To hear President Obama's supporters tell it, Canadian Prime Minister Stephen Harper is a one-man economic wrecking crew. He led the charge at the G-8 summit to endorse the goal of advanced nations cutting their deficits in half by 2013. Obama only reluctantly went along, warning of the ill effects of what the intellectual architects of his stimulus package plaintively call "premature austerity."
This dreaded austerity has treated our friendly neighbors to the north quite well. If deficit spending is the engine of growth, Canada should be a nation of Hoovervilles. Although it adopted a temporary stimulus during the current recession, Canada drastically cut spending as a percentage of GDP from the mid-1990s to 2008.
In The Weekly Standard, Fred Barnes compares Canada's economic situation with that of America: "Its unemployment rate is lower, its budget deficit breathtakingly smaller (after nearly a decade of balanced budgets), its debt burden far lighter, its banks more stable." It's enough to put the most spectacularly boring phrase in journalism -- "worthwhile Canadian initiative" -- in a new light.
In contrast to Harper, Obama has become the world's great evangelist for debt. What he won't do for human rights, he'll do for red ink.
If President George W. Bush had as direct a clash with a European ally as Obama did with fiscally buttoned-up Germany during the G-8, he'd be condemned for his untoward unilateralism. The German finance minister was rude enough to point out that all of Obama's spending hasn't kept the US unemployment rate from rising above 9 percent and that "there is no empirical proof that deficits aid growth."
He could have gone further and noted that there's evidence that fiscal retrenchment stokes growth. As Harvard economists Alberto Alesina and Silvia Ardagna write in a 2009 study of fiscal policy in OECD countries, "We uncover several episodes in which spending cuts adopted to reduce deficits have been associated with economic expansions rather than recessions." In a recent review of the economic literature, American Enterprise Institute scholar Kevin Hassett concludes, "It is clear that fiscal consolidations can be stimulative." (Continues here)