Trump should copy Canada – not question it

On Monday, U.S. President Donald Trump opined that "Canada does not treat us right in terms of the farming and the crossing the borders."

What, one is given to wonder, was he talking about?

It's strange to watch this President as he continues to question the Canadian way. He might do better to learn from it. On trade policy, on taxation and now on deficits.

The Republicans, like Canadian Conservatives, have traditionally been – or at least tried to be – the party of fiscal rectitude. Not any more, though.

With this week's budgetary gold rush, they're headed into deep deficit land.

They're going the deficit route when their economy is at or near full employment and hardly in need of a rocket boost. They're doing so after years of denouncing the Obama administration for running deficits. "If you were against President Obama's deficits and now you're for the Republican deficits," asked Senator Rand Paul who came to Washington on a Tea Party, deficit-slashing wave, "isn't that the very definition of hypocrisy?"

The deficit is set to double from the previous US$689-billion forecast and balloon thereafter. In the short term, the spending spree is sure to boost economic growth, which suits Republican electoral prospects nicely. For the longer term, however, the plan is seen by economists as reckless. Deficits and debt could jack up inflation and interest rates to disastrous levels.

The budget policy mix that is favoured by both Congress and the White House contains big new military outlays, increased infrastructure spending and cuts to the social safety net. It comes on top of a sweeping tax cut package that favours the wealthy and drains the treasury. In addition there is Mr. Trump's retrograde protectionist fervour.

Heavy deficits and economic nationalism were the blend that noxiously afflicted Pierre Trudeau's Liberals. They brought on ruinous debt, interest rate and unemployment levels. Mr. Trump and his Grand Old Party policy makers might have done well to view the example.

Canadian governments learned from the Trudeau experience. Deficits rose during Brian Mulroney's stewardship, but his Tories substantially reduced program spending while opening borders to free trade. The Harper Conservatives were forced by the opposition to fight the global financial meltdown with great wads of stimulus. But in their later years in power, they brought the budget back to near balance. As well, they expanded liberalized trade.

The Liberals of Jean Chrétien and Paul Martin wisely abandoned the economic nationalism of the Trudeauites. They also turned the Liberals into a book-balancing party, eliminating the large deficit that they inherited in 1993.

With economic growth in the doldrums (the GDP rate had averaged below 2 per cent for many years) Justin Trudeau's government embarked on a moderate stimulus plan that entailed deficit spending. But it was nothing like what the Republicans are doing. And the Liberal strategy has shown signs of success. Growth is up and deficits are down from what Finance Minister Bill Morneau originally projected.

In the United States, the tax cut package favouring upper-income brackets could well exacerbate income inequality trends. In Canada, Conservative and Liberal cuts over the years have been more widely and fairly distributed. It's another area where Ottawa is doing better.

Washington's new spending bonanza is largely the work of House Speaker Paul Ryan and Senate Majority leader Mitch McConnell. Once deficit hawks, they turned deficit chickens. They see the short-term political benefit of the new spending. As well they have noticed polls that show Americans are not as concerned about running deficits as they once were.

Democrats oppose the Trump tax cut, are against his protectionist preachings, but are supportive of new infrastructure spending even though it falls well short of the rebuild that is necessary. The military is getting the money that should have been reserved for the crumbling transportation network or for social safety-net programs such as Medicaid, food stamps and federal housing vouchers that are slated to be hit.

In his statement about not being treated right by Canada, Mr. Trump added that "we cannot continue to be taken advantage of by other countries," sounding like he might be threatening some new import tax.

But it's not a case of Ottawa not treating him right. It's a case of policy choices, of which side is making the right ones. If the President and his Republicans were doing so, being taken advantage of wouldn't be a problem.