By plunging 6500 points, the stock market has rendered it verdict on America’s attempt to get its fiscal house in order.  It’s a no go.

So where do we go from here?   Could the U.S.  move forward by taking  lesson from Canada?  Canada has been there – done that – in the nineties.

Canada made cuts in services but it also bulked up tax revenues by introducing a goods and services tax.  (Why in the world does the U.S. not have a consumption tax?)  We got less from our government and we paid more for it.  And we lived to tell the tale.

Look at the revenue side.  The U.S. collects just 30.5 per cent of GDP  in revenue to pay for all its big government.  The ratio in Canada is 37.4 per cent, lor roughly in line with the average 35.6per cent among advanced economies.

It’s clear what the United States must.  Cut services (especially the military) and hike revenues.  Exactly what Canada did.  The net result will be a system that looks a lot more like Canada’s.

Finally, raising rock-bottom U.S. fuel and alcohol taxes would bring in much-needed revenue.

As the New York Times recently pointed out:  “American policy makers might learn a thing or two from Canada’s patient, hysteria-free pruning ”  The newspaper  went on to applaud Canada’s “thoughtful”  review of government spending that saw the country pare its debt without sacrificing economic growth.

Has the U.S.  something to learn from Canada?

What do you think?


  1. 1
    Tony Kondaks Says:

    Yes, the US can learn from canada.

    Firstly, Neil, it was a 650 point drop, not a 6500 point drop.

    They can learn from Canada’s greatest ever Prime Minister, Paul Martin, and balance the budget. But they should institute a flat tax not a value added tax; that will increase tax revenue quite nicely.

  2. 2
    Neil McKenty Says:

    Tony, if the flat tax is such an attractive idea why haven’t more countries adopted it?

  3. 3

    Because the rich object to paying taxes, that’s why not.

  4. 4
    Tony Kondaks Says:

    Hong Kong has a flat tax.

    I don’t know why more countries don’t have it.

    Rich people would love a flat tax

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