September 30, 2010

Learning From Canada's Budget Triumph

  • David R. Henderson

    Associate Professor of Economics, Naval Postgraduate School in Monterey
  • Jerrod Anderson

    Statistician, Agency for Healthcare Research and Quality
Key materials

Today, the United States faces a bleak fiscal situation: a large deficit, a huge amount of debt, and an uncertain economic outlook. The budget deficit for 2010 is projected to be 10 percent of GDP, and publicly held debt is projected to be 62 percent of GDP by the end of the year. In 1993, Canada was in a similar situation. Yet over the next 16 years, Canada was able to escape from chronic deficits and trimmed its debt from nearly 70 percent of GDP to 29 percent of GDP, all without sacrificing growth. The United States can replicate this by pursuing fiscal discipline, with heavy emphasis on spending cuts rather than tax increases, and by making changes in the responsibilities for congressional committees.