For the past few weeks, I have been involved in negotiations with the vice president and congressional colleagues as we attempt to develop a plan to fix our nation’s increasingly dire fiscal problems. The conversations have been long and difficult, but the effort is worthwhile. There is no greater crisis facing our country than that posed by the massive deficits and debt obligations that threaten to drown our economy in a sea of red ink.
Consider this: federal debt held by the public accumulated during the presidencies of George Washington through George W. Bush totaled $6.3 trillion. Under Obama, it will nearly double to $11.9 trillion by the end of FY2012, and is projected to triple by the end of the decade.
The mounting debt recently led the head of the world’s largest bond fund to suggest that the United States is already in worse financial shape than Greece. He calculates our gross debt, which includes money guaranteed for entitlement programs, at nearly $100 trillion — more than any other developed country.
The debate about how to tackle our country’s massive fiscal problems is no longer some far-off academic discussion — it is a grim reality that threatens each and every American. Failure to change course from President Obama’s spending spree is a direct threat to the future of job creation in this country and will significantly reduce the standard of living for us, our children, and their children.
As we search for solutions, it may be worth taking a look at our neighbors to the north to see how they weathered a similar situation in the mid-1990s. Then, Canada faced a budget crisis at least as bad, if not worse, than what we see today in the U.S. Total national debt was a staggering 120 percent of GDP, with about a third of all revenue directed toward interest payments on the debt alone. The country lost its AAA credit rating and The Wall Street Journal declared Canada to be “an honorary member of the Third World in the unmanageability of its debt problem.”
That’s when Canada’s government got serious.
The left-leaning government took decidedly conservative action, slashing Canada’s federal bureaucracy, enacting significant program cuts and implementing sweeping welfare reforms, among other deficit-reduction measures. The liberal government also cut corporate, income and capital gains taxes to promote growth.
The result was a balanced budget within just three years, followed by more than a decade of surpluses and a reduction in Canada’s once-staggering debt.
Today, Canada’s conservative prime minister, Stephen Harper, is quick to point out that his country has some of the lowest ratios of debt-and-deficit to GDP in the developed world. Even after the worst global recession in a generation, Canada’s budget is on its way back to surplus by 2015 — an unimaginable proposition here — with a debt ratio far lower than ours.
It is a remarkable turnaround, and one that has had real benefits for Canadians. In fact, Canada’s strong fiscal position is what allows it to weather the global economic downturn better than almost any other advanced economy, boasting impressive job-recovery rates. In comparison, our unemployment rate continues to languish at more than 9 percent.
I’m not suggesting we should import all of their reforms to solve our fiscal problems. Canada’s government implemented some tax changes, for instance, with which I do not agree. But the overall takeaway is this — we should not resign ourselves to the grim future that awaits without quick and decisive reform. We have an opportunity today to reduce the size of our government and refocus our policies to promote job creation and prosperity.