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10Aug/11Off

Solution to the USA Debt Crisis

Take off, eh.

 

Yes, yes. Politics on a gaming blog is bad for business. However, I can't resist!

In the mid 90's Canada faced a very similar debt crisis - debt to GDP pushing 70%. Outrageous spending. Madness. The Federal Party at the time was the Liberal Party of Canada (I can already see my Republican American friends shuddering) and at that time Prime Minister Jean Chretien, and his Finance Minister Paul Martin, set a course to balance the books.

- Between 1995 - 1998 they cut Government spending by 14%

- For every ~$6  in expenditure cuts, they increased tax revenues by $1

- Unemployment dropped from 11.6%  in 1995 to just over 6% by 2007

- Canada ran a budget surplus every year from 1998 to 2007

- Marginal tax rates very similar on individuals (27% USA, 31% Canada)

- Corporate tax rates better in Canada (Federal/Provincial) ~26%  vs USA (Federal) 35% + State Corp tax of 0 - 4%

Here is the fun chart. Please remember that Canada's economy is tied VERY closely to the USA one.

While both economies were hit hard by the recession, the fallout and the result of it all didn't hit Canada nearly as hard. We are also leveling off the up curve really well.

I know it's far more complicated than just posting fancy charts, etc. My point here is that a 'socialist' country that provides universal health care and other expensive social programs with similar/lower taxation than our close friends south of the border can clean up their mess, the USA should be able too to.

Of course, it depends on if the political system will allow it to. Good luck my friends, and please remember that your friends up north and other good chunks of the world have figured this out before. Call if you need help.

 

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Comments (6) Trackbacks (3)
  1. The problem isn’t that we don’t know how to get out of this; it’s pretty obvious, really. The problem is that politicians are more interested in grandstanding and pushing ideological positions than in actually reaching a solution. Politicians are also motivated by trying not to catch the ire of the voters who vote based on simple soundbites; easier to pass the buck and make the next group handle the problem rather than taking making the hard decisions now. So, we get the current mess.

  2. When the guys calling for fiscal responsibility are called “terrorists”, it’s pretty clear that there are some deeper problems than merely some guys who don’t understand simple math.

  3. I’ve been watching with great interest, and I can’t help but wonder – how long with the American people put up with the grand standing? Does the average Joe not see through the BS and posturing? It’s so obvious from this outside perspective (and the news agencies that I watch for coverage (which aren’t FOX or CNN) that it is all a big joke and the opportunity to take this disaster and turn it into real change is all at the whim of the moods of your various governments.

    I used to like the checks and balances of the USA system – Canada has a Parlimentary system which basically means, if the government has the votes then things get done – no need to pass the initiatives through two separate government bodies.

    Of course, Canada does have a multi party system which has it’s benefits and downfalls, but I can’t help but think the USA should have more parties as well. Democrat, Republican, Tea Party, and a more left leaning party. There is no way that the American people can be split into Dems/Repubs down the line – with multiple parties the hard right and hard left can still have a voice, where the more centrist right/left have more control over policy.

    Meh, it’s a big mess. Sad to say without some huge uprising of the American people rallying against the way their government works, I just don’t forsee change. And that’s sad, because Americans deserve better.

  4. Psychochild beat me to it, but this phenomenon exists at every level, and damn near in every country. Every time there is a major national disaster or accomplishment, the politicians first try to leverage the situation to their advantage first, and then worry about coming up with a solution.

    “The previous administration left us this mess.” I don’t give a shit, fix it!

  5. The reason the recession didn’t hit Canada as hard is because the Canadian housing bubble hasn’t popped yet. But it shouldn’t be too much longer…

  6. @Mike – Maybe in Van / Cal / Toronto – but the rest seems to be fairly reasonable. (And yes, i suppose the that three of the biggest housing markets in Canada could cause a few ripples…)


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