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The Canadian CenturyThe Canadian CenturyMoving Out of Americas ShadowMoving Out of Americas Shadow

Jason ClemensDirector of Research, Pacific ResearchFellow, Macdonald-Laurier Institute


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Presentation OutlinePresentation Outline

Lauriers Vision and PrinciplesLauriers Vision and Principlesfor Prosperityfor Prosperity

Canada Loses Its WayCanada Loses Its Way

The Redemptive DecadeThe Redemptive Decade

U.S. Loses the ScriptU.S. Loses the Script

The Canadian CenturyThe Canadian Century


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The Canadian Century:The Canadian Century:Lauriers Aspiration forLauriers Aspiration for

CanadaCanada

Canada has been modest in its history,Canada has been modest in its history,although its history, in my estimation,although its history, in my estimation,

is only commencing. It is commencing in thisis only commencing. It is commencing in this

century. The nineteenth century was the century ofcentury. The nineteenth century was the century ofthe United States. I think we can claim that Canadathe United States. I think we can claim that Canadawill fill the twentieth century."will fill the twentieth century."

Sir Wilfrid Laurier, 1904Sir Wilfrid Laurier, 1904


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Lauriers Principles forLauriers Principles forProsperityProsperity

Prosperity grows from libertysProsperity grows from libertyssoil.soil.

Limited government, light taxes,Limited government, light taxes,and fiscal discipline.and fiscal discipline.

SelfSelf--confident engagement withconfident engagement withthe Americans.the Americans.

Free trade.Free trade.


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Canadas 1965Canadas 1965--95 Experiment95 Experiment

Deviating from Lauriers VisionDeviating from Lauriers Vision

Deficits & Debt TradeDiversion

IncreasingDependency

Higher Taxes

MountingDebt

Increasing Unemployment

Stagflation

StagnatingInvestmentIncreasingInterestRates

RisingInflation


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Federal Revenues and SpendingFederal Revenues and Spending(1961(1961--1993)1993)

10 00%

12 00%

14 00%

16 00%

18 00%

20 00%

22 00%

24 00%

26 00%

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

er

en

G

Spending Revenues

1965:Rev 15 3%Exp 15 0%

1992:Rev 18 6%Exp 23 5%


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Federal Deficit / SurplusFederal Deficit / Surplus(1961(1961--1993)1993)

-7 00%

-6 00%

- 00%

-4 00%

-3 00%

-2 00%

-1 00%

0 00%

1 00%

2 00%

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

e

rce

t

fGD


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Federal Accumulated DebtFederal Accumulated Debt(1961(1961--1996)1996)

10 00%

20 00%

0 00%

40 00%

0 00%

60 00%

70 00%

80 00%

90 00%

196119

6219

6319

6419

6519

6619

6719

6819

6919

7019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

96

erce

t

GD

1976:

2%

1996:78

%


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Federal Interest CostsFederal Interest Costs(1961(1961--199 )199 )

0 00%

00%

10 00%

1 00%

20 00%

2 00%

0 00%

00%

0 00%

196119

6219

6319

6419

6519

6619

6719

6819

6919

7019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

94

er

en

to

otal

ee

n

es

19

:10

2%

1990:

6%199

:

0 %

1961:11

9%


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Provinces ExacerbateProvinces ExacerbateProblemsProblems


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Provincial Revenues and SpendingProvincial Revenues and Spending(1961(1961--199 )199 )

1

1

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

Percen

o

P

Revenues Spending

196

:Rev 1

.

Exp 1 .

199

:Rev . Exp

.


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Provincial Deficit / SurplusProvincial Deficit / Surplus(1961(1961--1993)1993)

-4 00%

-3 00%

-2 00%

-1 00%

0 00%

1 00%

2 00%

3 00%

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

Pe

rcentofGDP


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Aggregate Provincial DebtAggregate Provincial Debt(19(19 --1996)1996)

1 %

1 %

2 %

2 %

%

%

4 %

4 %

%

%

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

Percento

GDP

19

:1

%

19 :2

6%

1996:49 %


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Provincial Interest CostsProvincial Interest Costs(1961(1961--1995)1995)

0 00%

2 00%

4 00%

6 00%

8 00%

10 00%

12 00%

14 00%

16 00%

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

Percen

to

otal

eve

n

es

19

:6

!6%

1961:4

!4%

1995:14

!9%


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Rise of DependencyRise of Dependency

6

1

1

1

e

cen

of

e

o

p

a

ion

19

19

1

19

19

3

19

19

5

19

6

19

19

19

9

199

1991

199

1993

199

1995

1996

199

anada n a io

Source: Frenetteand Picot (2003); Statistics Canada.


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Total overnment Spending as aTotal overnment Spending as aPercent of DP (19Percent of DP (19 --199 )199 )

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

Percentof

D

P

nited States anada

"

#

.1$

#

1.6 $

" %.

& $

& ".

