As American policymakers look for good ideas to get the economy humming again, here are two words for them: look up. It’s time to take a closer look at Canada.
Consider that as the U.S. unemployment rate persists stubbornly over 8%, Canada’s is now 7.3%. And Canada’s fiscal situation is much better than its southern neighbor. Canada’s federal debt-to-GDP ratio is below 35% while in the United States it is over 100%. Canada enjoys a better credit rating than the U.S., too.
Canada also avoided the excesses of the housing boom that plagued the United States (and the consequences of which we’re still suffering). Americans are ten times as likely to be behind on their mortgage payments as their Canadian counterparts.
Canada’s enviable economic performance of late was one reason the National Chamber Foundation decided to host an event called “Canada: the Northern Light.” The thought was that there was much we could learn from our Canadian neighbors as they have made a number of policy reforms in recent years to make their economy more robust.
For example, Canada has consistently lowered its corporate tax rate in recent years, dropping it from 22% to 16.5%. Canada’s experience is in keeping with that of other OECD countries that in recent years have lowered their corporate tax rates. Indeed, the United States has been something of an outlier, maintaining a top corporate tax rate of over 39%. That is now the highest rate in the developed world.
Canada has also instituted a number of immigration reforms over the years designed to attract and retain the human capital it needs topower a state-of-the-art economy. As I noted in a recent NCF paper, the United States has not done as good a job in recent years as it should in structuring its immigration policy to ensure that it has the talent to satisfy the needs of its economy and to push the technological frontier.
Things are not perfect in Canada, to be sure, but American policymakers may want to pay a visit over the northern border soon to learnmore about the interesting policy experimentation that is happening in Canada.