Offenders, the Law, and Crime in Canada (Toronto: Seal Books, 1992), p. 193. Canada, Department of Justice, The Evaluation of the Young Offenders Federal-ProvinciaVTerritorial Cost Sharing Program (Ottawa, January 1994), p. 235. The study hypothesizes that the increased use of custodial

CHANG I NG THE YOUNG OFFENDERS A C T

3 4

5 6

7 8 9

10 II

services might have resulted from incentives provided under the cost-sharing agreement. Liberal Party of Canada, Creating Opportunity: The Liberal Plan/or Canada (Ottawa, September 1993), p. 84. Paul Wells, "Youth Crime Bill Is a Mistake: Experts, Criminologists Say Toughening Law Will Aggravate Flaws, Not Fix Them," The Gazette [Montreal], October 19, 1994, p. B I. See also inlerviews with Wi ll iam Trudell of the Criminal Lawyers' Association in Ross Howard, "Your Rehab ilitation Loses Priority," The Globe and Mail, June 3, 1994, pp. A I, A5; and with Uni versity of Toronto Crim inologist Anthony Doob in Doug Fischer, "Law and Order: Talking Tough, Crying Wo lf; Rea li ty Check: Criminologists Say Howls for a Crackdown Are Backed Mostly by Selective Use of Crime Statistics," The Ottawa Citizen, May 14, 1994, p. A4. The Church Council on Justice and Corrections, representing all the main churches in Canada, is of the same opinion; see \Villiam Johnson, "Jail Doesn ' t Work: Church Council Says Oltawa Is on the Wrong Track with Its Tough New Approach to Young Offenders," The Gazette [Montreal], September 27, 1994, p. B3 . Gilles Gherson, " Rock ' s Recipe for Crime Prevention: Give People a Sense They Have a Future," The Globe and Mail, June 8, 1994, p. A22. Doug Fischer, "Crime Poll Reflects Fears," The Ottawa Citizen, June 9, 1994, p. A I. A 1994 Statistics Canada report also showed 46 percent of Canadians believed that crime in their community had increased since 1988, even though the report stated that the number of violent crimes aga inst ind ividuals had not increased. Statistics Canada found that one quaner of Canad ians fe lt unsafe wa lking in tlleir neighbourhoods and that on ly one half believed that the po lice were doing a good job. See Holly Johnson, " Public Perceptions of Crime and the Criminal Justice System" Juristat Service Bulletin, II , I (Ottawa: Statistics Canada, January 1991), pp. 1-14. Fischer, "Law and Order," p. A4. Rhoda L. Lenton, "Homicide in Canada and the U.S.A.: A Critique of the Hagen Thesis," Canadian Journal a/Sociology, 14, 2 (1989), p. 164. United Nations, Department of International Economic and Social Affairs, Compendium a/Social Statistics and Indicators (New York: Statistical Office, United Nations, 1991), pp. 654-57. Holly Johnson, "Homicide in Canada," Canadian Social Trends (Ottawa: Statistics Canada, Winter 1987), p. 5. Such international comparisons are frau ght with difficulties. For an excellent ana lysis, see Ken Pease, "Cross-Nationallmprisonment Rates, I. British Journal o/Criminology, 34, Special Issue (1994), pp. 11 6-30. "Crime Trends in Canada, 1962-1990," Juristat Service Bulletin, 12, 7 (Ottawa: Statistics Canada, March 1992), pp. 1-15. Johnson, "Homicide in Canada," pp. 2, 4. This inflated impression of the crime rate is not a new phenomenon; see Solicitor General of

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16 17

18 19 20

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24

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Canada, Selected Trends in Canadian Criminal Justice (Ottawa, 1984). Jeffrey Frank, " Violent Youth Crim e," Canadian Social Trends (Ottawa: Statistics Canada, Autumn 1992), p. 5. Department of Justice, The Evaluation of the Young Offenders FederalProvincial/Territorial Cost Sharing Program, p. iv. Joan Conway, " Youth Court Statistics 1991-92 Highlights," Juristat Service Bul/etin, 12, 16 (Ottawa: Statistics Canada, September 1992), p.3. Peter Carrin gton and Sharon Moyer, "Trends in Youth Crim e and Police Response, Pre- and Post- YOA ," Canadian Journal a/Criminology, 36, I (January 1994), pp. 1-28. Canada, Department of Justice, Toward Safer Communities: Violent and Repeat Offending by Young People (Ottawa, 1993), pp. 3-4 . Marron, Apprenticed in Crime, p. 2 1. Christine Wright, " Homicide in Canada 1991," Juristat Service Bul/etin, 12,18 (Ottawa: Statistics Canada, October 1992), p. 14. Gherso n, "Rock's Recipe for Crime Prevention," p. A22. James R. Kluegel, "Contemporary Juvenile Justice: Responding to Public Mandates for Change" in James R. Kluegel, ed., Evaluating Juvenile Justice (Beverly Hills: Sage Publications, 1983), p. 10, [Emphasis added] . Marron, Apprenticed in Crime, p. 13. Roberts and White did not find , however, a statisticall y significant re lationship between use of media and high estimates of recidivism rates, indicating that in th eir study, such estimates did not der ive d irectly fro m the medi a. Roberts and White, " Public Estimates of Recid ivism," pp. 229, 234. Anne L. Schneider, ed., Deterrence and Juvenile Crime: Results ]i'om a National Policy Experiment (New York: Springer Verl ag, I 990), p. 4, [Emphas is ours]. Judicial waiver occurs when judges use their discretion to transfer certain juveniles to adult court; legislative waiver occurs when state laws mandate that certain crimes are automat ically waived to adult court. Eric L. Jensen and Linda K. Metsger, "A Test of the Deterrent Effect of Legislative Waiver on Violent Juvenile Crime," Crime & Delinquency, 40, I (Jan uary 1994), p. 102. Simon I. Singer and David McDowall, "Criminalizing Delinquency: The Deterrent Effects of the New York Juvenile Offender Law," Law and Society Review, 22, 3 (1988), p. 522. Marron, Apprenticed in Crime, p. 26. One colleague has pointed out that prisons may be the only really effective training program in the country! There have been several cost-benefit studies of crime in general. To our kn owledge, however, the youth crime issue has not been addressed using this tool. A study by John Di luli o estimated that the cost to each victim and to society of the work of a typ ical criminal who committed an

CHANGING THE YOUNG OFFENDERS ACT

29 30 31

32

33 34

35

assumed 12 crimes a year was $27,600. The average cost of incarceration in 1987 was $26,000, leading him to argue for locking up all offenders. Cited in Lois G. Forer, "Behind Bars: Prison Is Not Always the Best Option," The Dallas Morning News, October 30, 1994, p. 11. A criIique of the use of cost-benefit analysis is offered in Franklin E. Zimring and Gordon Hawkins, incapacitation: Penal Confinement and the Restraint olCrime (New York: Oxford University Press, forthcoming), especially chap. 7. Statistics Canada, Adult Correctional Services in Canada, 1991-92, Cat. no. 85-211 , (Ottawa, 1992), table 6, p. 100. Ibid., Summary table 2, p. 28. Jeff Potts, " Amer ican Penal Institutions and Two Alternative Proposals for Punishment," South Texas Law Review, 443 (October 1993), p. 4. These costs make prison accommodation more expensive than building a five-star hotel! Much of these data are from Craig McK ie, " Canada's Prison Population," Canadian Social Trends (Ottawa: Statistics Canada, Summer 1987), pp.2-7.

