For the last 20 years, the Canadian government has worked to reduce federal spending. Our government can learn a few lessons from our neighbors to the north.
Today, Canada’s federal government spending accounts for only 38 percent of government spending at all levels. By comparison, in the U.S., the federal government accounts for 71 percent of all government spending.
The Canadian government has cut spending everywhere except health care. According to The Heritage Foundation’s Paul Bremmer, Canada’s budget cuts fall in line with many of Heritage’s proposed cuts:
The Canadian government, among other changes, altered benefit schedules for the Canadian Pension Plan to reduce the total amount of benefits paid.
In a similar vein, The Heritage Foundation suggests a variety of benefit changes to Social Security that would strengthen the program’s finances, for example, by raising the eligibility age slightly and replacing cost of living adjustments with the Chained Consumer Price Index for a more targeted measure of inflation in consumer goods. Bolder changes include gradually introducing a flat benefit that targets scarce resources to those seniors who need them the most and provides all seniors with protection from poverty in retirement.
Canada also cut corporate income tax rates. The U.S. has the highest rate among its competitors in the industrialized world. The combined federal and state corporate rate in the U.S. is over 39 percent. Canada now has a combined rate of only 25 percent.
Across the Atlantic, however, European countries have done the opposite. They have increased national government spending, with dangerous consequences:
High levels of spending on social welfare programs are at the heart of the problem. Greece, for example, spent 42 percent of its federal budget on social benefits in 2009, according to Aristides Hatzis from the University of Athens. Spain is slated to spend 63 percent of its budget on social expenditures in fiscal year 2013, according to Pedro Schwartz from Universidad San Pablo CEU.
Here in the United States, we have all the ingredients necessary to create a similar debt crisis in the not-so-distant future. Over the past four decades, federal spending has increased 288 percent, nearly quadrupling in real terms. Thirty-two cents out of every dollar spent was borrowed in 2012. Debt held by the public is a staggering 73 percent of GDP, and our government has run trillion-dollar budget deficits four years in a row.
This doesn’t need to be America’s future, though. The Heritage Foundation has developed a plan called Saving the American Dream to cut the debt, reduce spending and balance the budget.
Do you think America should borrow and spend less?