Shady dealings

A few notes on the equalization announcement yesterday by the federal and Nova Scotia Cons.

First, it's far from clear that the ultimate deal reflects any more generous offer by the federal government in order to get a deal done. Indeed, it was reported earlier this year that the federal offer at that time similarly contained no explicit downside while potentially offering an additional billion dollars over the life of the deal - double what the new deal apparently includes.

All along, the question was whether the federal government would actually stick to the deal offered by Harper. And from this angle, it still looks like MacDonald got the answer right the first time.

So what changed since the earlier offer? Obviously the federal Cons haven't done anything much to earn any additional trust in the meantime. But it seems entirely possible that MacDonald bought into the conventional wisdom (however flawed it may be) that with the Libs floundering, Harper's Cons will stay in power for some time to come - meaning that there was little prospect of a new federal government either offering a better deal, or overturning one agreed to by Harper.

Meanwhile, MacDonald likely recognized as well that the federal bargaining position wasn't about to change in his favour as long as Harper stayed in power. After all, the lone Con MP principled enough to stand up for his province had already been expelled, meaning that there was virtually no risk of in-caucus strife over the lack of a deal. Since Harper was obviously willing to pay the price in Nova Scotia seats for failing to keep the federal bargain before, there wasn't much reason to think that would change. And unlike Lorne Calvert, MacDonald hadn't shown any particular willingness to test the legal merits of his position.

As a result, MacDonald may have decided to simply take the best deal he could get on paper now in the hope that Harper (or a subsequent PM) would live up to it.

Based on the fact that the deal doesn't seem different from the previous federal offer, it's hard to give Harper much credit or blame for the fact that the deal happened. But the timing of the announcement has his fingerprints all over it.

In Atlantic Canada, the announcement figures to stop some of the bleeding following Danny Williams' successful anti-Harper campaign in Newfoundland and Labrador. (Though I have serious doubts that it'll actually improve the Cons' fortunes in Nova Scotia as some seem to think.)

And with a Saskatchewan election known to be in the cards, the deal also provides a signal to Brad Wall that Harper would very much like him to abandon any critical talk about the federal government in favour of a "Stephen Is My Sugar Daddy" strategy. Though I remain far from convinced that the result will be anything other than a backlash against both Wall and Harper.

What remains to be seen is whether MacDonald and Harper have calculated correctly in agreeing to the deal how and when they did. And it seems entirely possible that both minority governments will later regret their efforts to temporarily improve their standing now.

On popular opposition

Danny Williams' landslide win in Newfoundland's provincial election may not be receiving the attention it deserves on a national scale. But it isn't likely a coincidence that the premier who's attacked Stephen Harper most directly (despite sharing relatively similar ideological leanings) has managed to significantly improve his position as a result - while the one who received the most Con largesse to try to improve his electoral position, as well as the next three most Con-friendly provincial governments to face their voters, all lost ground within their provinces.

In case there was any doubt, this should provide an obvious hint as to the upside of presenting a strong challenge to the Cons' federal government - as well as an indication that Harper's supposedly deft political touch is more myth than fact. And it may not be long before Harper's own federal party is the next to learn that lesson the hard way.

Compulsive

We hardly needed another reminder of how far removed from reality the federal Cons tend to be. But the CP offers one anyway, reporting that Con MP Gerald Keddy couldn't even accept a personal compliment from Nova Scotia Premier Rodney MacDonald without taking the opportunity to pretend that Canada's No-Credibility Government had done something it hadn't:

Nova Scotia's premier is contradicting comments from federal Conservative MP Gerald Keddy that a deal on offshore oil and gas revenues is near.

The MP from the province's south shore made the comment on Tuesday to The Chronicle-Herald, after Premier Rodney MacDonald went out of his way to thank the federal politician for his hard work on the Atlantic accord.

Several hours after MacDonald's speech to the Bridgewater and Area Chamber of Commerce, Keddy said: "I think we're very close (to an agreement). I think the premier realizes we're very close."

"The worst thing that could happen right now is to raise the rhetoric rather than lower it."

However, on Wednesday the premier said he was surpised to read of Keddy's views because the province has not made progress on the controversial file.

"I was quite shocked, to be quite honest with you, because we haven't made progress in a couple of months," he said following a cabinet meeting.