We used "he" throughout this discussion on ly because males commit the vast preponderance of v iolent crimes. Martin L. Forst and Martha-Elin Blomquist, " Cracking Down on Juveniles: The Changing Ideo logy of Youth Corrections, " No Ire Dame J01lrnal 01 Law Ethics and Public Policy (1991), p. 323. Stevens H. C larke, "Getting ' em Out of Circulation: Does Incarceration of Juvenile Offenders Reduce Crime?" The Journal olCriminal Law and Criminology, 65 , 4 (1974), p. 528. In New Jersey in the 19705, the

recidivism rate (percentage of released population committing crimes)

36

37

38

39 40

41

was greater than 60 percent. Later studies put the figure as high as 80 percent. Cited in Potts, "American Penal Institutions." For the former, see Cal ifornia State Legislature Blue Ribbon Commission on Inmate Population Management, Final Report (Sacremento, 1990), p. 40. The latter are for Washington State, in Anne L. Schneider, "Sentencing Gu idelines and Recidivism Rates of Juvenile Offenders," Justice Quarterly, 107, (1984). Sharon Moyer, "Recidivism in Youth Courts," Juristat Service Bulletin, 12,3 (Ottawa: Statistics Canada, June 1992), table I, p. 6. The lack of data was confirmed by senior officials at both the Department of Justice and the Canadian Centre for Justice Statistics. Theodore N. Ferdinand, "History Overtakes the Juvenile Justice System, " Crime and Delinquency, 37, 2 (April 1991), p. 2 17. Data are for the State of Utah. Business Week, December 13, 1994, p. 75. Ronald A. Meng, "Compensating Wage Differentials in the Canadian Labour Market," Canadian Journal 01 Economics, 22 (1989), pp. 413 -24. The latter was also based on 1983 dollars and took employment risk

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43 44

45 46

47 48

49

50

51

52 53 54

55 56 57

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factors into account. The authors suggest that their mean estimate of $5.2 million may be too low. Ronald A. Meng and Douglas A. Smith, "The Valuation of Risk of Death in Public Sector Decision-Making," Canadian Public Policy, XVI , 2 (June 1990), pp. 137-44. Martin L. Forst, Jeffrey T. Fagan and T. Scott Vivonia, " Youth in Prisons and in Training Schools: Perceptions and Consequences of the Treatment-Custody Dichotomy, " Juvenile and Family Court Journal, 40, I ( 1989), p. I. Ontario, Ministry of Correctional Services, Research Services (Photocopied material, August 2, 1994). D.A. Andrews, et aI., " Does Correctional Treatment Work? A Clinically Re levant and Psychologically Informed Meta-Analysis," Criminology, 28,3 (1990), pp. 369-404; For an excellent overview, see Theodore N. Ferdinand, " History Overtakes the Juvenile Justice System," Crime and Delinquency, 37, 2 (April 1991), pp. 204-24. Ted Palmer, A Profile of Correctional Effectiveness (New York: Albany State University Press, 1994). Jeffrey K. Day, "Juvenile Justice in Washington: A Punitive System in Need of Rehab ilitation," University of Puget Sound School of Law, 16 (Fall 1992), p. 399. Forer, "Behind Bars," P. lJ . Day, " Juvenile Justice in Washington," citing the study by Ferdinand, "History Overtakes the Juvenile Justice System," p. 204. David Shichor," Historical and Current Trends in American Juvenile Justice, " Juvenile and Family CourtJou/'llal, 34, 3 (I983), p. 61. Evidence is also presented on the ineffectiveness of incarceration on recidivism. In Oregon, the recidivism rate for incarcerated youth was cut from 60 percent to 30 percent when prisons were made smaller and therapy became part of the program. Mark Silk, "Stopping Ju venile Crime: DCTYS Needs More of Everything," The Atlanta Constitution, September 23, 1994, p. OS. Ira M. Schwartz et aI., "Business as Usual: Juvenile Justice during the 1980s, " Notre Dame Journal of Law Ethics and Public Policy, 377 (1991), p. 392. Wright, " Homicide in Canada 1991 ," p. 15. Children' s Defense Fund, The State of America's Children, Yearbook (Wash ington, D.C., 1994). United States, Department of Ju stice, FBI, Uniform Crime Reports (Washington, D.C., 1986), pp. 182, 185. Wright, " Homicide in Canada 1991 ," p. 15. Canada, Department of Justice, Toward Safer Comm unities, p. 4. Editorial, "Crime Wave Not Even a Ripple," The Vancouver Sun, August 25, 1994, p. A 18.

13 Warring over Wheat: Managing Bilateral Trading Tensions

GRACE SKOGSTAD

American missiles pointed northward to force Canada to surrender in a wheat trade dispute? Preposterous? Certainly. Yet, these " bu llyboy tactics" were just what U.S. Senator Kent Conrad suggested in April 1993 to weaken Canada's resolve and appease American farmers angry about the level of Canadian wheat imports into the U.S. market. ' Senator Conrad's hyperbolical suggestion is telling testimony to the stormy relations of Canada-U.S. agricultural trade with which the Liberal government has had to contend si nce assum ing office in late 1993. At the eye ofthe storm has been the controversy over shipments of Canad ian wheat to the United States.' Other agricultural commodities are also contentious, however, including Canadian exports of refined

