EDITED BY KATHERINE A. H. GRAHAM AND ALLAN M. MASLOVE HOW OTTAWA SPENDS 2017-2018 CANADA @150 1 How Ottawa Spends CONTENTS Preface ..........................................................................................................................................3 CHAPTER 1 - Introduction: Canada @150 Katherine A. H. Graham & Allan M. Maslove .............................................................................4 POLICY BRIEFS CHAPTER 2 - A Post Secondary Education Dialogue for Canada Allan Tupper & Robert Harmsen .............................................................................................. 20 CHAPTER 3 - Overhauling NAFTA: Implications for Canadian Trade Policy Natalia Boliari ............................................................................................................................32 CHAPTER 4 - Science and innovation policy for Canada’s next 150 years Peter WB Phillips, Graeme Jobe, Adity Das Gupta, Sarah Juma, Paul Trujillo Jacome, Samuel Kanyoro Karba, Achint Rastogi & Michael Horvath ................46 CHAPTER 5 - Predictably Unpredictable: The Problem with Equalization from a Provincial Budgeting Perspective Erich Hartmann .........................................................................................................................59 CHAPTER 6 - The Politics of Intergovernmental Transfers in Canada Andrew Seto & Christopher Stoney ...........................................................................................69 CHAPTER 7 - Investing in Indigenous Youth Employment in Canada: Setting Policy Priorities Straight Senada Delic ...............................................................................................................................82 CHAPTER 8 - A Modest Proposal to Strengthen the Health of Canadians James McAllister ........................................................................................................................95 CHAPTER 9 - The State of Canada’s Pensions Policies: What To Do As the Number of Retired People Grows Allan Moscovitch & Richard Lochead .....................................................................................107 CHAPTER 10 - Canada’s Feminist International Assistance Policy: Game Changer or Fig Leaf? Stephen Brown and Liam Swiss ...............................................................................................117 CHAPTER 11 - Rethinking the Management Accountability Framework and Performance Monitoring for the Digital Era Evert Lindquist .........................................................................................................................132 CHAPTER 12 - Allocative Efficiency In Government Spending: The Case of Skills and Innovation Helaina Gaspard .......................................................................................................................144 2 How Ottawa Spends POLICY STUDIES CHAPTER 13 - Politics and Policy on the Federal- Provincial Journey to a Low-Carbon Future: A New Era of Canadian Energy/Environment Federalism? Aman Chahal, Zak Jacques, Marc Quintaneiro & Glen Toner ................................................158 CHAPTER 14 - Financing the Public Provision of Prescription Drugs in Canada: Comparison and Assessment of Financing Options Marc-André Gagnon.................................................................................................................180 Contributors ................................................................................................... 210 3 How Ottawa Spends PREFACE This is the 38th edition of How Ottawa Spends. We thank the School of Public Policy and Administration and our colleagues whose support has enabled an annual publication record that is unbroken since its first edition in 1980. This edition inaugurates a new format for How Ottawa Spends. To enhance its readability and appeal to a broad audience, most of the volume is composed of thought-provoking Policy Briefs designed to explore the options facing the federal government in a particular policy domain. We will continue to include longer Policy Research Papers similar in format and style to the chapters in previous editions. Two such studies are included in this edition. We wish to thank Brittany Wiwat and Ashley McKee, who provided, excellent research, logistical, and editorial assistance for this volume and Mary Giles for her continuing expertise in managing the publication process. For final for- matting and electronic publication services we wish to thank Creative Services in Carleton’s Department of Communications, and in particular acknowledge the work of Chris Strangemore. Katherine A. H. Graham and Allan M. Maslove Ottawa September 2017 4 How Ottawa Spends Chapter 1 CANADA AT 150: CONSISTENCY AND CHANGE Katherine A. H. Graham and Allan M. Maslove INTRODUCTION his 38th edition of How Ottawa Spends coincides with the 150th anniversary of Confederation. It is particularly appropriate, then, to Tlook back at Canada’s development and to look forward to the main issues that confront the country. As will be seen, the consistency of issues that have confronted the federal government over the years is quite remarkable. It is the specifics, in terms of items at the top of the policy agenda and the policy actors involved who may have changed over time. In this introductory chapter we combine that overview with an examination of the Trudeau government policies that relate to these issues, a brief assessment of the government’s 2017 Budget (Budget 2017) and a summary of each of the contributions to this volume. This edition incorporates a new format for How Ottawa Spends, also befitting this time of reflection on the themes of stability and change. The volume now has two types of contributions. Most of the chapters are in a new format that we are calling “policy briefs.” They are relatively short pieces designed to test ideas and be deliberately provocative. They often contain proposals for new policy directions. We continue, however, to value more fully formed “policy studies,” evidence-based contributions that readers of previous editions will be familiar with. As this year’s chapters on the state of federal policy on energy/environment and pharmacare suggest, policy studies will provide more in-depth analysis of some of the key contemporary issues on the federal policy agenda and on the public’s mind. THE BIG PICTURE The big picture economic and social challenges facing Canada@150 for the most part are not new. These same issues could have been identified in a 5 How Ottawa Spends chapter about Canada@100 or Canada@50, albeit in somewhat different forms and emphases. On the economic side, Canada has from its earliest days been dominated by three inter-related characteristics: a resource-based economy, regional dif- ferentiation, and external trade dependence. The enduring political questions throughout our history have involved the role of government in economic development and growth, and how to align political responsibility to effectively address the economic policy questions. Canada’s economic wellbeing has always been driven by resources, whether furs and forests or petroleum and natural gas. Notwithstanding the efforts of Canadian governments to foster non-resource dependent sectors, including the current government’s strategy to foster innovation and skills development (see below), the importance of natural resources to our economic prospects remains. What is different from our earlier history is the relative shift in reliance from renewable to non-renewable resources, and the need to balance resource exploitation with conservation and environmental concerns. Because natural resources are not distributed uniformly in geographic terms, the various economic regions of Canada have often developed at different rates and in different ways so that policies beneficial to one region have often been harmful to another. As examples, we need only recall policy debates over the years about exchange rates, industrial policy, and the fiscal equalization program (see the Policy Briefs by Erich Hartmann and by Andrew Seto and Chris Stoney in this volume). Obviously numerous other debates could be cited as well. Moving into the future, as we confront several of the major challenges before us, regional disparities and regionally diverse policy preferences are likely to be at the forefront. Perhaps the most obvious arena will be addressing climate change and the impacts on carbon-based energy exploitation, and the distri- bution of adjustment costs (see the Policy Research Paper by Glen Toner, et. al. in this volume). Another set of potential challenges will revolve around the renewal of NAFTA (see Boliari). The third related enduring question is about effectively aligning governance to address and manage these economic challenges. This has been another constant issue throughout the history of Canada that will continue into future 6 How Ottawa Spends years. Among the domains where we are likely to see this theme play out are federal-provincial resource revenue sharing (a major issue in fiscal equaliza- tion: see Hartmann), health care (see Gagnon and McAllister), post-secondary education (Tupper/Harmsen), infrastructure investment, and interprovincial trade. Social issues (broadly defined) have also been remarkably consistent over time. Once again, the specifics have changed but we are perennially concerned as a country with the role of the state in ensuring well-being in the broad fields of social welfare and health and with