|Canada: Home of moose, hockey,|
and well-capitalized banks
Looks like our neighbors to the north are doing something right.
Correction: they are doing a lot of things right.
Canada is succeeding by doing things "right," literally. They have implemented many of the same economic policies championed by fiscally conservative Republicans here in the United States, and swiftly began seeing positive effects.
Considering that Canada is often cited as an example by those on the left who wish to implement policies like socialized medicine, it is worth the time to look into the details of what Canada is actually doing.
Luckily for us, Frank Miniter wrote an op-ed at Forbes.com last week that serves as an excellent introduction to the topic:
With President Barack Obama claiming the government builds success, not individuals, Mitt Romney should look north to a story Obama would rather Americans didn’t notice. Canada is outperforming the U.S. on every economic front and they’re doing it with policies Republicans say they’d like to implement.
For the inside scoop I interviewed Tony Clement, Canada’s President of the Treasury Board (the COO for the Government of Canada who is responsible for managing spending among other duties) and a Member of Parliament with the Conservative Party of Canada.
He was enthusiastic. This is a story he wants to tell. A story that people south of the border should be paying attention to. According to senior Canadian officials who’ve had closed-door meetings with Obama administration officials, the White House has been curious about how Canada is growing. When Canadian’s told them how, they even toyed with implementing some of the same policies.
First, for context, we need to do a numbers comparison with the U.S.
Canada’s unemployment rate is now 7.3%, whereas the current U.S. unemployment rate is 8.2%. Canada’s combined federal and provincial debt to GDP ratio is 57.9%, while Canada’s federal debt to GDP ratio is 34%. Meanwhile, the U.S. debt to GDP ratio reached 101.5% in 2011.
Then there is the Canadian banking system. Canada’s banks are among the best capitalized in the world and far exceed the norms outlined by the Bank for International Settlements. During the financial crisis, no Canadian banking institutions had to be bailed out. The rest of this article, of course, could be filled with details about the troubles with U.S. banks and the Democrats’ Dodd-Frank Wall Street Reform and Consumer Protection Act, but I’ll let all that be addressed in other articles.
It’s worth noting here that homeowners are also in better shape in Canada. Today just 0.35% of Canadian mortgages are behind on their payments, whereas TransUnion reported that in the January-March 2012 quarter 5.78% of U.S. mortgage holders were behind on their payments by 60 days or more (that’s more than 10 times more than in Canada).
Canada also has a better credit rating than the U.S. Standard & Poor’s gives Canada a “AAA” rating and a “stable” outlook, but gives the U.S. an “AA+” rating and a “negative” outlook. Moody’s Investors Service Inc. lists the U.S. as triple-A but gives it a “negative” outlook. Meanwhile, Moody’s gives Canada an “AAA” rating and a “stable” outlook...Ouch. Our hockey-loving neighbors are kicking our tails, and they're doing it by implementing the very ideas that our politicians (well, at least some of them) have been chattering about (but not actually doing).
Canada has reduced its federal corporate tax rate and managed to pass a budget with actual, real spending cuts (not the "reduction in the rate of increase of spending" trickery that our Congress tries to call budget cuts). Even public sector unions were asked to make cuts, and the government pushed forward with those cuts despite howls of protests from the unions and the pro-labor Canadian press. Senior government bureaucrats saw their compensation change significantly, with bonuses tied to successful reductions in expenditures.
Miniter makes a good point that the Canadian system gives whichever majority coalition controls the government a lot more power to push forward their agenda, whereas the American system - especially when power is divided between the two major parties - invites more gridlock. However, as Miniter notes, despite this advantage that the Canadians seem to have right now, just being able to force through legislation is not necessarily the key to success:
But the thing is, until 2010, the Democratic Party did have majorities in the U.S. House Representatives and the U.S. Senate. This is how Democrats passed The American Recovery and Reinvestment Act of 2009 (the “Stimulus” bill) without Republican input or support. Whereas the Harper government has used its political power to trim the budget to grow out of the downturn, the Obama administration spent $787 billion.
And Canada got the growth!
Read the rest of the article here.