The Huffington Post article on Canada that I blogged earlier is fascinating…we have already looked at the role of big government in stuffing everything up and then attempting to fix it.
But what about the role of debt:
Governments must lead by example when managing their own debt and spending. Low debt is the result of low spending. Federal government spending as a share of the overall economy is 15 per cent in Canada (2) and 24 per cent in the U.S. (3). The numbers are not merely the result of prodigious U.S. military spending, though that is certainly a factor. Non-military federal government spending is 14 per cent of Canada’s economy (4), and 18 per cent of America’s (5).
Just as cause equals effect, spending equals debt. Net government debt as a share of the Canadian economy is 36 per cent. In the U.S., it is 83 per cent. America’s gross government debt is now bigger than the entire U.S. economy. According to the U.S. Treasury Department website, Mainland China holds $1.1 trillion of it. To quote Mark Steyn: “If the People’s Republic carries on buying American debt at the rate it has in recent times, then within a few years U.S. interest payments on that debt will be covering the entire cost of the Chinese armed forces.”
Imagine: through debt interest, soon American taxpayers will be funding 100 per cent of the Chinese military.
Steyn points out that, according to the Congressional Budget Office, by 2020 the United States government will be spending more annually on debt interest than the total combined military budgets of China, Britain, France, Russia, Japan, Germany, Saudi Arabia, India, Italy, South Korea, Brazil, Canada, Australia, Spain, Turkey, and Israel.
Meanwhile, job creators enjoy a growing tax advantage north of the border. Total corporate tax rates of all levels of government average 26.1 per cent in Canada, versus 39.1 per cent in the U.S.
These policy decisions have led the Wall Street Journal and Heritage Foundation to rank Canada sixth in the world on the economic freedom index. The U.S. now ranks 10th.
That is why we Canucks are not jumping off cliffs or smashing into ceilings.