Americans tend to think of Canada as a friendly, clean bastion of European-style socialism, replete with cradle to grave entitlements and a perpetually tepid economy. However, over the last few years Canada has set a pace for economic growth that clearly demonstrates that our current economic malaise is escapable.
A paper released Wednesday by the Aspen Institute documents the extent of Canada’s economic strength, noting that Canada managed to bounce back almost entirely from the economic morass of the Great Recession in just two years while the United States continues to struggle with high unemployment, slow economic growth and now the portents of inflation.
The study suggests that Canada’s economic resilience owes a lot to the country’s move towards deregulation and fiscal responsibility, policies that stand in sharp contrast to those advocated by our own president.
Our neighbors didn’t just luck into their current era of economic prosperity—it is the consequence of a series of sensible policy decisions made over the previous two decades, beginning with its determination to deal forthrightly with its own deficit crisis in the 1990s. Its liberal government came into power and decided that the apparently unending succession of deficits in excess of 10 percent of GDP simply couldn’t persist and responded by cutting spending dramatically across the board, with $7 in spending cuts for every dollar of revenue increases. As a result Canada achieved a balanced budget by the end of the 1990s but unlike the United States it managed to stay there, running a budget surplus for seven of the last ten years.
In contrast, the Obama administration has refused to even talk about significant spending cuts, especially in entitlements, preferring instead to demagogue Republican proposals—such as the recently announced Paul Ryan budget which calls for over $5 trillion in spending cuts—in an effort to score political points. As Treasury Secretary Timothy Geithner said of the Ryan budget proposal: “We don’t have a definitive solution . . . we just don’t like yours.”
In recent years Canada has done even more to improve its competitive standing in the world, cutting its corporate tax rate in half to put its rate near the lower end of OECD countries. President Obama’s tax proposal lowers the U.S. corporate tax rate from the highest in the world to the third highest while continuing to tax U.S. companies on profits made from their overseas operations, in contrast with every other developed nation. Few suppose that such tax code tinkering will make any substantial difference in America’s ability to compete abroad.
Canada recognizes the value of drilling for oil within its borders, providing its citizens both with energy independence and a valuable source of exports. On the other hand, President Obama has routinely adopted policies that reduce our domestic oil supply, such as his refusal to back the Keystone XL Pipeline and the moratorium placed on offshore drilling after the BP oil spill. The result of these policies is not only higher prices, but a continued reliance on oil producing countries in the Middle East, many of which are actively anti-American.
Canada has an immigration policy that encourages the acquisition of human capital in the form of highly skilled workers who can add substantial value to the Canadian economy. Our federal government, on the other hand, has refused to address the issue of millions of unskilled workers pouring illegally across our borders. At the same time, the immigration process for those who wish to become citizens legally remains inefficient, costly, and time consuming. Because of this, our nation is deprived of many talented doctors, scientists, and engineers from around the world.
Canada has shown an impressive ability to learn from its history and to make unpopular short-term decisions that have created substantial long-term benefits for its citizenry. Its Liberal party in particular deserves special attention for the alacrity with which it managed to recognize the inherent failures of its statist economy of the 1970s and 1980s and engineer a more efficient and competitive country in an increasingly globalized economy. It is high time United States learned the same lesson.
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