The Canadian Century

Moving Out of America’s Shadow

Jason Clemens
Director of Research, Pacific Research
Fellow, Macdonald-Laurier Institute
Presentation Outline
Laurier’s Vision and Principles
for Prosperity

Canada Loses Its Way

The Redemptive Decade

U.S. Loses the Script

The Canadian Century

 The Canadian Century:
Laurier’s Aspiration for
Canada

Canada has been modest in its history,

although its history, in my estimation,
is only commencing. It is commencing in this
century. The nineteenth century was the century of
the United States. I think we can claim that Canada
will fill the twentieth century."
Sir Wilfrid Laurier, 1904
 Laurier’s Principles for
Prosperity
Prosperity grows from liberty’s
soil.

Limited government, light taxes,

and fiscal discipline.

Self-confident engagement with

the Americans.

Free trade.
 Canada’s 1965-95 Experiment
Deviating from Laurier’s Vision

Deficits & Debt Trade Diversion Increasing Unemployment Higher Taxes

Increasing Interest Rates Increasing Dependency Stagnating Investment

Mounting Debt Rising Inflation Stagflation

Federal Revenues and Spending
(1961-1993)
1992:
26.00% Rev – 18.6%
Exp – 23.5%
24.00%
22.00%
Percent of GDP

20.00% 1965:
Rev – 15.3%
18.00% Exp – 15.0%

16.00%
14.00%
12.00%
10.00%

Spending Revenues
 Federal Deficit / Surplus
(1961-1993)
2.00%
1.00%
0.00%
-1.00%
Percent of GDP

-2.00%
-3.00%
-4.00%
-5.00%
-6.00%
-7.00%
 Federal Accumulated Debt
(1961-1996)
90.00% 1996:
78.3%
80.00%

70.00%
Percent of GDP

60.00%

50.00% 1976:
35.2%

40.00%

30.00%

20.00%

10.00%
 Federal Interest Costs
(1961-1994)
40.00% 1990:
34.6%
1994:
35.00% 30.4%
Percent of Total Revenues

30.00%

25.00%

20.00%
1961: 1974:
15.00% 11.9% 10.2%

10.00%

5.00%

0.00%
Provinces Exacerbate
Problems
Provincial Revenues and Spending
(1961-1994)
30
1993:
Rev – 22.2%
Exp – 25.8%
25
Percent of GDP

20
1965:
Rev – 12.7%
Exp – 10.7%
15

10

Revenues Spending
Provincial Deficit / Surplus
(1961-1993)

3.00%

2.00%

1.00%
Percent of GDP

0.00%

-1.00%

-2.00%

-3.00%

-4.00%
 Aggregate Provincial Debt
(1970-1996)
55.00% 1996:
49.7%
50.00%
45.00%
Percent of GDP

40.00%
35.00%
30.00%
1980:
25.00% 20.6%
1970:
20.00% 15.5%

15.00%
10.00%
 Provincial Interest Costs
(1961-1995)
1995:
16.00% 14.9%

14.00%
Percent of Total Revenues

12.00%
10.00%
1977:
8.00% 6.6%
1961:
6.00% 4.4%

4.00%
2.00%
0.00%
 Percent of the Population

10
12
14

0
2
4
6
8
19
80

19
81

19
82

19
83

19
84

19
85

19
86

19
87

Source: Frenette and Picot (2003); Statistics Canada.

Canada
19
88

19
89

19
90

Ontario
19
Rise of Dependency

91

19
92

19
93

19
94

19
95

19
96

19
97
 Total Government Spending as a
Percent of GDP (1980-1994)
55 53.3%

50
Percent of GDP

45 41.6%

40 38.5%

34.1%
35

30

United States Canada

Balanced Budgets Free Trade Lower Unemployment Lower Taxes

Low Interest Rates Reduced Dependency Increased Investment

Reduced Debt Low Inflation Economic Growth

The Redemptive Decade

Returning to Laurier’s Principles
 Federal Revenues and Spending
(1990-2008)
1992:
26.00% Rev – 18.6%
Exp – 23.5%
24.00%
22.00% 1998:
Percent of GDP

Rev – 18.3%
20.00% Exp – 17.9%
2008:
18.00% Rev – 15.4%
Exp – 15.2%
16.00%
14.00%
12.00%
10.00%