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sugar and sugar-containing products to the United States and U.S. exports of dairy, pou ltry and egg products to Canada. While in opposition, the Liberal Party was a vocal critic ofthe Free Trade Agreement eFTA) negotiated by the Mulroney Conservative government and ofthe emerging NOith American Free Trade Agreement (NAFTA). ln offi ce, however, the Chretien Liberal government has been fairly adroit in manag ing the bilateral trading relationship in agriculture, including the trade disputes that attend it. An assessment of the Chretien government's hand ling of agricultural trade disputes, and the reasons for the Liberals' considerable success, is the focu s of this chapter. The importance of agric ultural trade disputes, li ke the one in 199394 over wheat, is considerable. Such controversies predate both the FTA and NAFTA and continue in their wake. There is no guarantee that the Uruguay Round of the General Agreement on Tariffs and Trade eGAIT) will curb agricu ltural trade disputes. Indeed , 1995 began w ith th e U nited States challeng ing Canada's tariffs-legal un de r t he GAIT--{)n milk, dairy products, eggs, egg products, poultry and poultry products, and Canada responding w ith a similar contestation of U.S. tariffs on refined sugar and sugar-containing products. G iven that a major rationale of negotiating new and improved internationa l trade agreements in the past decade has been to curb trade protectionism and end trade wars, it is important to examine the reasons why trade harassment and conflict continue despite the existence of the international trade agreements. The trade tensions have the ir roots in the differing agricultural systems, policies and programs that exist in the two countries. The CanadaU.S. wheat dispute is best viewed as a susta ined U.S. chall enge to an agricultural policy regime that differs from its own. Canada is 110t inherently more protectionist or more prone to subsidies than is the United States. Contrary to the image that many Americans would li ke to project, trade confl icts between the Un ited States and Canada shou ld not be seen as attem pts by the world's foremost free trader to open up markets around the world . Rather, U.S . challenges to Canad ian exports into the United States are frequently driven by the desi re to preserve the American market for American producers and domestic industry. In the case of agriculture, U.S. contestation of other countries'-including Canada's-i ncreased penetration of the U.S. market

NA FT A AND THE W H EA T DI S PUTE

is accompanied by a distrust of agricul tural programs and trade policies that differ from their own. Efforts by American lobbies to curta il fore ign access to their markets very quickl y become attempts to discredit and disallow policy instruments and programs that are not configured in the U.S. image. In their endeavour to discredit other nations' practices when threatening to their own markets, American producers enjoy the adva ntage of a politica l framework and trade laws that trad iti onally have been weighted in their favour. The American political and admin istrative framework affords domestic interests ample opportunities to challenge the fa irness of other countries' trading practices. And fa rm lobb ies and certain members of Congress have been more than ready to exploit such opportunities. Although U.S. trade reliefactions agai nst Canada are initiated and driven by the obj ective of constraining Canadia n practices and programs that differ from those in the United States, such trade actions can appreciably constrai n Canada's domestic agricu ltural and trade pol icy options. Accordingly, the stakes in Canada's agricu ltu ral trade disputes with the United States are high. What is at stake is the scope for Canadian policy autonomy, including the very pol icy in struments and configurat ion of domestic programs that are deemed perm iss ible. Locked into the U.S. market more than ever th ro ugh international trade agreements like the FTA and NAFTA, Canad ians' access to the U.S. market appears increasingly to depend upon our do ing th ings " their way" when it comes to how we design our agricu ltural programs and policies. Canada-U.S. trade disputes thus present Canad ian governments w ith a difficul t balancing act. They must find a way to manage our most important bilateral relationship wh ile avoiding domestic societa l cleavages and damagi ng inter-regiona l tensions . Due to the stro ng li kelihood of continued trade confl icts in the future, there is little relief in sight from thi s juggl ing act. How adeq uately the Li beral government hand les agric ultural trade disputes wi ll be a good ind icator of its skill in playi ng the constantly ongo ing "two-l eve l game" of interna tional

trade diplomacy.' This discuss ion of the Liberal government's hand ling of agricul tural trade disputes with the United States begins by examining the cons istency between the government's behaviour and the trade policy objec-

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tives and principles outlined by the Liberals while in opposition and during the 1993 election campaign. The discussion then focuses on the Liberal government's handling of the wheat dispute and the government's success in managing the issue in terms of mitigating internal political tensions and controversy.4 The record shows a remarkable similarity between the approaches of the Liberal and Conservative governments in their reliance on highlevel diplomacy and negotiations. While the results achieved by the two administrations differ little, the Liberal ministers responsible for the trade dispute dossier appear to have had relatively more success than their Conservative counterparts in appearing not to have sacrificed domesti~ interests on the altar of good bilateral relations. In general, Agriculture and Agri-Food Minister Ralph Goodale, International Trade Minister Roy MacLaren and the Prime Minister himself have successfully navigated the troubled waters of agricultural trade relations. They have been fairly deft in soothing Canada's anxious agricultural policy community and persuasive in arguing that the interests of the Canadian crew have not been made jetsam to preserve the bilateral relationship. And they have managed to avert major schisms across regions and commodity groups by not forsaking the interests and livelihood ofone group ofcommodity producers to promote those of other commodity groups. CANADA-U.S. AGRICULTURAL TRADE: A TROUBLED HISTORY

Trade disputes over softwood lumber and agricultural products played a catalytic role in the FTA.s During the prelude to the FTA, Canadian hog and pork producers were waging a largely unsuccessful battle to persuade U.S. trade remedy authorities that Canadian subsidies were not injuring American hog producers. Hog and pork producers were not alone. Canadian raspberry, sugar, vegetable and potato growers had also been charged with exporting subsidized prod~cts that were causing material injury to their U.S. counterparts and had been slapped with countervailing duties. In accordance with GAIT law, U.S. trade remedy laws-like those in Canada-authorize relief for domestic industries if dumped or subsidized imports cause, or threaten to cause, material harm. The belief

