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Canada’s Economic Lesson: Is Obama Paying Attention?

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As President Barack Hussein Obama, his administration, and his economic advisors (czars) embark on their fourth year, they have searched about, baffled about how to get the US economy growing. But all Obama need do is look at Canada, whose solid growth is the product of tax cuts, fiscal discipline, free trade, and energy development.

“There would have been a day when we would have been the Greece of today,” recalled then Canadian prime minister Jean Chrétien, a Liberal who ended up chopping cherished social programs in one of the most dramatic fiscal turnarounds ever. Canada’s shift from pariah to fiscal darling provides lessons for Washington DC as lawmakers find few easy answers to the huge US deficit and debt burden.

Canada’s close call with disaster had been building for a long time. Over a decade earlier, in the 1980’s, top Finance Department officials had begun speaking about the problem of rising debt, a hangover from the big government era of the 1970s. The period before Jean Chrétien came to power in Canada is often likened to the situation in the US today. The country was not yet peering over a precipice, but was fast approaching it. The turnaround began with Chrétien’s election as Canadian prime minister in 1993. “I said to myself, I will do it. I might be prime minister for only one term, but I will do it.”

As of October, 2011, Canada’s Gross Domestic Product (GDP) grew by 3.075 percent over last year compared with the US GDP growth of 2.775 percent. Further, the Government debt as a percent of GDP (for all of 2011) was 102.6 percent for the US and 33.7 percent for Canada. For 2011, the deficit as a percentage of GDP in 2011 was 1.9 percent for Canada, with the forecast for next year to be 1.1 percent. By comparison, the US deficit as a percentage of GDP in 2011 was 8.61 percent, with a forecast for next year to be 6.86 percent.

Canadian Prime Minister Stephen Harper announced  on December 29 that he will reduce the corporate tax rate to just 15 percent. It was 22.12 percent in 2007. The US rate is 35 percent. Provinces have also been lowering corporate tax rates. Back in 2000, the combined federal/provincial corporate tax rate in Canada averaged 43 per cent. Total taxes for businesses in Canada will be 25 percent in 2012.

Canada has pursued its competitive advantage, oil. And it did so not through top-down industrial policy, but by getting government out of the way. Harper has enacted market friendly regulations to accomplish big things like the Keystone Pipeline.

Harper is very popular for shrinking government. “The Harper government has pursued a strategic objective to disembed the federal state from the lives of citizens,” wrote University of Calgary Professor Barry Cooper. Canadian debt fell to 29 per cent of GDP in 2008-09 from a peak of 68 per cent in 1995-96, and the budget was in the black for 11 consecutive years until the 2008-09 recession.

All of this activity has had a positive effect on the Canadian dollar and upon its bonds (sovereign debt). Canada’s dollar traded stronger than the US dollar on average in 2011, averaging 98.92 Canadian cents per U.S. dollar in 2011. “Years of conservative practices by our government, central bank and various regulators have contributed to a steady economy and now a currency that is relatively stable to other majors,” said C.J. Gavsie, managing director for foreign-exchange trading at Bank of Montreal in Toronto. Canada and the U.K. are the only Group of Seven countries that have both a AAA rating and a “stable ” outlook, according to data compiled by Bloomberg. Canada’s government bonds rose in 2011, driving yields to record lows. Canada’s benchmark 10-year yields fell to 1.94 percent, compared with 3.12 percent at the end of last year. The key point here is that the yield is dropping. For comparison, US 10-year bonds yielded 1.88 percent on December 30, 2011, and 3.3 percent at the end of 2010.

Canada’s incomes are rising, its unemployment is two percentage points below the US rate, its currency is strengthening, and it has Triple-A or equivalent sovereign ratings from the five top international ratings agencies. These sound principles of tax cuts, fiscal discipline, free trade, and energy development work every time they are tried, and they have led to a transformation in Canada. Just imagine what they could do in the US.

The key phrase here is, “work every time they are tried.” Liberals (or progressives as they now like to be called) can point to no economic policies that ever worked for more than a very short time. Yet conservatives can point out that  history is replete with conservative economic policies that worked for sustained periods. 

Bottom line: It takes political guts, something of which Obama is in very short supply!

But that’s just my opinion.

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  • Glenn Contrarian

    First, I AGREE with Warren Beatty – we SHOULD follow Canada’s economic model!

