Oh Canada!

On debt, Canada shows us the way out

Washington Post

By Charles Lane | February 2, 2010; 12:11 PM

Wondering how seriously to take the Obama administration’s claims that its new $3.8 trillion budget plan represents fiscal restraint? Look northward, to Canada. Compared to the belt-tightening that government imposed on itself in recent years, Obama’s effort appears trivial indeed.

A new report from McKinsey Global Institute, “Debt and Deleveraging: The Global Credit Bubble and its Economic Consequences” tells the story. As of 1998, Canada’s total debt -- the combined obligations of government, households, financial and non-financial corporations -- stood at 240 percent of gross domestic product, up 44 percentage points from the 1988 level. Government, both provincial and federal, was responsible for much of the increase. And so government, especially the federal government under the leadership of Paul Martin, who served first as finance minister and then prime minister, led the way in debt reduction.

Ottawa cut farm and business subsidies, scaled back social programs (including health care) and eliminated 55,000 public sector jobs. Interest groups howled. But these measures reduced government debt from 84 percent of GDP in 1998 to 58 percent of GDP in 2005. By contrast, Obama’s latest plan contemplates growth in the U.S. federal debt from 53 percent of GDP last year to 77 percent in 2020. Chrystia Freeland and Paul Krugman have recently sung the praises of Canadian bank regulation, which kept the debt of its financial institutions down to a dull roar. Yet timely fiscal discipline is also a major reason that Canada has been able to confront the global downturn in the best overall financial shape of any major industrial country.

“Canada’s deleveraging episode provides a model for countries with highly indebted governments today,” the McKinsey Global Institute report notes. “The key requirement was the political will to force through unpopular government spending cuts.” Still no sign of that will in Washington.

Canada Demands Backup In Afghanistan or They Leave.

Will the Nato coalition last in Afghanistan?

Canada's demand gets attention

NATO defence ministers set to discuss Kandahar mission ultimatum
Jan 30, 2008
ALLAN WOODS
OTTAWA BUREAU The Star

OTTAWA–Canada's Afghanistan ultimatum will be at the top of the agenda when NATO defence ministers meet in Lithuania in one week's time, a spokesperson for the military alliance said yesterday.

Prime Minister Stephen Harper said this week that Canada's 2,500 soldiers in Kandahar must be backed up by an additional 1,000 troops from another country or he will pull out of the Afghan mission in February 2009.

NATO spokesperson James Appathurai said he is optimistic NATO can find more soldiers, but indicated that Harper's threat has caused some alarm at NATO headquarters in Brussels.

"Clearly there is an issue in Kandahar and this will certainly be discussed in Vilnius," he said, referring to the Lithuanian capital where defence ministers will gather on Feb. 7 and 8.

The comments came as Washington endorsed Harper's criticism that NATO's efforts have not been adequate in Afghanistan, particularly in Kandahar province.

The Pentagon has long complained European militaries are not sending enough soldiers or sharing enough of the risk in Afghanistan, and a spokesperson said yesterday that NATO could not count on the U.S. to carry a heavier load.

The U.S. is deploying 3,200 marines to Afghanistan in March, 2,200 of whom will be sent to Kandahar and other dangerous southern provinces.

But that rotation will only last seven months, Pentagon spokesperson Geoff Morrell said in Washington. "That's as much and as deep as we're going at this point," he said. "We've done, as I made clear, what we can do."

Harper has vowed to lead a diplomatic effort to convince Canada's NATO partners to make greater contributions to the multinational force, and his efforts are focused on a major meeting of the alliance in Bucharest in April.

But Canada will also get help from Washington, Morrell said.

"You will hear from us, as we get closer to Vilnius and Bucharest, a desire to have our allies who are providing combat forces to the efforts in Afghanistan ... see what more they can do," he said. "So, hopefully, we'll make some progress there that will help the Canadians extend their commitment to the mission."

Last week's report by former Liberal minister John Manley on the future of the Afghan mission painted a gloomy picture of disjointed United Nations and NATO efforts and of poor co-ordination of aid and development dollars. But it also said the Canadian mission was bound to fail, and should be ended, if Canada did not get military help, plus transport helicopters and unmanned aerial surveillance craft.

"We obviously have taken good note of what Harper has said and we have read the Manley report very carefully. We share the view that Afghanistan needs long-term support, and that includes military support," Appathurai said.

He said 10 countries have already promised to boost the number of soldiers they have on the ground in Afghanistan, including Poland.

"I don't think there is any reason to call into question NATO's credibility. The mission continues to increase in size and continues to achieve success," he said.