NAFTA AND T H E WHEAT DISPUTE

grew in Canada, however, that both the U.S. trade remedy laws and the process of apply ing these laws were not in keeping w ith the spirit of the GATT. Ev idence mounted that U.S . trade rules and procedures were biased in favour of domestic complainants, were subject to political interference and increasingly yielded outcomes that were protectionist. Vaguely worded American trade statutes left considerable discretion for U.S. trade law administrators to interpret the meaning of key concepts in the trade laws, such as "countervailable subs idy," " materi al injury" and " like product." Given the ambiguity and im precision of these statutes, and faci ng combined pressure from U.S. industries and members of Congress, it was not surprising that American trade ad ministrators regularly found that dumping or subsidization causing material injury had occurred . It was against this backdrop oftrade harassment that support grew in the Canad ian business and agricultural communities for a CanadaU.S . trade agreement. An agreement that included fairer trade remedy rules and established a new bi-national dispute settlement mechanism came to be viewed as necessary to limit U.S. unilateral restrictions on Canadians' access to the U.S. market' The FTA, which was negotiated by the Mulroney Conservative government and became effective in January 1989, fe ll well short in terms of securing access to the U.S. market. It lacked a mutually acceptab le set of trade rules, including clear definitions of what constitutes a subsidy and dumping. The United States clearl y preferred that such defi nitions be resolved w ithi n the multilateral forum of the Uruguay Round trade discussions, rather than bilaterally with Canada in the FTA (or in the subsequent NAFTA). C hapter 19 of the FTA did, however, provide for a new dispute settlement mechanism: bi-national panels to review the decisions of domestic trade administrators in anti-dumping duty and countervailing duty cases . These bi-national panels, which have large ly rep laced the domestic bodies to which admin istrative decisions in anti-dumping duly and countervai ling duty cases are appea led, have been described as "a significant procedural improvement over the pre-FTA system ofjudi-

cial review."7

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THE LIBERAL PARTY ' S TRADE POL ICY

During the 1988 election campaign, the Liberal Party opposed the FTA on the grounds that it failed to realize what the Prim e Minister had cited as its prim ary objective: to guarantee Canada secure access to the U.S. market. It repeated these criticisms in the 1993 campaign. The Liberal Party' s Red Book criticized the mechanisms that the FT A had created for reso lving bi-national trade disputes as "often lengthy and costly" and cited an add itional fl aw in the as-yet unsigned NAFTA. The NAFTA proposed to scrap the bi-national working group established under the FTA to develop a set of rules on subsidies and ant idumping by 1995. The exclusion of this provision from the NAFTA could mean that uniform trade rules would still remain out of reach becau se each co untry would reta in its own anti -dump ing and countervailing duty laws. To overcome these deficiencies in the FTA and NAFTA, the Liberal Party's Red Book proposed to renegotiate both the FTA and NAFTA to obtain a subsidies code, an anti-dumping code and a more effective dispute resolution mechanism ' These provisions were deemed necessary to create a "level playing-field" in CanadaU.S. trade relations. The negotiations of both the NAFTA and GATT were in their penultimate stages when the Liberals assumed office in 1993. Little wonder, then, that they did not succeed in renegotiating the NAFTA to achieve their stated objectives. Gilbert Winham notes that the dispute settlement mechanism was "a subject of strong disagreement between Canada and the United States late in the negotiation" and that the issue " went down to the wire.'" Canad ian negotiators were successful in stavi ng off an init iati ve by the United States to codify U.S. standard s of due process into the NAFTA dispute reso lution procedures. The very dispute settlement mechanisms that the Liberals had faulted as costly and lengthy, however, were made permanent in the NAFTA, which continues the FTA provision for impartial bi-nationa l panels to review the decisions of domestic ad ministrative bodies to impose antidumping and countervailing duties. The Liberal government also made no progress on a subsidies or anti-d um ping code. Canada may, in fact, have lost ground. While the FTA established a time frame and a mechanism to negotiate antidumping and subsidies codes, the NAFTA does not. Negotiating such

NAFTA AND T H E WHEAT DISP U TE

codes is a voluntary matter that will depend upon the political will and commitment ofthe three countries. Article 1907 of the NAFTA commits Canada, Mexico and the United States to consult an nually on the implementation and operation of the dispute sett lement mechanism applyi ng to anti-dumping and countervailing duty actions. The three parties further agree to consu lt on the possibility of developing more effective rules concerning the use of government subsidies. I. Such consu ltations commenced in December 1994, fo llowing an agreement by the three countries in December 1993 to reimpose the FTA time fra me for negotiating replacement anti-dum ping and subsid ies codes by December 1995. Having fa iled to obtain their professed " bottom line" objectives, should the Liberals have fo llowed through on their election campaign statements and refused to sign the NAFTA? Not being part of the NAFTA was never a serious option; non-membersh ip in the NAFTA carried more disadvantages for Canada than did membership. As David Leyton-Brown has noted: "Canada paid considerably for the market access benefits it achieved under the FTA [and] wo ul d have been serious ly d isadvantaged if the benefits had been lost or dil uted through provision of the same or si milar benefits to Mexico w ithout any re imbursement or reduction in costs." Had Canada excluded itse lf and a llowed the United States and Mexico to negotiate a separate bilate ral arrangement, both Canada and Mexico "would have on ly competitive access to the U.S. market and no particular access to each other," whi le the United States "would enjoy preferential access to the markets of both its partners."1 1 T he little headway made to date in real izing professed trade po licy objectives with in the NAFTA arena is contrasted with greater success in the GATT forum. Reiterating its long-sta nding support for multilateral ism "as the cornerstone of Canada's trade policy," the Liberal Party' s Red Book committed the party to a successful compl etion of the Uruguay Round of the GA TT. 12 T his Agreement negotiated in December 1993 does make progress on the issues that have proven so intractable in the FTA and NAFTA. The GA TT Agreement, whose various provisions are being implemented in 1995, clarifies the defi nition of a subsidy and what consti tutes permissible subs idies. More detailed and clearer rules for anti-d ump ing actions are a lso spec ified. "Sunset" provisions ensure that anti-dumping and countervailing duty

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H OW OTTAWA SPENDS

penalties will generally expire within five years. As well, the GAIT dispute settlement mechanism is considerably strengthened by clearer and stronger rules and by a new enforcement mechani sm . The new policing and implementing body is the World Trade Organ ization which became operative in January 1995. Compared with the GAIT panels that it replaces, the World Trade Organization should be in a strong position to curtail unilateral action and redress "unfair trade" by all countries, including the United States. " THE WHEAT DISP UT E : THE IS S U E AND I T S RESOLUTION

The wheat dispute posed a different challenge for Canada than did the long-running (1989-92) attempts by U.S. industry to keep Canad ian pork and hogs out of the United States. The pork and hog di sputes entai led U.S . claims of material injury resulting from subsidies paid to Canad ian producers. Since the implementation ofthe FTA on January I, 1989, Canada has had the right to appeal decisions of the U.S. domestic trade tribunals- the Intemational Trade Admin istration (ITA) in the Department of Commerce and the International Trade Commission (ITC)-to bi-national panels on which Canada has equal representation. Bi-national panel decisions have tended to vind icate Canad ian exporters' positions and given the latter a rough justice denied by U.S. domestic trade remedy authorities. The U.S. endeavour to restrict im ports of Canadian wheat is not a countervail ing duty claim and did not hinge on establishing that Canad ian wheat exports were subsid ized by Canadian governments. Rather, it was claim ed that U.S. farm support costs had risen as a result of Canadian exports and that remedial action (quotas and/or tariffs) on Canadian wheat exports into the United States were thus needed. The relevant statute that enabled trade action is Section 22 of the Agricultural Adjustment Act of 1933 (as amended). Thi s section protects domestic farm programs by authorizing the President to impose import restrictions if imports impair or interfere with the price and income support programs of the Un ited States Department of Agriculture (USDA). When the Pres ident believes such a situation exists, he can request the ITC to conduct an investigation into the