    First, a few observations:

    Warren Beatty points out that Canada’s corporate tax rate is much lower than America’s…and if we only pay attention to the NOMINAL percentage, he’s right!

    BUT if we look at the REST of the story, as Paul Harvey used to say, we’d know that after all the tax breaks and exemptions and back-room deals are taken into account, America’s EFFECTIVE corporate tax rate is the second-lowest in the developed world.

    Time and time and time again I see BC conservatives break out the old ‘highest corporate tax rate’ accusation, but they never, ever seem to be able to explain how, if our corporate tax rate is SO high, the corporate-tax percentage of our total GDP is SO low. I have no reason to expect Warren Beatty to be any different.

    Oh, and Warren – if you’ll look at my latest article, which was published immediately after yours, you’d find that ‘drill-baby-drill’ ain’t what you think it is.

    But back to what I initially said – I AGREE with you that we should follow Canada’s economic model! We should spend as little as Canada does (percentage-wise) on defense, and we absolutely should have taxpayer-funded universal health care!

    See, Warren? Sometimes I do agree with you!

  • Jordan Richardson

    This is a bit of a mixed bag.

    First, Canadian conservatives are generally seen as to the left of America’s Democrats. They’ve preserved health care, “believe in” climate change, don’t harp about gay marriage and other social issues, and so on.

    With regard to the cuts, the end results are not yet known so it’s probably not quite time to start celebrating our successes. Significant job losses will result, for instance, and Canada will slip with respect to research, public works, etc. That’s not going to have a good long-term result. Newfoundland has already seen its search and rescue services diminished to the point that they’re almost unusable and certainly unreliable. That’s not good when lives are on the line.

    Harper has forced Canadians to pay more into EI (unemployment insurance) and both employers and employees are on the hook for more of that than ever. There’s also a massive amount of spending dedicated to prison-building, stealth jets (??) and a huge, unwieldy, STUPID omnibus crime bill that even Texas finds too harsh. Texas!

    Canadian conservatives are cutting defence and CSIS spending, however, and that’s worth celebrating, but don’t think we’re some model to follow when we’ve got our own set of problems.

  • Jordan Richardson

    Here’s an article about the impact of those cuts on Canada’s jobs.

    In part:

    “Statistics Canada reported on Friday that full-time employment dropped by 26,000. The new numbers come at a time when Ottawa and the provinces can no longer afford stimulus programs such as the tens of billions they spent to boost employment during the global recession.”

    Oh, and that stimulus? Put in play by Harper’s conservatives, who went with the mandate (a right idea but poorly implemented) to “spend their way out of the recession.” It worked to get out of the dip, but the long-term effects are that we now have to make up for it by slashing and burning key sectors. We’ve already seen our tech sector all but waltz out to “greener pastures,” so what’s next? How much more of Canada can be sliced and diced?

    Trust me, Warren, this is not a model you want to follow.

  • Warren doesn’t care what the facts of the matter are. He’s just looking for another excuse to bad mouth the president as evidenced by his use of Obama’s middle name which he doesn’t do with any other person he names.

  • Clavos

    So,, EB, are you or Obie ashamed of his middle name?

    As I recall, liberalism’s god (always a small g for that word) was usually known as Franklin Delano Roosevelt FDR for short), now we have yet another bright shining star in the Democrat firmament, it seems only fitting to honor him by following the custom.

  • Clav,

    Don’t you think you ought to revise your appraisal of FDR? It was a different era, different times.

    Do you think it’s fair to be making such cross-historical comparisons? I’m aware it’s quite in vogue these days: “anything goes” is sign of the times. But you’ve never been a party hack and you never will.

    So to replay the refrain, “what goes?”

  • Clavos

    I should have used switches on that comment Roger:

  • Glenn Contrarian

    Roger –

    Clavos can’t do so because modern conservatives aren’t allowed to give liberals credit for doing anything good or right. We liberals, OTOH, are also accused of never giving conservatives credit even though we’ve often done so.

    It’s just a ‘sign of the times’ – don’t give liberals credit for anything, and pretend that liberals are just as inconsiderate in return.

  • Arch Conservative

    “Don’t you think you ought to revise your appraisal of FDR? It was a different era, different times.”

    You got that right Roger. On the eve of d-day FDR recited a prayer on national radio in which he asked “almighty god ” for “thy blessings,” FDR also used the terms “unholy enemies,” “apostles,” and amen in his prayer.

    If FDR were around to try that today the left would sick the ACLU on him and scream about the “separation of church and state,” a phrase which is not found in our Constitution.

