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A Northern Tiger? Canada’s Economic and Fiscal Renaissance and its Implications for the United States

March 29, 2012  • Jeremy A. Leonard

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Little known to an American public weary of the seemingly intractable fiscal problems facing the United States is an example of a mature democracy successfully addressing a similar set of problems. In the 1990s Canada faced chronic fiscal deficits, saw one-third of its Federal expenditures go to debt relief, and suffered unemployment averaging over 9.5% for the entire decade. Yet by the end of that decade it had eliminated the annual deficit, was able to cut its debt burden, and at the same time strengthen its economic performance so that its growth surpassed that of the United States in the decade of the 2000s. This paper chronicles the systematic steps undertaken by Canada to turn a chronic budget deficit into a surplus and slash the overall debt burden. It also outlines many of the policies—free trade agreements, instituting a value added tax while cutting corporate and individual taxes, improving supply chain integration within North America, and bolstering scientific research—to promote competitiveness in a global economy. Not all of the measures were fully successful, and not all of the changes in federal programs can be translated into comparable initiatives in the United States, but both the total package of fiscal reform and the individual components are well worth better understanding south of the 49th parallel.