Oh Canada: Canadian Markets and Fiscal Policies Are Positive Examples for the US

Feb. 14, 2013
Canadian markets such as housing and taxation and revenue policies give the US a worthy example to follow.

In rough terms, Canada’s economy is 9.8% the size of the US economy.  GDP per capita in Canada stand at $41,500; the US is higher at $49,500 (24thand 12thhighest in the world, respectively).  However, and importantly, our smaller, slightly less affluent (as measured by GDP per capital) neighbor to the north did not suffer the housing meltdown that we did in the US, nor is it on the road to bankruptcy. 

The average cost of a home in Canada is $352,800, as compared to a median of $172,400 in the US.  You may notice that the two systems do not equate given one is an average and the other is a median, but you get the idea nonetheless.  The strength in the Canadian market is partially the result of solid banking rules that prohibited the risking lending we had in the US.

It should also be noticed that the Canadian system does not depend on tax incentives from personal mortgage interest deductions.  There is no need for any government to prop up a segment of the economy for which there is a natural demand.  A slow phase out of the housing interest deduction in the US would not hurt the US housing industry.

Our neighbor to the north also has a great balance sheet, despite what is generally viewed as a more generous entitlement platform that encompasses the entire population.  Canada’s federal debt is just 38.9% of GDP (ours is 103.3%).  Their federal debt is roughly 3.7% of our federal debt, which is disproportionately small given their economy is 9.8% the size of ours. 

How did Canada do this?  Simple, they cut spending more than they raised taxes.  Raising taxes for more programs is not the answer.  Cutting spending and limiting the federal government will reap great benefits in the years to come.  Canada has shown us that this is possible and ultimately beneficial, as they will be paying down their national debt in a few years while we are piling it on. 

About the Author

Alan Beaulieu Blog | President

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and 60 years of correct calls. In his keynotes, Alan delivers clear, comprehensive action plans and tools for capitalizing on business cycle fluctuations and outperforming your competition--whether the economy is moving up, down, or in a recession.

Since 1990, he has been consulting with companies throughout the US, Europe, and Asia on how to forecast, plan, and increase their profits based on business cycle trend analysis. Alan is also the Senior Economic Advisor to NAW, Contributing Editor for INDUSTRYWEEK, and the Chief Economist for HARDI.

Alan is co-author, along with his brother Brian, of the book MAKE YOUR MOVE, and has written numerous articles on economic analysis. He makes up to 150 appearances each year, and his keynotes and seminars have helped thousands of business owners and executives capitalize on emerging trends. 

Prior to joining ITR Economics, Alan was a principal in a steel fabrication company and also in a software development company.

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