Saturday, August 14, 2010

Canada, Land of Smaller Government, Has Regained All Jobs Lost in 2008-09 vs. U.S. Still Down By -8m

The chart above displays monthly employment levels in the U.S. and Canada back to 2002, and shows that while Canada has now basically recovered all of the jobs that were lost during the recession, the U.S. is still about 8 million jobs below the pre-recession peak employment level.  In fact, a recent WSJ article by Jason Clemens points out that "Canada is emerging more quickly from the recession than almost any industrialized country." 

How did Canada survive the global slowdown with fewer job losses than the U.S. (-2.3% reduction in employment vs. almost -6% in the U.S.), and how did Canada recover from the recession so much faster that the U.S.?  Well, it sure wasn't because Canada raised taxes, like the U.S. is now considering during a fragile recovery. In fact, Canada has actually been aggressively cutting both taxes and government spending, with impressive results in economic performance.  Here's more from the WSJ article "Canada, Land of Smaller Government":

"Canadian taxes have also come down at the federal and provincial level. They were reduced with the stated goal of improving incentives for work effort, savings, investment and entrepreneurship. Tellingly, the last three Canadian elections have all had key debates on tax relief—not whether there should be tax cuts but rather what type of tax cuts. Beginning in 2001 under a Liberal government, even the politically sensitive federal corporate income tax rate has been reduced. It is now 18%, down from 28%, and the plan is to reduce it to 15% in 2012. The U.S. federal rate is 35%."

And what about government spending? Accoding to Jason, "If present trends continue, within two or three years Canada will have a smaller government as a share of its economy than the U.S."

Jason concludes that "Americans can learn much by looking north," and maybe the lesson from Canada is that tax cuts along with cuts in government spending are the keys to both improved economic performance and greater fiscal responsibility. 

28 Comments:

At 8/14/2010 10:00 AM, Blogger Dr William J McKibbin said...

If Canada were to emerge prosperous, and the USA were to fall into depression, what would that mean for fiscal and monetary policy...? Oh, by the way, Canadians enjoy a robust social services and entitlements program as citizens. Another by the way, Canadians are not engaged in foreign wars right now, which is something the US might consider during this crisis. Something is very amiss with the USA right now, and I am not convinced the proximate cause of our problems is either entitlements or banking -- I have to wonder where the military-industrial complex fits into the calculus...

 
At 8/14/2010 10:15 AM, Blogger juandos said...

"I am not convinced the proximate cause of our problems is either entitlements"...

Why not?

Have you ever considered doing a little homework on the subject?

We can thank FDR and LBJ and their respective Congresses for extorting more money from the citizens to be wasted on totally useless projects...

 
At 8/14/2010 10:25 AM, Blogger Buddy R Pacifico said...

Canada is looks to be getting more fiscally responsible vs. the U.S. The Canadaian tax system is more responsive to making Canada competitive in the Global economy.

The U.S. is the only major world economy without the Value Added Tax (VAT). Canada introduced the Goods and Services Tax (VAT) on Jan 1st, 1991 with the main purpose to promote Exports. Why? The taxes paid by Canadian Exporters are taken out of goods and services when they leave Canada.

The U.S. needs the VAT immediately. I know that this is a contentious proposal BUT the corporate tax rate needs to be lowered. Why not trade a drastically lower (or zero) corporate tax rate for a VAT? The Canadian Goods and Services tax is 5% which is 3% less then the original.

This could be the greatest tax reduction for U.S. business in history and a huge boost to GDP growth!

 
At 8/14/2010 10:38 AM, Blogger fboness said...

Canada has yet to face their housing crisis full on. I doubt it will be confined to a few cities like Vancouver.

 
At 8/14/2010 11:10 AM, Blogger ABCHANABB said...

Umm, I am afraid this article is deeply flawed. If you used Canadian Government numbers for your answer there is your first mistake. New value added taxes are already rampant and increasing killing spending and jobs. BC and Ontario's real estate prices are disproportionate to earnings. Canada has a much longer way to go than the US. Our dollar is subject to yours, and yours changes to suit the needs the people; unlike ours.

 
At 8/14/2010 11:29 AM, Blogger sethstorm said...

Thank the employers that are refusing to hire or are doing so under temporary terms. They're the ones to blame.