Spending Revenues
Federal Public Sector Employment

450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0

Military Federal Employees

 Federal Deficit / Surplus
(1961 -2007)
2.00%
1.00%
0.00%
-1.00%
Percent of GDP

-2.00%
-3.00%
-4.00%
-5.00%
-6.00%
-7.00%
-8.00%
 Federal Accumulated Debt
(1961-2007)
90.00%
1996:
78.3%
80.00%

70.00%
Percent of GDP

2007:
60.00% 42.7%

50.00% 1976:
35.2%

40.00%

30.00%

20.00%

10.00%
 Federal Interest Costs
(1994-2010)
35.00% 1996-97:
29.8%
30.00%
Percent of Revenues

25.00%

20.00%
2009-10:
15.00% 11.4%

10.00%

5.00%

0.00%
Redemptive Decade Transcends
Geography and Political Party

Alberta
 Provincial Revenues and Spending
(1980-2008)

28.00% 1992:
Rev – 22.0%
Exp – 25.8%
26.00%
1980:
Percent of GDP

24.00% Rev – 20.1%

2008:
Exp – 20.4%
Rev – 20.9%
Exp – 20.2%
22.00%

20.00%

18.00%

16.00%

Spending Revenues
 Provincial Deficit / Surplus
(1993 -2008)

2.00%
1.50%
1.00%
0.50%
Percent of GDP

0.00%
-0.50%
-1.00%
-1.50%
-2.00%
-2.50%
-3.00%
-3.50%
 Aggregate Provincial Debt
(1993-2007)
1998:
55.00% 48.4%
50.00%
2007:
45.00% 40.2%
Percent of GDP

40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
 Provincial Interest Costs
(1990-2008)
1995:
16.00% 14.9%

14.00%

12.00%
Percent of Revenues

2008:
10.00% 8.5%

8.00%
6.00%
4.00%

2.00%
0.00%
 Total Government Spending as a
Percent of GDP (1980-2008)
55 53.3%

50
Percent of GDP

45
39.7%
38.5%
40

35 39.0%

30

25

United States Canada

And the World Didn’t End…
Real GDP Growth
6

4
Percent

Canada G7 Average - Canada

Real GDP Per Capita Growth

5
4.5
4
3.5
3
Percent

2.5
2
1.5
1
0.5
0

Canada G7 Average - Canada

 Job Creation
3

2.5

2
Percent

1.5

0.5

Canada G7 Average - Canada

Gross Fixed Capital Formation
16
14
12
10
8
Percent

6
4
2
0
-2
-4

Canada G7 Average - Canada United States

 U.S. Loses the Script
Enhancing the Canadian Opportunity
U.S. Federal Surplus/Deficit
(As a Percent of GDP)
4
2
0
Percent of GDP

-2
-4
-6
-8
-10
-12
-14
CBO Update (March 2010)
Updated CBO Projections (August 2009)
CBO Historical and Baseline Projection (March 2009)
U.S. Federal Debt
(As a Percent of GDP)
100 90.0%
90
80
Percent of GDP

70
60
50 34.1%
40
30
20
10
0

CBO Update (March 2010)

Updated CBO Projections (August 2009)
CBO Historical and Baseline Projection (March 2009)
 U.S. Federal Interest Payments
(As a Percent of Revenues)
25.00%
20.7%

20.00%

15.00%
Percent

8.5%
10.00%

5.00%

0.00%

CBO Update (March 2010)

Updated CBO Projections (August 2009)
CBO Historical and Baseline Projection (March 2009)
 U.S. Federal Spending
(As a Percent of GDP)
30
25.2%

25
Percent of GDP

18.4%
20

15
10

CBO Update (March 2010)

Updated CBO Projections (August 2009)
CBO Historical and Baseline Projection (March 2009)
Other Challenges to the U.S.

Cost of Entitlements (Social Security,

Medicare, and Medicaid)

Tax Challenges:
 Burden
 Design
 Distribution
 Compliance Costs

Centralized Nature of Government

The Canadian Century
Canadian Century: Next Steps

Do we aspire to the Canadian

Century?
If so…
Return to Laurier’s principles.
Let the success of the Redemptive
Decade guide us:
Balanced Budgets and Debt Reduction.
Tax Relief.
Free Trade.
Engagement with the U.S. and others.
Questions & Answers