“Soft despotism is a term coined by Alexis de Tocqueville describing the state into which a country overrun by "a network of small complicated rules" might degrade. Soft despotism is different from despotism (also called 'hard despotism') in the sense that it is not obvious to the people."

Tuesday, February 02, 2010

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.


  1. Obama will have no impact upon the 2020 expenditures, none at all.

    Unless, of course, one believes that the 2010 and 2011 Federal expenditures are all on Mr Bush's authority and responsibility.

    The comparison of Canada known 2005 debt, and the US's PROJECTED debt, for 2020 is apples to oranges.

    The 2020 numbers are as bogus as the climate change science. It all depends upon the "projected" numbers plugged into the "model".

    Neither the numbers, nor the "model' represent any reality at all.

  2. Wall Street Journal -

    WASHINGTON—Adm. Mike Mullen, the nation's top uniformed officer, made a strong appeal for allowing gays to serve openly in the military, a shift that highlighted the Pentagon's growing support for lifting the "don't ask, ...

  3. BBC News -

    The US has reacted warily after Iran appeared to accept a deal to swap enriched uranium for nuclear fuel. President Mahmoud Ahmadinejad said Iran would have "no problem" if most of its stock was held for several months before being returned as fuel ...

  4. As for the US cutting programs that are not really going to impact US, here on Earth. The outrage is palpable, or so it is reported.

    AP HUNTSVILLE, Ala. --

    President Barack Obama's decision to scrap NASA's back-to-the-moon program in favor of private spacecraft created an outrage in places like Huntsville, where jobs depend on a return lunar trip.

    Obama pursues a small dose of privatization, and the outrage in the "Red" State of Alabama, why it just flows.


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