A different take on Canada’s deficit-fighting story
By John Geddes - Monday, August 15, 2011 - 40 Comments
With the United States and European Union staggering under debt burdens, Canada’s success in sorting out its fiscal problems a decade and a half ago is often held up as an example to emulate. But it’s a model I often don’t recognize, even though I covered the turnaround story back in the 1990s.
For instance, there’s this recent Washington Post piece, which touts the “Maple Leaf Miracle.” “Facing an unprecedented fiscal crisis, Canada got down to work,” it says. “The country passed a landmark budget in 1995. The plan tilted heavily towards cutting expenditures but also included some new revenue (the ratio was about $7 in cuts for every $1 of revenue). Canada cut the civil service by about 25 percent and overhauled its pension program. The plan worked.”
An American or, say, German fiscal hawk might well perk up at that prescription—cut public spending ruthlessly, laying off one in four government workers, while boosting the tax haul only very modestly by comparison. Sounds like a plan. Except it’s not the one that actually transpired in Canada.
-
Can we really spend our way out of this mess?
By Andrew Coyne - Wednesday, January 21, 2009 at 12:00 AM - 87 Comments
The remarkable re-embrace of deficit spending is every bit as mindless as the financial panic that preceded it
The phrase “paradigm shift” was coined by the historian Thomas Kuhn to describe the process by which an old belief system, long entrenched and widely shared, is suddenly overthrown by a new one. But how to describe the sudden revival of an old belief system to replace the new?
How, in particular, to explain the remarkable re-embrace of deficit spending (“fiscal stimulus,” in the phrase of the moment) across much of the developed world—not only by the political class, for whom its appeal is obvious, but by much of the economics profession? How, when so little fresh evidence has been offered of its effectiveness, and so much of the original critique that first discredited it remains intact? And how, in Canada of all places, which suffered more than most from a previous generation’s experimentation with deficit finance, and where the case for Doing Something would seem less pressing than elsewhere?
