This post was originally published on the Public Notice Research & Education Fund: Washington Could Learn a Lot Blog.
The answer is yes. At least according to a Wall Street Journal op-ed that evaluates how our neighbors to the north cut spending to tackle their own debt crisis.
Fred Barnes, executive editor of the Weekly Standard and author of the op-ed, contends that the crisis that the Canadian government faced in the early ‘90s was not all that dramatically different from the difficulties facing America today.
At the time, Canadian “government debt was nearly 70% of GDP” and “interest payments on the debt took up 35 cents of every tax dollar.” As shown in our latest video, the US will borrow 41 cents of every dollar spent this year, and our projected debt-to-GDP is 102%.
While tax increases versus spending cuts are a contentious issue in Washington today, Barnes remarks that the Canadian government “took decisive action” and implemented a ratio of spending cuts to tax increases at nearly 7-to-1.
The cuts, Barnes argues, revitalized the sagging economy by turning a sizable deficit into a $3 billion surplus, sliced the debt-to-GDP ratio in half, and encouraged “faster economic growth than America” which today has promoted a “lower jobless rate… a deficit-to-GDP ratio that’s a quarter of ours, and a stronger [Canadian] dollar.”
While Canada with a population a tenth the size of ours is not poised to annex their fiscally irresponsible neighbor to the South, Barnes provides a thought-provoking case study for politicians in Washington to consider as they debate both raising the debt ceiling and the significant spending cuts need to tackle our $14.3 trillion debt.