Thomas Jefferson famously opined that “the natural progress of things is for liberty to yield and government to gain ground,” but Canada has bucked that gloomy forecast in recent years. As my co‐authored op‐ed in the Washington Post yesterday showed, Canada has:
- Cut government spending
- Cut government debt
- Balanced its budget consistently
- Pre‐funded its version of Social Security to make it solvent
- Decentralized power within its federation of provinces
- Cut taxes, particularly corporate taxes
Meanwhile, the United States has headed in the opposite direction in each of these policy areas. Consider further that Canada has other economic policy advantages over the increasingly uncompetitive welfare state to its south:
- Canada has more liberal immigration policies for highly skilled workers than does the United States, which has added greatly to the entrepreneurial vibrancy of Canada’s economy.
- Canada has long had a stable, efficient, and competitive financial sector, which avoided the government‐assisted meltdown that occurred in the United States.
- Canada has a home ownership rate as high as the United States, yet it does not have a distortionary mortgage interest tax deduction.
- Canada recently implemented large Roth IRA style savings accounts, which are much more flexible than the U.S. version.
- The Canadian federal capital gains tax rate is 14.5 percent, which compares to the current 15 percent in the United States and 20 percent under Obama’s tax plan.
- Canada has no federal ministry or department of education. The K-12 schools are the sole responsibility of the provinces, yet Canadian kids generally do better than American kids on international tests.
- In recent years, Canada has probably been more supportive of NAFTA, and free trade in general, than its main trading partner, the United States.
Major pro‐market reforms are possible in advanced welfare states — Jefferson can be proven wrong, as Canada illustrates. U.S policymakers can prove Jefferson wrong as well. They can start by cutting spending, decentralizing power out of Washington, and making pro‐growth tax reforms in response to globalization, as Canada has, rather than imposing self‐defeating “Buy America” provisions and making childish rants about “corporations moving jobs offshore.”