  • zingzing

    clavos: “So,, EB, are you or Obie ashamed of his middle name?”

    about as much so as you are ignorant of exactly what is up with using it. if a politician had the middle name hitler, would you think it totally innocuous if the opposition made constant reference to it? of course you don’t. you can play dumb, but don’t bother being dumb enough to think the rest of us that dumb.

  • Clavos

    Are you saying that an Arab name invites prejudice, zing?

    Tsk, tsk. Shirley not in amerika.

  • Anybody who would go by the middle name of Hitler would have to be insane to go into politics.

    I suppose the same would apply to anyone who goes by the middle name Hussein, but we won’t go there lest we incur the liberal wrath.

    Just kidding, zing. You made me do it, though.

  • I love that Shirley bit. Let’s have some more.

  • zingzing

    clavos: “Are you saying that an Arab name invites prejudice, zing?”

    yes, and any arab name will do. but hussein… well, you know what the right thought when his middle name came up, don’t you?

    the guy who runs the bodega catty-corner to my place is named muhammad. i didn’t know this and i was there with my jewish roommate and he said, “thanks, muhammad,” and i was all like “damn, man… just cuz he’s arab…” and he said “no!! his name’s muhammad!” tis a strange world we live in. by trying to be the good guy, i became the ignorant one.

    oh well. you know what the right is up to with the “barack hussein obama” schtick, i guess. it’s ridiculous, but passive racism is a stupid game.

    “i don’t hate all arabs, but look at this guy’s name and come to your own conclusions,” you might as well say.

  • zingzing

    i am serious. and don’t call me shirley.

  • why would I be ashamed of his middle name? you appear to be getting better at playing dumb with all the practice you are getting in

  • Re: comments #2 and 3, Jordan, my article focused on the economic growth of Canada through “… the product of tax cuts, fiscal discipline, free trade, and energy development.” While the article you cite is correct, the Canadian unemployment rate is still below the US rate.

    Re: comment #4, EB, are you ashamed of Obama’s middle name? And you disappointed me by not having a comment about my comment of Obama’s lack of political guts!

  • Deano

    A few points on the Canadian economic front:

    1). Deficit reduction has become a fiscal mainstay of both the Liberal and the Conservative parties. Both sides regularly poach the other side’s policies, ideas and proclamations around it but few would ever disregard it entirely. The route to political success in Canada – the “big tent” ideal – has been fiscal conservatism, liberal social mores. In short, mind the dollars, stay out of the bedroom and people will vote you back in. Whether Harper can control his overwhelming urge to meddle on the social front now that he has a majority is questionable.

    2). Social Programs – Canada has largely kept most of its social programs intact – it is still a “bastion” of socialized medicine and still provides a social safety net for the unemployed, poor and indigent (albeit not quite as robust as it was). Change, improvements and fiddling will doubtlessly continue but major revisions would likely to be politically unpopular.

    3). Resources – Yes Canada has taken full advantage of the rising oil prices but this is neither new nor surprising. One key issue overlooked in the article is the slow growth (or in some regional areas the complete hollowing-out) of the manufacturing sector. Canadian industry and economy remains largely “hewers of wood and drawers of water” rather than building up a stronger manufacturing and industrial base. When the coal, fish and trees run out….

    4). Banking / Finance – I’m surprised that this got relatively little mention in the article as the comparatively strong regulatory environment has been the primary reason for Canada’s current escape from the mortgage-fund blues. Canadian banking regulations remained significantly stronger and the Liberals resisted the urge to DE-REGULATE, keeping Canadian banks from getting sucked into the orgy of fiscal stupidty and greed that seems to have overtaken so many south of the border. It ensured that most Canadian banks got to wistfully stand on the edge of the baccanal.

    5). War – Canada mostly avoided getting drawn into the US war on Terror, staying out of the economic sinkhole that was Iraq and spending mostly lives rather than major coin in Afghanistan. Canadian troops made up for their low numbers (usually about 2500 men) by consistently being posted in the worst possible combat areas for the majority of their time in-country, a strategy which, fiscally sound, was somewhat morally bankrupt, buying US goodwill with the lives of their men.

  • Jordan Richardson

    While the article you cite is correct, the Canadian unemployment rate is still below the US rate.

