Commentary

Canada’s got the stimulus plan right

Marketplace Staff Aug 5, 2009
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Commentary

Canada’s got the stimulus plan right

Marketplace Staff Aug 5, 2009
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TEXT OF STORY

Kai Ryssdal: It was a public policy grab bag for the President today out in Wakarusa, Ind. He talked health care for a while. He promised to get a reform bill passed by the end of the year. And he played up his economic stimulus package, too. He announced almost $2.5 billion in stimulus grants for electric car manufacturing. Stimulus has been a theme of his the past couple of days. Last week he said the improvement in economic growth shows his spending plan is working. Commentator David Frum says not all stimulus plans are created equal.


DAVID FRUM: Economic bad news is arriving at a slower pace these days. Some days there’s even good news, like the jump in home sales in June. These glimmers have led one newsmagazine to pronounce the recession over.

Not so fast.

But there is another economy in North America where optimism does seem justified: north of the border.

The Bank of Canada predicts the Canadian economy will resume expansion in the fall, the first G7 economy to emerge from recession. Canada’s central bank predicts 1.3 percent growth in the third quarter of 2009; 3 percent in the fourth.

To some extent, Canada is benefiting from unplanned good luck. Canada’s housing market did not inflate the way America’s did, so it had less far to fall. Natural resources constitutes a larger share of the Canadian economy than in the United States, so Canada profits more from China’s recovering demand for raw materials.

But policy matters too.

Like the United States, Canada adopted a stimulus plan. But while the U.S. plan amounted to 5 percent of GDP over three years, Canada’s plan gave a jolt of 2.5 percent, in only a little more than one year. So Canada got more bang for less buck. If both country’s projections prove accurate, Canadians in 2015 will shoulder only about one-third as much debt per person as Americans.

More and more, the $800 billion stimulus plan is looking like a great mistake — too much long-term debt for too little immediate benefit, all of it too closely tied to the Democratic party’s political imperatives in the 2010 election cycle.

The result: an unemployment rate in the United States fully one point higher than in Canada. To paraphrase a television commercial familiar to Canadians of a certain age, “Only in Canada? What a pity.”

RYSSDAL: David Frum is a resident fellow at the American Enterprise Institute.

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