Force their hand to hire more securely, get a recovery.

 
At 8/14/2010 11:31 AM, Blogger Dr William J McKibbin said...

Hi Juandos, you linked an article for me to read under "homework" in your last post and what I read was that the Heritage Foundation is reporting that entitlements are encroaching on defense spending. In your view, is that a bad thing? I'm just curious if that was your point, thanks...

 
At 8/14/2010 11:49 AM, Blogger cluemeister said...

Sethstorm said:

"Force their hand to hire more securely, get a recovery."

The day the government comes into my business to force me to hire people, is the day I shut it down.

 
At 8/14/2010 11:56 AM, Blogger sethstorm said...


We can thank FDR and LBJ and their respective Congresses for...

A recovery in the case of FDR. Revisionism by UCLA won't help your case.

As for the "entitlement state", I don't see employers trying the supposed best solution - secure work. When they are either forced to provide it or they decide to provide it, you might have a valid reason to stop.

 
At 8/14/2010 12:06 PM, Blogger sethstorm said...


The day the government comes into my business to force me to hire people, is the day I shut it down.

If you wish to be the insignificant minority of the already-failed businesses, go right ahead. Your sabotage will be documented and prosecuted.

If you have done nothing wrong, you have nothing to worry about. But if you have, you will have plenty of things to worry about.

 
At 8/14/2010 1:27 PM, Blogger cluemeister said...

If I want to shut down my private enterprise for whatever reason, it's none of your business. For instance, I can shut down my business if I don't like the color of the sky that day.

Key word: Private.

My money. My labor. My risk.

 
At 8/14/2010 2:55 PM, Blogger Mick and Zabee said...

This comment has been removed by the author.

 
At 8/14/2010 4:04 PM, Blogger sethstorm said...


cluemeister said...

Then someone else more in tune with regulations will take your place.

Never mind how expensive it can be made for you to scuttle a business.

 
At 8/14/2010 5:19 PM, Blogger Ron H. said...

cluemeister said...

"If I want to shut down my private enterprise for whatever reason, it's none of your business. For instance, I can shut down my business if I don't like the color of the sky that day.

Key word: Private.

My money. My labor. My risk.


Well said, cluemeister, my sentiments exactly, but words wasted on sethstorm.

He has one or two meaningless comments he keeps recycling.

 
At 8/14/2010 5:30 PM, Blogger cluemeister said...

Is it just me, or do Seth's threats against private business sound just like the socialist genius Hugo Chavez?

Hugo, is that you?

 
At 8/14/2010 5:30 PM, Blogger Ron H. said...

"Your sabotage will be documented and prosecuted."

"Never mind how expensive it can be made for you to scuttle a business.
"

Sethstorm scowls threateningly from his spot on the couch, sitting up only long enough to type these few words, then it's back to sleep.

He will arouse shortly to shuffle out of his mother's basement to see if the mailman has delivered his weekly unemployment check. They have been arriving like clockwork for a very long time, and will likely continue as long as he draws breath.

 
At 8/14/2010 5:56 PM, Blogger juandos said...

"In your view, is that a bad thing? I'm just curious if that was your point, thanks"...

Yes sir Dr. McKibbin, ANY entitlement encroachment is a bad thing and entitlements themselves are at the very least constitutionally questionable at best...

Let's not forget that the incompetent socialist FDR threatened a constitutional crisis in order to push his 'nanny state agenda'...

 
At 8/14/2010 6:10 PM, Blogger juandos said...

Per his usual style sethstorm has more his unsubstantiated Marxist babble: "A recovery in the case of FDR. Revisionism by UCLA won't help your case"...

According to what credible sources or is this more of your tenuous grip on reality being manifested again?

Care to try a dose of economic history sethstorm?

 
At 8/14/2010 7:54 PM, Blogger Paul said...

"Your sabotage will be documented and prosecuted."

Uh, no it won't. You're confusing reality with the thugocratic dreamworld you inhabit while the rest of us are working.

 
At 8/14/2010 8:24 PM, Blogger John said...

Ron H you are a hoot! Best post I've seen in weeks.

BTW...Seig Heil, seth.

 
At 8/14/2010 10:18 PM, Blogger Ron H. said...

sethstorm said...

