Ohhhh Canada!

How I would love to write about the American Airlines order. It appears  that AMR has agreed to one of the largest airframe purchases in the history of flight. They bought 200 Boeing 737’s and 260 A320’s, Airbus wins again. It is my understanding that due to Boeing’s inability to make a decision Airbus earned the larger portion of the order. Regardless, it is a good thing for both companies. However, Bombardier has a new offering that will give Airlines another option, and China is right around the corner with their small airline offering. However, that is not what I want to talk about today. Today I want to talk about Canada.

Everywhere I turn I hear people say that we don’t want a health care system like Canada. Other folks had made comments about Canada’s financial health, all of which I believed. However, the truth is often much different than what we hear.

In 1993 Canada was in dire straits. Government spending represented about 53% of the economy, while government debt was 70% of GDP. Their interest payments amounted to $.35 of every tax dollar. The Canadians understood their situation well. Rather than haggle over politics they decided to take action.

The first action taken was to cut spending. Benefits were slashed and taxes were increased. However, the ratio between reduced spending and increased taxes was 7:1. For every new dollar of increased revenue, the government cut seven dollars in spending.

The second action involved privatization. Canada’s national railway and air-traffic control systems were privatized to gain efficiencies.

After taking these actions the Canadian economy improved. According to the Wall Street Journal, “Between 1995 and 1998, a $36.6 Billion deficit turned into a $3 Billion surplus.” Also, the debt-t0-GDP ratio was cut in half. As a result, their economy began to grow, and it is now growing faster than ours.

You would think that it was the conservatives that forced this action, much like the republicans are here, but that was not the case. The leaders who pushed these actions through their government were part of the Liberal Party.

Today our great country is in the same situation as Canada. Our government is spending like crazy, our debt-to-GDP ratio is growing, from 40% in 2008 to 62% in 2011, and our interest payments are about 9% of our budget. Our deficit has exceeded $1 trillion for three consecutive years, while our politicians play their fiddles and ignore the flames on the horizon.

As I write this a Bruce Springsteen song comes to mind, “Glory Days.” Our politicians are sitting at the bar, thinking about the days that once were. They are not being leaders they are crying in their beer. We have become fodder for late night jokes, and a lesson of what not to do. A former Canadian ambassador to the US stated in the book, The Canadian Century: Moving Out of America’s Shadow, “If we want to see what would have become of Canada had we not lived through the difficult changes, we need look no further than Washington D.C., where unreformed entitlements and undisciplined borrowing are hobbling America’s power to be a world leader.” Shame on you politicians for your lack of leadership. Shame on you politicians for your inability to manage this country.

And that is my thought for the day!


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