Father Raymond J. de Souza explains why Canada’s financial success story can’t be easily replicated by Europe or the United States:
The slaying of the deficit by Paul Martin saved Canada from the sovereign debt turmoil now afflicting Europe and America. While full credit is due to Mr. Martin, and it is gratifying to see other countries look to our experience, the turnaround in fiscal policy that Canada achieved in the 1990s is simply impossible to achieve in Europe or the United States in the near term. When we had our debt crisis, sparked by downgrades of the federal government’s credit rating between 1993 and 1995, we could make tough choices with the prospect of almost immediate results. No country has that option today.
That is only partly due to politics. Many have observed that the Liberal majority government of the day had the power to take dramatic action. That understates the case. Not only did the Grits have a majority, they had the near-certainty of another majority in 1997, given the disarray among the four opposition parties. The Chrétien government of 1995 was the most electorally secure government in Canadian history. No other country — not even Canada — has that circumstance today.
[. . .]
Europe and America face weak economic growth, rising debt service costs and no tax reforms to provide robust new streams of revenue. Even if granted the vast powers of the Chrétien government — not for nothing was it called the “friendly dictatorship” — neither Europe nor America have a path to slaying their deficits, aside from ever more brutal spending cuts. And indeed, if serious spending cuts add to unemployment and, in the short term, restrain economic growth, then the deficit may not shrink as welfare costs rise and revenues shrink.
Canada did well to respond to our crisis in the 1990s. We were lucky to have had it when we did.