Of course, given Keddy's apparent lack of credibility when it comes to the status of negotiations, it shouldn't be long before MacDonald has to start wondering as well whether Keddy has been working as hard as he may have claimed. But it's all the more clear that MacDonald is right not to trust Deceivin' Stephen and his crew - and that there's every reason for Nova Scotians generally to follow suit.

The cost of distrust

The Halifax Daily News reports that the federal government has offered Nova Scotia an equalization buyout which, on paper, would hand the province a billion dollars more than the deal Rodney MacDonald is asking for. But the projected benefits would be entirely dependent on the Cons keeping their promise - and MacDonald seems to have understandably concluded that even a billion-dollar risk premium isn't worth banking on Deceivin' Stephen:

Ottawa has offered Nova Scotia an offshore revenue agreement that's arguably $992-million better than what the province is demanding under the Atlantic Accord, according to a federal source.

Two economists who studied the accord dispute for the Atlantic Provinces Economic Council said Friday that option does seem to be more lucrative than what the province is demanding. But Wade Locke of Memorial University in Newfoundland and Paul Hobson of Acadia University both doubt the federal government could guarantee the terms would remain unchanged for the life of the agreement...

Nova Scotia's demand boils down to full offshore revenue plus O'Brien money, without any clawbacks. According to projections contained in Locke and Hobson's June 13 report, it adds up to $23.999-billion over the life of the accord, which expires in 2019-20.

The federal source said the deal Ottawa offered weeks ago could be worth $24.991-billion, using the same APEC figures. The province was apparently interested, before MP Bill Casey broke ranks with the Conservative Party and voted against the budget...

The problem, according to Locke, is every province that receives equalization might be better off if it was allowed to stay with the old fixed formula. If Nova Scotia gets to choose a richer equalization program than the rest of Canada, Ottawa will be under pressure to give others the same option, or reduce that 3.5% fixed growth rate.

"The issue comes down to a matter of trust that a sworn promise is not going to be violated or a commitment is not going to be changed later on when other people are coming to your door saying hey, what about me?" Locke said.

Of course, the Cons have a well-established track record of broken promises - not to mention efforts to pick fights with anybody who dares to point them out. So it's clear why MacDonald would see his province as better off with an arrangement which minimizes the chances of another Harper reversal.

But if even a Con premier and former Harper supporter is willing to leave that much money on the table out based on Harper's untrustworthiness, it shouldn't be a tough decision for voters to decide that the cost to Canada of Deceivin' Stephen's reputation is far too high to tolerate.

Open-wound federalism

The Globe and Mail reports that Deceivin' Stephen has started off his summer by making it clear once again that any provincial premier who dares to call one of his bluffs won't be invited back to the table. And the Cons' pettiness seems to have resulted in an even more dangerous step than we'd known about to date:

Prime Minister Stephen Harper will appeal directly today to the people in two of the three provinces that have been at loggerheads with his government over the control of resource revenues...

Neither Nova Scotia Premier Rodney MacDonald nor Saskatchewan Premier Lorne Calvert, who publicly condemned the federal budget for including resource revenues in the equalization formula, have been given formal notice of the visits...

Mr. Calvert caught a plane to Iqaluit yesterday to attend a conference of western premiers and will be out of his province when the biofuels announcement is made at a grain terminal near the Gardiner Dam.

There has been little or no communication between his officials and the Prime Minister since Saskatchewan decided to ask the courts whether the budget violates the constitutional right of a province to own its non-renewable natural resources and whether it contravenes principles of fairness.

Mr. Calvert says the fact that resource revenue has not been removed from the equalization formula, as Mr. Harper promised during the last election campaign, will cost an estimated $800-million annually to Saskatchewan...

Mr. Calvert accused the federal Conservatives of using this type of funding as a dodge on the equalization issue. And "one would have liked a certain sense of prior knowledge of the Prime Minister's visit," he said. "It doesn't help relationships when we're surprised."

What's most striking about the above is that the Cons' strategy appears to have progressed well past the point of merely snubbing premiers for individual events. Indeed, with Calvert out of the province attending a well-publicized conference, the Cons could plainly have informed Saskatchewan's government of today's announcement without any risk that Calvert himself would attend.

But apparently, based on Saskatchewan's acceptance of Harper's own invitation to sue, the Cons are simply refusing to communicate with Saskatchewan as a matter of course. Which can only confirm just how disinterested the Cons are in listening to Saskatchewan - as well as hinting at how far the Cons might go in dealing with all but the most friendly of groups if they ever managed to win a majority.

Update: Greg has more on Harper's shunning tactic.