NAFTA AND THE WHEAT DISPUTE

matter. Recommendations made by the ITC are not binding upon the President; the ITC acts in an advisory capacity only. The wheat di spute followed a sharp surge in Canadian exports of wheat and barley to the United States. The former rose from an average of one million tonnes (a tonne is a metric ton, equal to 1,000 kilograms) annually between 1990 and 1992, to a record 2.9 million tonnes in 1993 -94; the latter rose to an unprecedented I .S million tonnes in this period. From the Canadian perspective, the unprecedented levels of American imports of Canadian grains could be explained by several factors: the U.S. system of export gra in subsidies, which made the U.S. market one of the highest priced in the world; the weakness of the Canad ian dollar relative to the U.S. dollar; the high quality of the Canad ian product; and a shortage of U.S . domestic supply. In addition, floods in the American Midwest in the su mmer of I 993, and U.S. wheat growers selling the ir crops abroad with the benefit of export subsidies under the Export Enhancement Program, left American millers and pasta manufactu rers short of supply. American wheat growers were less interested in the reasons for the surge of imports from Canada and more worried about the poss ible price suppression and market displacement threats the imports posed. The American wheat growers pressed thei r Secretary of Agriculture for remedial action. Armed with a USDA task force report that showed U.S. wheat program costs had increased as a result of rising wheat imports, the Agriculture Secretary advised the President to use his Section 22 powers. Domestic political factors loomed large in President Cli nton 's decision to request an ITC investigation to determ ine whether imports of wheat, wheat flour and semo lina into the Un ited States were rendering ineffective, or materially interfering w ith, the U.S. wheat support programs. Promise of an ITC inquiry was a concession made by P.resident Cl inton to firm up the votes ofa number of members of the House of Representatives to secure passage of the N AFTA. That a presidential prom ise of an ITC inquiry into wheat imports could swing the votes needed to ensure passage of the NAFTA can only be appreciated by recalling that Canad ian wheat sa les into the United States had been a thorn in the side of American wheat growers for some time. To the initial irritant of Canadian durum wheat exports

331

332

HOW OTTAWA SPENDS

were added, in 1993-94, Canadian exports of "spring" milling wheats and feed wheats. Canada had tripled its durum wheat sales to the United States over the decade of the 1980s. By 1993-94, durum wheat imports were five times what they had been at the beginning of the 1980s. The s ignificant increase in Canad ian imports-to a level now comprising about 20 percent of U.S. durum wheat consumption---'

FISCAL FACTS AN D TENDS

Thi s appe ndix presents an overview of the federal governmetcifi scal position and includes certain major economic policy indicators for 19851994, as well as some international comparisons. Facts and trends are presented for fed eral ~jenue sources, federal expenditures by policy sector, the government!s share oflhe economy, interest and infl ation rates, Canad ian balance of pay ments in total and with the Un ited States in particular, and other nationa l economic indicators. In add ition, international comparisons on rea l growth, unemployment, inflation and productiv ity are reported for Canada, the U.S., Japan, Germar~and the U.K. The figures and time series are updated each year, providing readers w ith an ongoing current record of major budgetary and economic variables.

0 V>

J/j

If.~

376

,

HOW OTTAWA SPENDS

It·) ,

Federal Revenue by Source 1985-94

-/i'''

As a Percentage of Total Ot h e r Revenue

Total

A nnu n l

R evenue

Cha ng e

Per s onal Tax (3)

Co r po r a Ie

1985

4 7. 1

12.0

23.3

17.5

100 .0

6.3

1986

50.3

1 1.1

22.8

15 .8

100 .0

5.6

1987

54.2

I 1.3

23.9

10.7

100.0

13.7

19 88

55.8

10 .9

23.6

9.7

100.0

6.6

1989

54.0

11.1

24.6

10 .3

100.0

10.3

1990

53.5

11.1

24.4

11 .0

10 0.0

4.7

19 9 1

57.3

9.6

2 1 .7

I I .5

10 0.0

6.7

1992

60.7

7.2

21.3

10.8

100.0

- 0.2

1993

6 1 .0

6.0

22.0

I 1.0

100.0

-0.5

1994

59.0

7.7

23.3

10.0

100.0

- 0.9

Fiscal Year

T"

Indirect Taxes (b)

(a) For Ihe years 1985·88. unemployment insurance contributions are included in the total. (b) Consists of sales (axes, energy (axes (excepi for petroleum and gas revenue lax and incremcnlal oil revenue tax), excise duties. customs impon duties. and the GST. (c) ConsiSIS of non-resident income lax, petroleum and gas revenue lax, incremenlal oil revenue tax, miscellaneous other taxcs and non·tax revenue.

Source: Public Accounts of Canada

FI SCAL FA CTS AND TRE NDS

r

377

Sources of Federal Revenue as a Percentage of Total 1994

IndirectTaxes 23 .3%

Corporate Taxes 7.7% Personal Taxes 59.0%

Source: Public Accounts of Canada

378

HOW OTTAWA SPENDS

Federal Expenditures by Sector 1991·96

/J--, . .I

Percentage of Total Outlays 1991

1992

1993

1994

1995

1996

Justice

1.9

2.0

2.1

2.1

2.0

2.0

Heritage

2.0

2.0

2.2

2.1

1.8

1.6

Transport

2.3

2.5

1.8

1.9

1.8

1.7

Industry

1.9

1.8

2.1

2.1

2.5

2.4

Foreign Affairs

2.3

2.5

2.6

2.5

2.5

2.7

Natural Resources

3.4

4.4

3.9

3.5

3.0

2.7

G ov't 0 perations

3.7

3.6

3.8

3.8

4.2

4.0

D efeoce

7.5

7.1

7.7

7.3

7.1

6.6

Fiscal Arrang.

10.8

10.7

11.0

11.9

16.1

16.0

Public Debt

26.5

24.9

25.0

24.7

25.5

30.1

Social Program 5

37.7

38.6

37.8

38.0

33.7

30.5

Total Outlays

100

100

100

100

100

100

Sector

Source: Public Accounts of Canada and Main Estimates, 1995-96

FIS CAL FA CT S A ND T REND S

·iJ .

