Already in infinitely better fiscal condition than the basketcase U.S., the Canadian government is going positively Tea Party in their new budget proposal:
Under the blueprint submitted to the House of Commons by Finance Minister Jim Flaherty Thursday, government programs and the civil service that operates them will bear the brunt of the upcoming federal efforts to eliminate the deficit.
Over the next three to five years, little or no new money will flow to the operations of the federal government. The defence department, a Conservative spending priority since 2006, will see its budget grow more slowly than anticipated. Most other departments will see little or no growth for the foreseeable future and some will also endure outright cuts.
Flaherty says his plan will ensure Canada is virtually deficit-free within five years.
For comparison purposes:
At 3.5 per cent of gross domestic product, Canada's current budget shortfall is essentially what European countries are aiming to achieve to honour the terms of membership in the European Union, which demands a deficit-to-GDP ratio of 3 per cent. The U.S. deficit is almost 11 per cent of its economy.
In effect, Canada's relatively paltry budget shortfall has become one of the country's greatest competitive advantages. The U.S. government's interest payments are on track to increase by 170 per cent over the next five years, while Canada's will remain essentially flat.
Canada's deficit in the depth of the recession is 3.5% and they have realistic plans to take that to zero within a few years. We are running 11% and have no plans to ever get that less than high single digits, even with optimistic GDP growth assumptions.