Canadas Smaller Government
A recent Investors Business Daily editorial points out Canada had developed a well-earned reputation as a welfare state. But a new understanding has taken root north of the border, and Canadians have pursued some policies the U.S. should also follow.
In the May/June Cato Policy Report, analyst Chris Edwards notes: “In some ways the United States is in even worse fiscal shape today than Canada was two decades ago” when it was suffering through “a deep recession and teetered on the brink of a debt crisis caused by rising government spending.”
After years of implementing socialist policies, Canada, as Sweden has done, quietly reversed course in the 1980s, cutting taxes and launching privatization efforts. The tax cuts have acted as a stimulus while privatization, writes Edwards, “reduced government debt and helped spur economic growth by creating a more dynamic industrial structure.”
Perhaps the most promising instruction from the Canadian experience is that, according to Edwards, the country’s “fiscal reforms undermine the Keynesian notion that cutting government spending harms economic growth. Canada’s cuts were coincident with the beginning of a 15-year boom that only ended when the United States dragged Canada into recession in 2009.”