Federal Expenditures by Sector Estimates 1996

Socia l Programs

30%

Publ ic Deb t 30%

Fiscal Arrangements 16%

Defence 7%

Source: 1995·96 Main Estimates

OUler 17% Gov' !. Operations Natural Resources Foreign Affairs Industry Justice Herilage Transport

4.0% 2.7% 2.7% 2.4% 2.0% 1.6% 1.6%

379

380

H OW O TT AWA S PEN D S

.::

Federal Expenditures by Sector 1990-96

Billions of Dollars

(current) 100

75 Social Programs

- -----.....

------- ... Public Debt

l.__________----------------------------------:::::::~O;t~he~r~.

25 r

Fi scal Arrangements

........................................................... . . .. .. . Defence

O+------.-----.------r-----.------.-----,

1m

'91

'92

'93

'94

'95

Fiscal Year

• Other includes: Justice. Heritage. Transport . Industry. Foreign Affairs. Natural Resources and Government Operations

Source: Public Accounts of Canada

38 1

FISCA L FA CTS AND T R ENDS

Federal Revenue, Expenditures and Deficit as a Percentage of GDP 1985-94

Percentage of GDP

25

20

Expenditu res

15 L_-----------~IRevcnue

10

..... .... ..... 5

.....

- ---

Budgetary Defic it

---_ ..... -

____ -

-

-

o +---~--~--,_--,_--,_--,_--,_--,___.

1~

''i5l

'88

'89

'91

Fiscal Year

SO/tree: Public Accounts of Canada and the Bank of Canada Review

'91

'93

382

HOW OTTAWA SPENDS

Federal Deficit

q,

1985·94

Millions of Dollars Fiscal Year

Total Revenue

Total Expenditures

Budgetary D dicit

1985

71 053

109 568

38 512

17.0

8.1

1986

76 933

111516

34 583

-10.2

6.8

1987

85 931

116 664

30 733

-11.1

5.6

1988

97 612

125 813

28 201

-8.2

4.7

1989

104 067

133 018

28 951

2.7

4.5

1990

113 707

142 703

28 996

0.2

4.3

1991

119353

149 971

30 618

5.6

4.5

1.992

122 032

156 675

34 643

13.1

5.0

1993

120 380

161 401

41 021

18.4

5.7

1994

115984

157 996

42 012

2.4

5.9

Revenue totals are calculated on a net basis. Source: Public Accounts of Canada

Annual Change %

As % ofGDP

FI SC AL FAC T S A N D TR EN DS

383

Federal Revenue, Expenditures and Deficit 1985-94

Billions of Dollars (c urrent)

------

TOlal Expenditures

l:xl

Total Revenue

1m

Budgetary Deficit

--- ---- ---- -- --- --O +---.---.---.---.---.---r---r---r-~

1585

'9:)

";{1

'88

'89 Fiscal Year

Source: Public Accounts of Canada

'91

'92

'93

'94

384

H OW O TT AWA S P ENDS

Growth in Real GDP 1985-94

An nual Change (percentage)

6

4

2

o +-------------------\-----~~-------

~ +---.---.---.---.---.---.---.---.---, 1~

'&5

''07

'88

'0')

Fiscal Year

SOl/ree:

Bank of Canada Review. and The Daily, March 1. 1995.

'91

'92

'93

'94

FISC AL FACT S AND TREND S

385

Rates of Unemployment and Employment Growth

1

1985-94

Percenlage

12

,. .... -- ..... ..... .

Unemploy ment Rate

....

10

..... ..........

.... ,

8

, --.",. ...... ...

/

/

6

4 2

Employment Growth Rate

o+-------------------~----------~~

-2 4+---~--~--~--~--~--~--,_--,_--~ 1~

'as

'fjJ

'88

'~

'91

Fiscal Year

Source: Historical Labour Force Stat istics (71-20 1), Statistics Canada

'92

'93

386

HOW OTTAWA SPENDS

Interest and Inflation Rates 1985-94

Percentage

15

10

5

O+-------------------------------------------~-

~+---~------------------~------------------1~ "if! '88 '91 '92 '93 Fiscal Year

• The CPI excludes food. Energy is excluded from 1990 to 1994.

Source: Historical Labour Force Statistics (71-201), Statistics Canada

FtSCAL FACTS AND TRENDS

3 87

Productivity and Costs 1984-94

An nual Change (perce ntage)

8

un it labour costs

6

-\

\ \

4

\ \ \

2 omput (per person hour)

O+---------------------~----JL-------~ ,

~ +---._--_r--_.----r_--._--_.--_.--_,r___.

1~

'85

'86

"if!

'88

'89

Fiscal Year

Economic and Fiscal Reference Tables, Department of Finance SOllrce: Bank of Canada Review, and The Dai ly, March I. 1995.

'91

'92

'93

388

H OW OT T AWA SPEND S

Balance of Payments 1984-93

Billions of Do ll ars (current)

10

-- ......

'-

-

o+-----------~,~-------------------,........ ,....... ...... ," " ...... /

Total

-10

-:lJ

Bilateral (CanadalU.S.)

-J)

40 +---~--~--~--~--.---.---.---.---,

1t;S4

'85

"if1

'88

'89

Fiscal Year

Source: Economic and Fiscal Reference Tables, Department of Finance

'91

'92

'93

FISCAL FACTS AND TRENDS

\

/'

•

389

Growth in Real GDP Canada and Selected G7 Countries 1984-93

Annual Change (Percenlage)

8

6 "

4

.

" ....'" " .. , , ... "

"

........ /

•

flo

\,

I 2

. ...

Japan

.. •

"

Uniled Siaies

"

I

\\

O+-----------------------~~--~L,~

\ Gcnnany

-2 United Kingdom

4 +---.---.---.---.---,---,---.----r--~

1\84

'85

'8)

"i51

Source: OECD Economic Outlook

'88

'89

'91

'92

'93

390

HOW OTT A WA SPENDS

\V) , ('

Unemployment Rates Canada and Selected G7 Countries 1984-93

Standardized Unemployment Rate (percentage)

14

12

1-..._--'"

Canada

10 8

- - __

..

""""' .. , ",:"..

... - - - -.......:

~ •

4 2

:

:""

6

~.

",

United States .... ,.,., ..,.,.: .. ...

s· .... " :: ":.' ,-'. "'::" :.; .......: .• : )0:'

•

... ; -

Germany

............... .. . . . .. . . ... . . .. . . .. . . . Japan

O+---~----~--~----~--~----,---~----,---~

1~

'85

'~

"if!