"A recovery in the case of FDR.

A recovery? It lasted as long as FDR was in office, and only ended when he was dead. Some recovery.

 
At 8/15/2010 11:15 AM, Blogger John said...

Doc McKib,

I wish to take issue with your statement that "Canadians are not engaged in foreign wars".

I have a very good friend from Ontario with two sons in the Canadian armed forces. His youngest son is in Afganistan today. Canada has had troops there since 2002, arriving roughly three months after the mission began. Those interested can find a synopsis of Canada's involvement at Wikipedia.org/wiki/Canada%27s_role_in_the_Afganistan_War

Canada's armed forces, while under an independent command structure, are closely integrated with those of the United States. Both my friend's sons (whom I know - as well as their wives and children) have been stationed at Ft. Bragg, NC and have deployed from there with American units.

 
At 8/15/2010 11:18 AM, Blogger John said...

Doc,

One other thing I neglected to mention: My friend's older son deploys to Afganistan at the end of August. He will have TWO sons in Afganistan at the same time.

My friend and his wife reside in Ontario, Canada and often spend winters here in Florida.

 
At 8/15/2010 10:03 PM, Blogger juandos said...

I hope this Kiplinger pages will come through for you: Approximately 57% of Obama's $3.8 Trillion Dollar 2011 Budget Comes In Direct Payments To Individuals Or Is Spent On Their Personal Behalf

 
At 8/16/2010 7:43 AM, Blogger Lorenzo said...

Australia did as well as Canada. The peak of employment was 7.85m in Aug 2008, it fell to a low of 7.66m in Aug 2009 (a drop of only 2.4%) and was back up to 7.86m in May 2010. (Data available from here.)

 
At 8/16/2010 8:57 AM, Blogger KineticReaction said...

Canada didn't have a Fannie Mae to destroy it's mortgage industry. In the US, Fannie Mae owns or guarantees 50% of the $12 trillion mortgage market, a level of government intervention/central planning that would have impressed the Soviets.

 
At 8/16/2010 7:16 PM, Blogger Deborah said...

The picture in Canada is not as rosy as the WSJ journalist is pointing out. Value added taxes have increased, job growth has stalled, real estate prices are tanking and Canadians are still failing to save, instead opting for massive consumer debt. Our economy is intricately linked to that of the US. When we fall (because that's where we're heading), it won't be subprime mortgages, it will be because of credit card debt and the collapse of real estate markets and home equity.

 
At 8/17/2010 9:18 AM, Blogger joe said...

To fboness: "Canada has yet to face their housing crisis full on. "[...]

Canada's mortgage crisis was not as deep-rooted as those in the US & Europe. We were not lending out at 105-110% of home values (at large) like other countries were. Subsequently, the home value appreciation that we had was more moderate and sustainable in most markets. Some corrections have occurred.

Canadian banks didn't suffer as much as US/European banks during the "mortgage meltdown" because Canadian GAAP was quickly changed and backdated to Oct 2007 to allow companies to reclassify assets from held-for-trading and available-for-sale to held-to-maturity. This means that they didn't have to declare unrealized losses from rotten mortgage backed securities and saved trillions of equity. (CICA 3855-3863). The US and Europe did come onboard. However, reclassifications under their revision could only be made from 1 July 2008. This longer turnaround time contributed the extended slowdown for US banks and companies.

I agree with John, Canada has been in Afghanistan since 2002 however the funds that we dedicate to this war are low compared to the US. The US's military budget is 4x China's budget, which is the country with next largest military spending. If the US cut this expense slightly there would be some job loss but the funds could be spread around and help spur the overall economy instead of one sector.

Much of the "Canadian recovery" can be attributed to resurgences in areas like forestry. The forestry sector accounts for 13 per cent of Quebec’s exports, and it's predicted that forestry product exports will increase 18 per cent this year (from the depressed 2009 levels) and a further 5 per cent in 2011. This is due to natural disasters in Chilli (world's largest pulp and paper producers) earlier in the year which wiped-out their production capability.

There are literally hundreds of other factors that contributed to the differences between our economies over the past couple of years from taxes to savings to luck. With that said Canada still rises and falls with the USA because we haven't developed substantial secondary markets for our goods. However, we'll rarely feel the same highs and lows.

 

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