How Canada Dealt with Debt
Oct 04, 2012
Look at our debt. Sixteen trillion dollars and rising. For every dollar our government spends, we have to borrow 40 cents. Are we in as bad a shape as Greece? No. Not yet, but if we stay on this path, we can get there.
Maybe we should look around for some country that has dealt with this kind of a problem successfully. We don’t have to look very far. Look north – Canada.
The Canadian debt problem was building over many years dating back to the 1960s. It just kept getting worse. The government was promising more than it could deliver. The markets were losing confidence in Canada. The country was paying more than 7% to borrow the money spent. Something had to be done.
In 1993, Prime Minister Chrétien came to power. Paul Martin was given the job of Canadian Finance Minister. They had to turn things around. The country was in a fiscal death spiral.
Deep cuts of spending of 10% were forced through. Nothing was spared. Their healthcare system was chopped. Block grants to the Provinces would force them to deal with the welfare programs. In 1998, their government passed bug cuts in taxes, including corporate and personal. This massive reform was accomplished by the liberal party. Hard to believe. However, Paul Martin points out that the driving force was not "ideology but arithmetic."
The Canadian Provinces had the same kind of debt problems. Their debt rating was downgraded. They had to "bite the bullet" also. The Province of Saskatchewan closed 52 hospitals, schools, thousands lost their jobs.
Doesn’t this sound familiar? Our federal government and many states are spiraling downward. We are approaching our own day of reckoning. The "chickens are coming home to roost." Our own politicians could learn from the Canadian experience.
In closing, I would encourage you to access my website which archives my radio commentaries dating back 10 years and will go back 20 years when complete. Check on what I said back then. Go to www.johnblockreports.com.
Until next week, I am John Block in Washington.