The lead article in the new Cato Policy Report is entitled “We Can Cut Government: Canada Did.” The article reviews Canada’s economic reforms since the 1980s, which have included free trade, privatization, spending cuts, sound money, large corporate tax cuts, personal tax reforms, balanced federal budgets, block grants, and decentralizing power by cutting the central government.
Those all sound like things we ought to pursue in America. The political systems of the two countries are different, but Canada’s pro-market reform lessons are universally applicable.
Canada’s reforms, for example, refute the Keynesian notion that cutting government spending harms economic growth. Canadian federal spending was cut from 23.3 percent of GDP in 1993 to 16.5 percent by 2000. Keynesians and their macro models would predict a crushing economic blow from such a spending reduction. They would argue that the “austerity” would slash “aggregate demand” and “take money out of the economy.”
Read more at http://www.cato.org/blog/canadas-economic-reforms
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