Federalism matters: welfare reform and the inter-governmental balance of power in Canada and the United States.

• Author: Harles, John

"(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 residents."

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. Yet this essay will argue that Canadian and American patterns of federalism are resistant to change even when cross-border policies move in the same, though not precisely the same, direction.

If Canadian and American federalisms are resilient, do they retain a discrete influence on welfare policy? Among students of political economy, there is considerable disagreement regarding policy latitude under globalization. Most famously, New York Times columnist Thomas Friedman writes that if states wish to prosper in an age of globalization, they must put on a "golden straitjacket" of political decision-making, implementing those initiatives--balanced budgets, limited taxation, modest regulation, privatization, and so on--necessary to secure the confidence of capital markets. (5) Given market interdependence, the argument runs, governments feel constrained to recast their economic and social policies to resemble what is on offer in other countries. Downward harmonization of social provision is the likely outcome. Other scholars demur, insisting that states maintain considerable autonomy to frame public policy as they see fit. Globalization stimulates demand among ordinary citizens for protection from heightened market risk--unemployment and reduced wages and benefits. On this perspective, it is in the interest of governments to redress these insecurities not only because they are a potentially volatile election issue, but also because publicly-funded social programs may enhance social stability, reduce business costs--as in the case of education and health care--and thereby increase market advantage in the competition for international investment. When for these reasons governments choose to act, the mediating effect of diverse political institutions, distinct political cultures, and the historical momentum of state policy legacies means that identikit social policy is not destiny. (6)

Crafted according to the same global economic imperatives, welfare reforms in Canada and the US share many features. Structurally, American states have come to resemble Canadian provinces more closely in their degree of autonomy over welfare programming. Conditional grants from the federal government to states and provinces have been replaced by block grants. Means tested benefits have been replaced by work-tested benefits. Welfare is disbursed largely on the basis of an individual's accommodation to the market rather than because it is an intrinsic right of social citizenship.

Still, there are important nuances. American states have introduced social assistance terms that are more invasive and harsh than those found in most Canadian provinces. The constitutional architecture of each country, of which federalism is a central prop, is in large part responsible. Given the legal authority of the Canadian provinces for welfare as well as the fact that the CHST is a block grant, provincial governments have the flexibility to determine what part if any of the federal transfer will be spent on social assistance. In the US, states do not have this power. Far more than Ottawa, Washington has been free to set the terms of welfare reform, as national American standards for time limited assistance, workfare, and efforts to change personal behavior indicate. This paper maintains that in some measure it is due to federalism that Canada and the US continue to follow distinct social policy trajectories. (7)

The analysis proceeds in four stages. Section One establishes the institutional context of social policy-making in Canada and the US with respect to federalism, focusing on executive-legislative relations as well as the constitution and judicial review. Section Two surveys the nature of welfare reform under PRWORA and the CHST. It shows how American versions of reform are less forgiving than their Canadian counterparts with respect to time limits and work requirements and more ambitious in seeking to affect behavioral changes among welfare recipients. Section Three assesses the Canadian and American inter-governmental balance of power since the introduction of the CHST and PRWORA. Whereas Ottawa leaves program design largely in the hands of the provinces, Washington has an ongoing presence in the administration of American reform. Whether those patterns hold, especially in the US case, depends in part on the stability of the financial relationship between central and sub-central governments. Section Four evaluates the way in which federalism's influence on welfare reform has been mediated by American and Canadian political values. Federalism plays a formative policy role as part of the institutional framework of Canadian and US government, but that influence is filtered through discrete constitutional and cultural matrices. Over time, such factors bias the specific ways in which federalism matters to Canadian and American social policy. Consequently, despite a joint commitment to the devolution of policy responsibility, welfare reforms in Canada and the US retain the imprint of country specific patterns of intergovernmental relations.

1. THE INSTITUTIONAL CONTEXT

   Canada and the US are both federations, but they are not federations in quite the same way. In order to evaluate the relationship of federalism and welfare policy in the two countries, one must first consider the constitutional architecture of which federalism is a part.

   Executive-Legislative Relations

   The fact that the Canadian political system is parliamentary, while the American government is presidential, is critically important. The fusion of executive and legislative power in Canada's Westminster model helps to explain Ottawa's ability, on occasions like the introduction of the CHST, to impose its will over the provinces without significant input from the latter. Provinces have no reliable and forceful voice in the councils of central government. In view of parliamentary norms of party discipline, Canadian governments are largely unencumbered by a contentious House of Commons--an imperfect body for airing provincial perspectives in any case...