How did they manage this?
- Across-the-board spending cuts: In the 1990’s, “The Canadian government cut defense, unemployment insurance, transportation, business subsidies, aid to provincial governments, and many other items….Aside from budget cuts, Canada improved its fiscal outlook by fixing the Canada Pension Plan, which is like our Social Security system. In 1998 Canada began moving the CPP from a pay-as-you-go structure to a partially funded system. Today the CPP is solvent over the foreseeable future…”
- Balanced Budget: “The spending reforms of the 1990s allowed the Canadian federal government to balance its budget every year between 1998 and 2008. The government’s debt plunged from 68 percent of GDP in 1995 to just 34 percent today.”/
- Tax cuts: “During the 2000s the top capital gains tax rate was cut to 14.5 percent, special “capital taxes” on businesses were mainly abolished, income taxes were trimmed, and income tax brackets were fully indexed for inflation. Another reform was the creation of Tax-Free Savings Accounts, which are like Roth IRAs in the United States, except more flexible. The most dramatic cuts were to corporate taxes. The federal corporate tax rate was cut from 29 percent in 2000 to 15 percent in 2012. Most provinces also trimmed their corporate taxes, so that the overall average rate in Canada is just 27 percent today.”
These Tea Party dream reforms, which had bipartisan support (the initial spending cuts were put forward by the Liberal Party), Canada’s dollar, which was jeered at as the “northern peso” in the 1980’s, has acheived parity with the U.S. Dollar, despite the fact that Canada’s GDP is less than a tenth the size of ours. Imagine what our dollar would be worth if our political class had the fiscal sense of Canadian Liberals.