In today's WSJ, Fred Barnes writes that Canada had a debt crisis in 1993 very similar to our current situation. And Canada's Liberal prime minister saved his country by doing exactly the opposite of what Obama is doing now.
Mr. Chretien and his finance minister, Paul Martin, took decisive action. "Canadians have told us that they want the deficit brought down by reducing government spending, not by raising taxes, and we agree," Mr. Martin said. The new administration slashed spending. Unemployment benefits were cut by nearly 40%. The ratio of spending cuts to tax increases was nearly 7-to-1. Federal employment was reduced by 14%. Canada's national railway and air-traffic-control system were privatized.
The economy rebounded. Between 1995 and 1998, a $36.6 billion deficit turned into a $3 billion surplus. Canada's debt-to-GDP ratio was cut in half in a decade. Canada now has faster economic growth than America (3.3% in 2010, compared to 2.9% in the U.S.), a lower jobless rate (7.2% in June, when the U.S. rate was 9.2%), a deficit-to-GDP ratio that's a quarter of ours, and a stronger dollar.
Today the United States is in a situation almost identical to Canada's in the 1990s. Government spending is surging, a huge deficit and national debt are setting peacetime records, interest payments are soaring, the economy is stagnant, and unemployment is stuck at around 9%. Yet one thing is missing: Liberals in America refuse to lead.
Led by President Obama, liberals have held back, leaving conservatives to lead and then stymieing conservative proposals because they rely on spending cuts. Liberals have sought to protect domestic programs, including entitlements, from even small cuts.