Source: OECD Economic Outlook

'88

'89

'SO

'91

'92

'93

FISCAL FACTS AND TRENDS

39 1

Annual Inflation Rates Canada and Selected G7 Countries 1984-93

Inflalion Rale (percenlage)

10 United Kingdom

8

6

4

2

0

."

. ':'-.

..

United States ~

'\

'-,

Japan

•

•

~ +---~--~--~--~--~--~--~--~--~ '&:; 1~ '85 "67 '88 '91 '93 '92

Source: QECD Economic OUIlook

392

H OW OTTAWA S PE N D S

Increase in Unit Costs Canada and Selected G7 Countries 1984-93

Annual Change (percentage)

12 United Kingdom

10 8

Gennany

6

/',

Canada """-""..

4

/

/"

"', ,,'< United States

- \.

2

,, , O~r, -----.r-----~

, ,,

~

\.

,

..

' .,.'.

"",

.. . -tI". -

:.,/

\.

--:" __----~~,~------------------------~ ,,

..... ,

'

Japan

~ +---~--~--,---,---,---,---,---,---~

1~

'85

"if!

Source: QEeD Economic Outlook

'88

'89

'91

'92

'93

FISCAL FACTS AND TR ENDS

393

, {; \

International Economic Comparisons 1984-93

Percentage Change from Previous Period 1984

1985

1986

1987

1988

1 989

1990

19 9 1

1992

1993

4 .2

5.0

2 .4

-0.2

-1.7

0.7

2.4

Growth in Real GDP

Ca na da

6 .3

4.7

3.3

U .S.

6 .2

3. 2

2.9

3. 1

3 .9

2 .5

1.2

-0 .7

2.6

3. 0

Japan

4 .3

5 .0

2 .6

4.1

6 .2

4 .7

4 .8

4 .3

1.1

0 .1

G~rmany

2 .8

2.0

2 .3

1.S

3.7

3 .6

5.7

4.5

2. 1

-1.3

U.K.

2 .3

3 .8

4.3

4.8

5 .0

2 .2

0.4

-2 .2

-0 .6

1.9

Unemployment Ruus

Can ad a

I 1. 2

10.4

9.5

8.8

7.7

7.5

8.1

10 .2

I 1. 2

I I. 1

U .S .

7.4

7. 1

6.9

6 .1

5 .4

5.2

5.4

6.6

7 .3

6.7

Japan

2.7

2 .6

2.8

2.8

2 .5

2 .3

2. 1

2. 1

2.2

2 .5

Germany

7.1

7. 1

6.4

6.2

6 .2

5 .6

4.8

4 .2

4 .6

5 .8

U.K.

I 1. 7

I 1.2

11.2

10. 3

8 .6

7 .2

7.0

8 .8

10,0

10 . 3

P rivate Consumption

Canada

3.9

3.7

3 .8

4.0

3 .8

4 .7

4.4

4 .7

1. 1

1.S

U .S.

4.0

3.9

3. 1

4.2

4 .2

4 .9

5.1

4.3

3.3

2 .7

1II p a n

2.5

2.2

0.4

0.2

-0 . 1

1.8

2.6

2 .5

2. 1

1.0

Germany

2 .5

1.8

-0 .6

0.5

1.3

2 .9

2.7

3.7

4 .7

4 .0

U.K.

5 .0

5 .3

4 .0

4 .3

5 .0

5 .9

5.5

7.4

4 .8

3 .5

Uni t Labour Cost in the Business Sector

Canada

1.3

3.4

2.8

4.9

4 .7

4 .8

4.9

4 .2

2 .2

1.2

U .S .

2. 8

3 .0

2 .5

3.7

4 .2

3.1

4.9

3.8

2.4

2.3

Ja pa II

0.3

- 1. 0

0 .9

·0.4

- I .4

1.2

2.2

1.6

1.6

0.5

Ger lll ll ny

0 .8

1. 6

2.6

2.4

-0 . 1

0.7

1.3

2.8

5.8

3.8

U .K .

5 .9

5 .0

3.6

3.3

6 .3

9 .3

9.9

6.7

3.3

0 .8

Unemployment Rates accordi ng to OECD Standardized Definilion Source: OECD Economic Outlook

,

RE SU M ES EN FRAN CA I S

RESUMES EN FRANCAIS

Carol ine Andrew and leffMorrison Canada Infrastructure Works: Between "Pick and Shovels" and the Information Highway Le programme d'infrastructures constitue une anomalie dans la politique federale actuelle. En effet, au moment ou Ie deficit et les compressions budgetaires ainsi que l'etabli ssement des priorites sont au centre de cette politique, Ie programme d' infrastructures depense de l'argent dans tout Ie pays suivant des parametres larges, s ino n vagues. De plus, alors que les te nsions regionales se rechauffent ala veille du referendum au Quebec, Ie programme d'infrastructures a reuni les trois paliers de gouvernement dan s une relation qu i a ete en grande partie harmonieuse. Ce chapitre exp lique pOlll'quoi les liberaux ont inclul'infrastructure dans Ie Livre rouge et quels ont ete les resultats concrets du programme. On examine les resu ltats selon quatre criteres: Ie fait de creer des emplois, de favoriser des re lation s intergouvernementales harmonieuses, de promouvo ir Ie developpement economique et de rehausser la qua lite de la vie dans les comm unautes. Michael M. Atkinson The Integrity Agenda: Lead Us Not into Temptation Le gouvernement liberal a pri s Ie pouvoir en 1993 en promettant de restaurer la confiance des Canadiens a I' egard des gouvernements.ll s'est ave re difficile de tenir cette promesse, non pas parce que les liberaux n'ont pas voulu developper des strategies pour s'attaquer au deficit per9u au niveau de l'ethique, mais plutot parce que les exigences inlHlrantes a un gouvernement de parti donnent it I' integrite une qual it" insa isissable. Pour rea liser un semblant d' integrite, Ie premier ministre et ses collegues disposent de trois strategies : la strategie de la vertu, qui met I'accent sur l'excellence de caractere; la strategie de retrecissement, qui vise it reduire les occasions de ga in personnel; et la strategie des regles, qu i s'appuie sur Ie besoin de fournir des directives explicites a ceux qui exercent des fonctions officielles. Ce chapitre eva lue I' usage qu 'a fait Ie gouvernement liberal de chacune de ces strategies depu is son avenement au pouvoir, ai nsi que les resultats obtenus. On conclu t

