The Canadian Century

Last week, in A Supply-Siders Investment Thesis, I mentioned Dr. Canto thinks the US should pursue a similar fiscal strategy as that of Canada in the mid-nineties. More on that topic from David Hay of Evergreen Capital Management, via John Mauldin. After reading The Canadian Century: Moving Out of America’s Shadow David makes the following points:

  1. Canada was in worse shape than the the US is currently. Interest expense, for example, was around 33% of government revenue versus approximately 10% for the US currently.
  2. Canada’s success was not without sacrifice. Government spending and employment was cut, targeted tax increases were made, the welfare system was modified and the Canadian Pension Plan (their version of Social Security) was reformed.
  3. As a result of these actions, the federal budget was balanced in three years and a surplus was run for 11 years thereafter allowing Canada to cut its federal debt nearly in half. Not only did they reduce debt but also saw GDP growth of 3.3% versus the developed-world average of 2.7%.

Canada, by most any measure, is better off for the changes they made. The question remains, is there enough political will and foresight to make similar changes here?

Source: http://www.investorsinsight.com

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