    Except that now we’re moving in opposite directions. Our national unemployment has risen to 7.5 percent, marking the third increase in three months. Seasonally adjusted, the US unemployment rate was 8.5 percent in December of 2011 according to data from the U.S. Bureau of Labor Statistics.

    I’m not sure how you can divorce economic growth from jobs. It’s all connected in some way.

  • Clavos

    Practice makes perfect, EB.

    Next week, Carnegie Hall.

  • Grant C

    Yes, let’s use Canada’s model. No picking and choosing one aspect of the tax rates you like and ignoring everything else though. Overall tax burden in Canada is higher than in the US by a not insignificant amount. Which helps them with revenues, which lowers their deficit. When Canada turned their budget picture around in the 90s and ran over a decade of consecutive budget surpluses they didn’t do it JUST by cutting spending, they simultaneously RAISED TAXES. Cut spending AND raise revenue… that’s how it works.

    Of course try that in the US and you’re somehow a socialist.

    Speaking of… they maintain a universal national health insurance system that is twice as efficient as the system in the US.

    They have slightly low but at least *sane* levels of defense spending.

    They have regulatory entities that actually *regulate* things instead of just doing whatever the private sector tells them to.

    When the recession hit precious few people in Canada thought twice about employing economic stimulus to deal with it, it was a no brainer. Again, we come back to that “sane” thing.


  • Re: comment #21, Grant C., is there some reason, besides your personal opinion, why the USA cannot/should not pick and choose what worked in Canada, and discard/ignore what we citizens don’t want? And while there were tax increases, you may find this source interesting (scroll down about 1/5 of the way, just above the second chart). BTW, I had NOT seen this source when writing my post.

  • Glenn Contrarian

    Warren –

    is there some reason, besides your personal opinion, why the USA cannot/should not pick and choose what worked in Canada, and discard/ignore what we citizens don’t want?

    How about the fact that America’s the ONLY first-world nation where people go bankrupt because of medical expenses…and HALF of all those who do go bankrupt in America do so BECAUSE of medical expenses?

    Yay, we’re SO free! When we go bankrupt, well, that’s FREEDOM!

  • Re: comment #23, Glenn, your comment #23 makes no sense at all. Perhaps I miss your point. Please elaborate on how picking and choosing what has worked in Canada has anything to do with Americans going bankrupt.

  • Grant C

    If you want to emulate a system that works you have to emulate the system. Not one line item of it that doesn’t work if you divorce it from everything else.

    You’re not going to get the deficit under control by cutting spending while CUTTING taxes. Cutting spending helps deficits, cutting taxes hurts deficits, they cancel each other. Which is why Canada didn’t cut taxes they raised them and THAT helped the deficit. If you want to use them as an example of an approach that worked then use them as an example. But don’t just say that today one small portion of their tax code happens to be lower than the comparable section of the US tax code then pretend like THAT’S why the deficit picture looks the way it does because it’s absurd and dishonest.

    And you can’t talk seriously about cutting spending without dealing with health care and defense. Again, if you want to use the Canada budget strategies as an example, *use them*.

    Does that cover “some reason”?

  • Again, why would I be ashamed of Obama’s middle name?

    What you should be ashamed of is your lack of cleverness and the pathetic attempt to appeal to Obama’s detractors’ xenophobia. Or is it a revelation of your own?

    And let me end your disappointment: it’s a dopey, meaningless line, especially considering the source.

    “and I am outta here!” – Dennis Miller

  • Warren is backpedalling again.

    The basic gist of his article is “why can’t we be like Canada?” implying that if the US followed the same fiscal policies that Canada has, the economy would boom.

    When it’s pointed out to him that not everything about the Canadian economy is all wine and roses, he tries to argue that America should just pick and choose what works about Canada.

    But if what Canada is doing is so great, why the reluctance to embrace the not so shiny bits? I’ll tell you why. It’s because Warren knows that Canada as a country is just a little bit different from the US, just as Canada is a bit different from, say, Tonga.

    Canada has, for instance, a different size, shape, history, set of natural resources than the US does, and of course there’s the fact that only about 27 people live there.

    When the Canadian government puts a set of economic policies into place it is because it believes they will work for Canada, and they are designed specifically for the unique Canadian situation. It doesn’t follow that the same set will work for the US.

    It’s true that certain species of fiscal policies have proven success when they have been tried, but any such policy has to have the right economic climate in place in order for it to work. As I said, Canada’s economy is unique to Canada, just as the Untied States’ is unique to the US.

