Federalism Matters: Welfare Reform and the Inter-Governmental Balance of Power in Canada and the United States

(We) believe that the restrictions attached by the federal government to transfer payments in areas of clear provincial responsibility should be minimized.... (T)he cost sharing approach of the past no longer helps the provinces, who have clear responsibility to design and deliver social assistance programs, to do so in a way that is as effective as possible and in tune with local needs. Finance Minister Paul Martin, 1995 Budget Speech (1) Perhaps the fact that is most important to me personally, by passing this bill we give the states flexibility to design programs that will work best for their Senator Conrad Burns (R-Montana, August 1, 1996) (2) (The) States should have more flexibility to design programs to meet the needs of their residents. I do not believe that detailed prescriptions from Washington, DC are the answer to the problems afflicting the current welfare system. Senator Russ Feingold (D-Wisconsin, August 1, 1996) (3) If Americans invented federalism, Canadians have long been among its most enthusiastic practitioners. At the turn of the 21st century Canada is one of the most decentralized countries among advanced industrial democracies, its provinces possessing a status and policy reach unrivaled by American states. (4) Canadians often speak of having eleven senior governments in recognition of the rough political parity between the provinces and Ottawa. There is no equivalent in the American lexicon to reference the relationship between Washington and the fifty states. Of late, however, American and Canadian practices of federalism seem to be moving in the same direction. A fillip has been the response of each country to those common macro-economic forces that come under the rubric of globalization, the integration of world markets through enhanced trade and investment and the fluidity of capital. Subject to the twin pressures of market liberalization and fiscal restraint, during the last decade of the twentieth century Ottawa and Washington became ardently committed to lower taxes and balanced budgets. One method of achieving such ends was to reduce central government expenditure on social programs. In the event, most administrative authority and much policy-making and financial responsibility for such initiatives were devolved to sub-central tiers of government. The paper explores this nexus of globalization, federalism and social policy. At the heart of the discussion is the recent experience of Canada and the US with welfare reform, a process that began in earnest in the 1980s and which came to fruition in 1996 with the introduction of the Canada Health and Social Transfer (CHST) and the US Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA). Two related questions are posed. First, in conditions of globalization, has welfare reform led to a convergence in the distribution of power between central and sub-central governments in Canada and the US? Federalism has always had an important influence on the provision of welfare benefits in the two countries. Not all social assistance programs have been a matter of joint inter-governmental responsibility--notably, unemployment insurance and old age pensions have not--though for the last seventy years or so policies regarding public health insurance, aid to individuals with disabilities and income support to children and families in distress have had this dual character. Typically the construction of the welfare state is attributed to the superior economic position of a strong national government, its financial capacity to provide high levels of desired public services that sub-central governments are unable to offer. In the context of federal economic austerity, welfare retrenchment would seem to be a force for the de-centering of power, national governments shifting the burden of social assistance to lower-level jurisdictions. …

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