395

396

HOW OTTAWA S PENDS

que les liberaux, tDutcomme leurs predecesseurs, sont pousses dans la direction de la strategie des regles, qui, elle, tout en pennettant un succes temporaire, exige une ambiance de vertu pour souten ir ses praticiens et convaincre un public sceptique. David M. Cameron

Shifting the Burden: Liberal Policy for Post-Secondary Education Le projet de reforme dans Ie dom aine des programmes sociaux tel que devoile par Ie ministre du developpement des ressources humaines, Lloyd Axworthy, en octobre 1994 est lourd d' im plications pour I' education postsecondaire au Canada. Axworthy proposait d'eliminer les transferts aux provinces dans Ie cadre de I' Accord sur Ie financement des programmes etab lis. Cette mesure devant entralner des augmentations de fra is de sco larite, Ie ministre proposait I'instauration d' un regime de prets-bourses incorporant Ie principe de re mboursement en fonction du revenu. L' impact de ces propositions aurait varie de fa~on importante entre provinces et institutions, et des groupes etudiants ont exprime une forte opposition. Les propositions d' Axworthy ont ete deplacees par Ie budget de 1995 , qui creera un grand transfert, appele Ie Transfert social, pour I'education postsecondaire aini que la sante et Ie bienetre. Le transfert federal combine sera reduit de fa~on dramatique, de quelque 6 milliards $ ou 37 pour cent, sur une periode de tro is ans, mais on n'a pas ann once de nouveau regime de prets aux etudiants pour les sou lager quelque peu du fardeau des augmentations de frais de sco larite en perspective. Ce chapitre analyse de fayon critique l' im pact qu ' aUfont ce s changements all financement de I'education postsecondaire sur les provinces, les un iversites et les etudiants eux-memes. James P. Feehan

The Federal Debt Dans Ie Livre rouge, les liberaux apportaient une double solution au probleme de la dette: la relance economique ainsi qu ' une discipline fi scale modeste qui serait appliquee au cours de leur mandat. Depuis leur avenement au pouvoir, Ie programme des liberaux est de plus en plus domine par la question de la dette etdu deficit. A I' heure

RESUME S EN FRAN C;:A I S

actue lle, c'est surtout la dette qui determ ine I' importance des depenses federa les. Ce chapitre exam ine la dette du gouvernement federal. On etudie differents aspects de la dette: son amp leur, sa mesure, les principes et implications des deficits, et un contexte hislorique. On elabore egalement une regie au niveau des politiques en vue du financement du deficit et de la stabi lisation de la dette it I'avenir - regie ex igeant une discipline fiscale au niveau micro- et macro- mais sans insister sur un budget equi libre. On compare les intentions des liberaux au plan du budget avec cette regie et on eva lue la probabilite qu'ils pourront tenir leurs pro messes en ce qui concerne a la reduction du·deficit. N. Harvey Lithwick and Dahlia Lithwick The "Liberal" Treatment of Violent Young Offenders Le gouvernement libera l a apporte les changements it la loi sur les jeunes contrevenanls te ls que promis dans Ie Livre rouge. L' approche a ete basee sur trois hypotheses: que Ie crime violent constitue maintenant une epidemie au Canada; que lajeunesse violente y est pour beau coup; que la solution la plus efficace est de sev ir aupres de celle-ci. Ce chap itre exam ine les trois hypotheses de fayon rigoureuse et les declare toutes les troi s fausses. Si les realites ne justifient pas la ligne dure, pourquoi I'adopter? C'est que les liberaux repondent a la peur reelle - quoique irrationne lle - qu ' a Ie pub lic a ('egard du crime violent. Cette peur a ete no urrie et gonfl ee par Ie medias et des politiciens demagogues. Les liberaux ont ainsi choisi Ie chemin facile de I'opportunisme politique, ce qui ne manquera pas d' exacerber I' hysterie du public et de jeter les bases d' une soc iete beaucoup plus violente au Canada. Susan McCorquodale Federal Spending on the Atlantic Fisheries La fermeture de la pecherie de I' Atlantique constitue une de mises it pied les plus importantes de I' histoire canadienne. Des communautes, et tout un mode de vie, ont ele detruits . En vertu de la Strategie du poisson de fond de I' Atlantique (SPA), Ie gouvernement federa l versera 1,9 milli ard $ pendant c inq ans a 30 000 trava illeurs des pecheries. Ce chap itre analyse pourquoi et comment Ie gouvernement federal a laisse la situation se deteriorer au point de

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necessiter un moratoire sur la peche de la morue et d'autres po is sons ainsi que de tels versements de soutien. Si plusieurs facteurs ont mene a cetle situation, la cause premiere c' est que pendant des annees Ie gouvernement federal- malgre de nombreux avis contraires - a accorde une priorite a I' emploi dans les pecheries, plutot qu' a la conservation d 'une ressource viable. II reste, cependant, que les possibilites d'autres emplois dans les provinces de I' Atlantique surtout a Terre-Neuve, etaient loin d'etre evidentes. Allan Moscovitch and Andrew Webster Aboriginal Social Assistance Expenditures La mise en oeuvre du Transfert social en 1996-97 risque d'avoir un impact important sur Ie financement de la prestation de I' assistance sociale aupres des peuples autochtones, ainsi que sur les relations federales-provinciales qui I' entourent. Ce chapitre examine I'histoire, les problemes et les reformes en perspective des programmes d'assistance sociale fournis aux peuples autochtones, sur les reserves et en dehors des reserves. Nous analysons les deux regimes fiscaux distincts pour I' assistance sociale aupres des autochtones: Ie programme a frais partages federal-provincial dans Ie cadre du Regime d'assistance publique du Canada ainsi que Ie systeme finance par Ie federal, qui releve du ministere des affaires indiennes et du nord, qui soutient la prestation de services sur les reserves. Nous expliquons comment et pourquoi la politi que federale exige a I'heure actuelle la prestation de services sur les reserves, de fa~on aimiter la pratique provinciale. Nous concluons que Ie taux croissant de dependance a I' egard des prestations de I' assistance sociale ainsi que la politique du Transfert social exigeront du gouvernement federal qu' it examine des alternatives radicales pour I' assistance sociale aupres des autochtones qui liberera Ie systeme federal des reglements provinciaux, et qui pourra tres bien comprendre des alternatives basees dans les communautes. Gilles Paquet and Jeffrey Roy Prosperity Through Networks: The Bottom-Up Strategy That Might Have Been Le Parti liberal a presente son programme electoral en 1993 dans son fameux Livre rouge. Ce document contenait I'esquisse d'une

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