    And can Warren and Clav please stop pretending innocence and tell us honestly why they choose to go out of their way to use Obama’s middle name? And drop the “Delano” bullscheisse?

    That naming style was a fad that was only ever applied to certain presidents, and not necessarily “great” ones at that. (William Howard Taft, anyone?) It started to go out of fashion after WWII when people just started using the president’s middle initial rather than the full name – probably because that was all Harry Truman had. Nixon was the last president that the style was customary for, and even then not all the time. (The “W.” of the last one was only used to distinguish him from his dad.)

  • Clavos

    And can Warren and Clav please stop pretending innocence and tell us honestly why they choose to go out of their way to use Obama’s middle name?

    I don’t…

  • I of course can’t speak for either Warren or Clav. However, I thought President Obama’s middle initial stood for “Humble.”

  • zingzing
  • I don’t see what’s the big deal. Those who resort to Mr. O’s middle name, to mean anything other than “honorable” or “humble” (thank you, Dan Miller!), obviously express their discontent; and as far as I know, it’s a longstanding practice in the Anglo-Saxon tradition to parody political figures, let alone figureheads.

    After all, it were the British who have introduced us to Punch, let alone The Monty Python, for which we’re are eternally grateful. So I don’t see what honestly’s got to do with it.

    A second-hand emotion, perhaps?

  • zingzing

    it’s playing to their audience’s xenophobia and racism, roger. (and displaying the author’s own.) but you knew that. it’s not parody, it’s not even satire. if they need to resort to racism in order to “express their discontent,” maybe they should find another way to do it. like calling him an ineffectual president who is a fascist dictator or something like that. not that that makes any sense either.

  • Clav said it straight out. “He don’t pretend.”

    Atta boy! There’s been enough pretense on this site to last a lifetime.

    Let’s set up a new trend for 2012,

  • Yes, it is parody, zing, hate to disagree with you. By my lights, Clavos hasn’t a prejudicial bone in his body.

    That’s how I’ve always read him. Tongue in cheek, ironic — no question about it. But perhaps I’m not as thin-skinned as you are. I’ve got nothing to defend,. A person is a person to me, and I’m no respecter of persons. I ain’t into any personality cult, be it a black woman or a black man, or be they white for all I care.

    It’s all the same to me, or macht nicht, to use a German idiom.

  • zingzing

    that’s not what he said, roger… look again at what he bolded.

  • OK, I’ll grant you one could be more creative for satiric purposes.

  • OK, so he said “he’s not going out of his way to …”

    Where is the fault in that?

  • zingzing

    parody: An imitation of the style of a particular writer, artist, or genre with deliberate exaggeration for comic effect.

    so, you think clavos was parodying himself? i wasn’t really looking at it like that…

    clavos wasn’t really the one i was really looking at anyway. he doesn’t tend to use obama’s middle name. i really can’t recall a time where he has, even on this thread. it’s people like warren that i’m talking about. there are others around here as well.

    we seem to have gotten our wires crossed, at any rate. i wasn’t talking about clavos. you said: “I don’t see what’s the big deal. Those who resort to Mr. O’s middle name…” and that’s what i was responding to. that stuff isn’t parody or satire or any of that. maybe clavos is making fun of himself, i dunno. his cynicism is a layer you have to read through.

  • zingzing

    “Where is the fault in that?”

    it was contextualizing the sentence, but i don’t think that’s what clavos was responding to. his bold of the other part of the sentence is the clue i took. that’s how i took it anyway. and i think that’s how he meant it.

  • Well, I don’t worry about Warren and company, no more so than I worry about Rush or Bill O’Reilly, a first-class buffoon.

    Only in America can people become millionaires by their stupidity.

  • zingzing

    “Only in America can people become millionaires by their stupidity.”

    i only wish that were true.

  • Well, you need a bit of lack as well.

  • Zingzing


  • Glenn Contrarian

    For what it’s worth, I’ve seen no indication that Clavos is prejudiced. Unfortunately, the same can’t be said for millions of Republicans…if polls and their continued support of certain race-baiting pundits is any indication. It does Clavos great discredit to associate him with them…but it’s his choice that he sides with them. You lay down with dogs….

  • michael

    your you kidding,this article seems more like neocon propaganda,harper is a neoconservative,he s taking a page out of George W bushes page on how to destroy an economy,harper and his neocons are pocketing,hoarding money,spending on a mass scale.everything is glossed over in rhetoric.canada is going down the toilet.