Go to the Globe and Mail homepage

Jump to main navigationJump to main content

(JONATHAN ERNST/REUTERS)
(JONATHAN ERNST/REUTERS)

U.S. not ready for Canada’s deficit playbook Add to ...

The intent was to present Canada as a beacon to guide the U.S. out of its budgetary malaise. The result was to show why the United States likely is at least a couple of years away from cleaning up its budgetary mess.

On Tuesday afternoon, the Ottawa-based Macdonald-Laurier Institute, led by managing director Brian Lee Crowley, came to Washington to promote a new publication: “Northern Light: Lessons for America from Canada's Fiscal Fix.” The American Enterprise Institute, a think tank that tends to favour Republican policies over Democratic ones, played the enthusiastic host.

More Related to this Story

Mr. Crowley knows how to put on a show. The event featured a bravura performance from keynote speaker Paul Martin, the former prime minister who, as finance minister, turned a generation of budget deficits into a decade of budget surpluses. A separate panel discussion included Stockwell Day, the former federal and Alberta cabinet minister, and Janice MacKinnon, the former Saskatchewan finance minister. It was like a Montreal Canadiens alumni team, only for Canadian economic policy geeks.

The message to the Americans in the room from Mr. Crowley: you can do this. His book, which he co-authored with Robert Murphy, shows that the spending cuts Mr. Martin implemented were bigger in magnitude than those proposed by President Barack Obama's deficit commission, led by former Republican senator Alan Simpson and former Democratic White House adviser Erskine Bowles, and the proposal of House Budget Committee chairman Paul Ryan, the Republican Party's nominee for vice president. The locals were impressed. Andrew Biggs, a resident scholar at AEI who was asked to comment on the Canadian presentations, said Canada’s experience spoke to the need for “politicians that are willing to show leadership and take chances.”

That’s part of it. The other part is having a population that is ready to be led. When Messrs. Martin and Day and Ms. MacKinnon implemented deep spending cuts, the Canadian population was ready; scared, even, of what would happen if it didn't take its medicine. Interest rates were rising. The Wall Street Journal was comparing Canada to a Third World country. But even then, as Mr. Martin told his audience Tuesday, it took a year to condition voters for what was coming. Mr. Martin organized public, pre-budget consultations that for the first time put all the vested interests around one table and let them have at it. “We wanted Canadians to understand there were no perfect answers,” Mr. Martin said.

The point was to get Canadians to equate fiscal prudence with personal wellbeing. Americans just aren’t there yet.

The country largely shrugged off last years’s downgrade of the U.S.’s AAA credit rating by Standard & Poor's, as interest rates went down rather than up. The Bowles-Simpson commission produced a deficit-reduction plan that was widely described as workable, yet the Republican lawmakers on the committee -- among them, Mr. Ryan -- refused to support it, and Mr. Obama oddly declined to fight for it. That’s certainly a failure of leadership, but maybe politicians know, that at this stage at least, leadership would be futile? There’s fear in the American voting public, but it’s over the fact that there are four million fewer people working today than there were before the recession. And few Americans seem to accept there’s a link between hiring and the deficit. In a poll of small business owners released this week by George Washington University and Thumbtack.com, a Web-based company that links service providers with job opportunities, only 5 per cent of respondents ranked the federal budget deficit as the single most important issue in determining their choice of president. Forty per cent said jobs and the economy; 14 per cent chose “ethics, honesty, corruption in government.”

Perhaps the most remarkable thing about Tuesday's event was how Mr. Day, an unapologetic conservative, and Ms. MacKinnon, a senior figure in a left-of-center New Democratic Party government, gave almost identical accounts of what it took to conquer a deficit. “Across all party lines, we were united,” said Mr. Day. “Parties across the board were saying the same thing,” Ms. MacKinnon said. “We didn’t talk about anything else.”

American politics at the moment seem incapable of that kind of consensus. Neither side gives ground until one of two things loom -- disaster, or a congressional holiday. (And the former tends to cause lawmakers to punt, rather than embrace a real solution.) In Canada, electoral losers tend to behave as such, clearing a path to getting things done. In the U.S., the electoral losers do everything in their power to block their opponents. And these days, there are more checks than balances.

So where does this leave us? After an ideologically charged election, the U.S.’s political leaders will have to take steps to shift the debate to neutral ground – as Mr. Martin said Tuesday, make it a question of “arithmetic” rather than an unwinnable struggle over the merits of “small” and “big” government. That could take a second deficit commission, or at least a president who is focused on little else. It seems unlikely that could be done in less than a year. If interest rates stay low, that’s enough time. Mr. Martin said he senses that U.S. officials believe that will be the case. He’s not so sure. “I would suggest to you there is a tipping point,” he said.

Globe Investor - GIT Upsells
It's never been a better time to get Globe Unlimited
Try Globe Unlimited, featuring new Globe Investor Tools, for a special trial rate. Only 99¢ for your first month.

Are you a Globe Investor Gold subscriber?
You qualify for complimentary access to Globe Unlimited.
Visit: globeandmail.com/globeplusunlimited
Try it today

In the know

Most popular video »

Highlights

More from The Globe and Mail

Most Popular Stories