By Kevin Meyer
Those of us in the U.S. often look to our friends from the great white north for ideas on beer and policy. Yes I know those links date me a bit, but that's what you get for reading something from a guy that went to school rather close to the frozen tundra a few decades ago.
So policy ideas… everyone seems to want to copy the Canadian health care system. Perhaps in these tough financial times we should look at some of their other inventions.
When Americans look to Canada, they generally think of an ally,
though one dominated by socialist economic policies. But the Canada of
the 1970s and early 1980s—the era of left-wing Prime Minister Pierre
Trudeau—no longer exists. America's northern neighbor has transformed
itself economically over the last 20 years.
reforms began in 1988 with a U.S. free trade pact that would lead to the
North American Free Trade Agreement. But change really began to take
off in 1993. A socialist-leaning government in Saskatchewan started by
reducing spending and moving towards a balanced budget.
1995, the federal government, led by the Liberal Party, passed the most
important budget in three generations. Federal spending was reduced
almost 10% over two years and federal employment was slashed 14%. By
1998, the federal government was in surplus and reducing the nearly $650
billion national debt. Provincial governments similarly focused on
eliminating deficits by paring spending and reducing debt, and then they
started to offer tax relief.
Uh… wait a minute. A left-leaning government reducing spending (and actually doing it, not just promising it and basing "unbiased" analysis off of the promises…) and reducing federal employment? Seriously? I thought that something genetic prevented even thinking that way! But it gets better.
Jean Chrétien (a Liberal) won elections in 1993, 1997 and 2000 by
promising to balance the books, to prioritize federal spending to ensure
that government was doing what was needed, and also to deliver tax
relief. Mr. Chrétien's former finance minister, Paul Martin, became
prime minister in 2003, but he lost power to the Conservative Party in
2006, in part because he moved away from some of the Chrétien
Tellingly, the last
three Canadian elections have all had key debates on tax relief—not
whether there should be tax cuts but rather what type of tax cuts.
Beginning in 2001 under a Liberal government, even the politically
sensitive federal corporate income tax rate has been reduced. It is now
18%, down from 28%, and the plan is to reduce it to 15% in 2012. The
U.S. federal rate is 35%.
Canada has also reduced capital gains taxes twice (the rate is now
14.5%), cut the national sales tax to 5% from 7%, increased contribution
limits to the Canadian equivalent of 401(k)s, and created new accounts
similar to Roth IRAs.
Ok this is just nuts. Since when do liberals reduce taxes, let alone corporate taxes? And as a side note, with Canadian corporate taxes at 18% versus 35% in the U.S., I wonder where corporations… and their jobs… will want to go. We know that the cold Canadian winters must make their men accustomed to shrinkage, but government shrinkage? How was that accomplished?
mid-1990s, Canada's commitment to reform allowed it to tackle two
formerly untouchable programs: welfare and the Canada Pension Plan
(CPP), equivalent to Social Security in the U.S. Over three years,
federal and provincial governments agreed to changes that included
investing surplus contributions in market instruments such as stocks and
bonds, curtailing some benefits, and increasing the contribution rate.
The CPP is financially solvent and will be able to weather the retiring
They got the gumption to tackle ever-growing entitlement programs? Their politicians obviously have more guts than ours.
There is one area where our Canadian friends are looking to learn from us, but they better look fast as we're trying to emulate what they are already trying to change.
The one area Canada has been slow to reform is health care, which
continues to be dominated by government. However, some provinces have
allowed a series of small experiments: a completely private emergency
hospital in Montreal and several private clinics in Vancouver. British
Columbia and Alberta also are experimenting with market-based payments
to hospitals. While these are incremental steps, the path in Canada is
fairly clear: More markets and choice will exist in the future. The
trend in the U.S. is the opposite.
How's Canada doing today?
Most strikingly, Canada is emerging more quickly from the recession than
almost any industrialized country. It's unemployment rate, which peaked
at 9% in August 2009, has already fallen to 7.9%. Americans can learn
much by looking north.
Perhaps we should.