Canada Beats America: And we don’t mean in hockey. Try taxes, spending and energy.

Energy, Frontier Centre, Taxation, Uncategorized, Worth A Look

Not too many years ago, Americans could get away with cracking jokes about spendthrift Canada, its weak dollar and the long wait for MRIs. These days, the joke is on Americans, as Canada's government has cleaned up its fiscal mess and focused on private economic growth.

The governing Conservative Party took another step forward last week with a pledge to balance the budget by 2015 without raising taxes. That's a year later than Prime Minister Stephen Harper pledged on the stump in 2011, but it sure beats America's four consecutive years of deficits of $1.3 trillion. Canada's federal debt as a share of GDP is forecast to fall to 28.5% in 2016–17 from 33.8%. Add in state debt and that number is closer to 66%, but the trend is in the right direction, while America's is heading toward 70% and rising.

Canada's progress isn't a political accident. Our northern neighbor has been liberalizing since the mid-1990s, under politicians of the right and left, and through better policies it dodged the government-supercharged housing boom and bust that sent the U.S. into recession.

Provincial governments led the intellectual way. Alberta's Ralph Klein in the 1990s cut taxes, slimmed government and created a stable investment climate. Saskatchewan's socialists, British Columbia and Ontario reformed too. The Harper government took power in 2006 and started to cut taxes, trim government employment and clinch free-trade deals. Canada's corporate tax rate is now 15%, compared with America's 35%.

Finance Minister Jim Flaherty explained that policies to "raise taxes, increase government spending, and shun new trading opportunities" would "kill jobs, impose crushing deficits, and cripple our economy." He will not be President Obama's next Treasury secretary.

Overall federal spending will continue to rise, but at a slower pace. Most notably, the budget proposes to raise the eligibility age to 67 from 65 for Old Age Security, starting in 2023, and it will also allow retirees to voluntarily defer benefits if they want to receive a higher payout later. A later retirement age, phased in over time, is precisely the kind of reform that the U.S. needs for Social Security and Medicare.

The budget also treats Canada's energy resources as national assets to be exploited—with as few delays as possible. Thus the budget proposes to eliminate overlapping federal and provincial environmental reviews for major projects. It proposes firm review timelines, including for projects that are already underway, such as the Northern Gateway pipeline from northern Alberta to the Pacific coast. Mr. Flaherty's catch phrase is "one project, one review." Contrast this with the multiple reviews that have stymied the Keystone XL pipeline from Canada and North Dakota's Bakken Shale to the Gulf Coast.

As America's recent performance proves, the wealth of a nation isn't guaranteed. Canada shows how mistakes can be reversed with sound policies.