Fiscal Federalism: An Unlikely Bridge between the West and Quebec

Abstract

Is there common ground in intergovernmental fiscal relations? This question is tackled by examining the ongoing federal-provincial debate about the most appropriate way to allocate resources among governments and the related issue of vertical and horizontal fiscal imbalance. It turns out that the provinces have found common ground with respect to vertical imbalance and the need to limit Ottawa’s spending power. The Equalization program, however, illuminates significant differences not only between Quebec and the western provinces but also among the four western provinces themselves. Fiscal federalism raises too many divisive issues for anyone to hope that these differences can all be settled in the foreseeable future.