" $


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The Redemptive DecadeThe Redemptive DecadeReturning to Lauriers PrinciplesReturning to Lauriers Principles

BalancedBudgets Free Trade

ReducedDependency

Lower Taxes

ReducedDebt

Lower Unemployment

Economic Growth

IncreasedInvestmentLowInterestRates

LowInflation


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Federal Revenues and SpendingFederal Revenues and Spending(199(199 -- ))

1 %

1 %

14 %

1 %

1 %

%

%

4 %

%

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

er

en

G

Spending Revenues

199'

:Rev 1 ( ) 0 %Exp

'3

)5%

199(

:

Rev 1( )

3%Exp 1 1 ) 9%' 2 2 ( :

Rev 15)4%

Exp 15) '

%


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Federal Public Sector EmploymentFederal Public Sector Employment

ilitary Federal Employee


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Federal Deficit / SurplusFederal Deficit / Surplus(1961(1961 -- ))

-8 %

- %

-6 %

- %

-4 %

- %

- %

-1 %

%

1 %

%

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

e

rce

t

fGD


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Federal Accumulated DebtFederal Accumulated Debt(1961(1961-- ))

1 %

%

%

4 %

%

6 %

%

8 %

9 %

196119

6219

6319

6419

6519

6619

6719

6819

6919

7019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

07

erce

t

GD

193

6:4 5 6 7

%

1996:3

86 4

%

7 8 8 3 :

47 6 3

%


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Federal Interest CostsFederal Interest Costs(199(199 -- 1 )1 )

%

%

1 %

1 %

%

%

%

%

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

/09

2009

/10

2010

/11

e

r

ento

e

en

es

1996-99

:@

9A B

%

@ C C9-1

C:

11A D

%


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Redemptive Decade TranscendsRedemptive Decade Transcends

eography and Political Partyeography and Political Party

Alberta


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Provincial Revenues and SpendingProvincial Revenues and Spending(19(19 -- ))

1 %

1 %

%

%

4 %

%

%

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Percen

o

G

P

Spending Revenues

19 E F :

Rev G F H

1%Exp G F H 4%

199 G :Rev G G H F %Exp G 5 H E %

G F F E :Rev G F H 9%Exp G F H G %


25/42

Provincial Deficit / SurplusProvincial Deficit / Surplus(1993(1993 -- ))

-3 %

-3 %

- %

- %

-1 %

-1 %

- %

%%

1 %

1 %

%

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Pe

rcentofGDP


26/42

Aggregate Provincial DebtAggregate Provincial Debt(1993(1993-- ))

1 %

1 %

%

%

3 %

3 %

4 %

4 %

%

%

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Percento

GDP

199I

:4 I P 4%

Q R R S :4

R P Q%


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Provincial Interest CostsProvincial Interest Costs(199(199 -- ))

%

%

4 %

%

%

1 %

1 %

14 %

1 %

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Per

cento

even

es

1995:14

T9%

U V V W :W T 5%


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Total overnment Spending as aTotal overnment Spending as aPercent of DP (19Percent of DP (19 -- ))

4

4

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

PercentofD

P

nited States anada

X Y.

` a

` X . X a

X 9. b a

X 9. c a


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And the World Didnt EndAnd the World Didnt End


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Real DP rowthReal DP rowth

Per

e

t

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

a a a era e a a a


31/42

Real DP Per Capita rowthReal DP Per Capita rowth

Per

e

t

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

Ca a a era e Ca a a


32/42

Job CreationJob Creation

er

ent

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Cana a era e Cana a


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Gross Fixed Capital FormationGross Fixed Capital Formation

er

en

t

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

Canada G7 era e Canada nited tates


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U.S. Loses the ScriptU.S. Loses the Script

Enhancing the Canadian OpportunityEnhancing the Canadian Opportunity


35/42

U.S. Federal Surplus/DeficitU.S. Federal Surplus/Deficit(As a Percent of GDP)(As a Percent of GDP)

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

PercentofGDP

B Update ( arc )

Updated B Projections (Au ust )

B Historical and Baseline Projection ( arc )


36/42

U.S. Federal DebtU.S. Federal Debt(As a Percent of GDP)(As a Percent of GDP)

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

Percentof

GDP

U date ( arc )

U dated Pro ect ons (A st )

stor cal and asel ne Pro ect on ( arc )

d

e

.e

f

g

h

.i f


37/42

U.S. Federal Interest PaymentsU.S. Federal Interest Payments(As a Percent of Revenues)(As a Percent of Revenues)

.

.

.

.

.

.

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Perce

nt

B U date ( arc )

U dated B Project ons (Au ust )

B H stor cal and Basel ne Project on ( arc )

p q . r s

t . u s


38/42

U.S. Federal SpendingU.S. Federal Spending(As a Percent of GDP)(As a Percent of GDP)

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

PercentofGDP

B Update ( arc )

Updated B Projections (A g st )

B Historical and Baseline Projection ( arc )

v w .x

y

. y


39/42

Other Challenges to the U.S.Other Challenges to the U.S.

Cost of Entitlements (Social Security,Cost of Entitlements (Social Security,Medicare, and Medicaid)Medicare, and Medicaid)

Tax Challenges:Tax Challenges: urdenurden

DesignDesign

DistributionDistribution

Compliance CostsCompliance Costs

Centralized Nature of GovernmentCentralized Nature of Government


40/42

The Canadian CenturyThe Canadian Century


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Canadian Century: Next StepsCanadian Century: Next Steps

Do we aspire to the CanadianDo we aspire to the CanadianCentury?Century?

If soIf so

Return to Lauriers principles.Return to Lauriers principles.

Let the success of the RedemptiveLet the success of the RedemptiveDecade guide us:Decade guide us:

alanced udgets and Debt Reduction.alanced udgets and Debt Reduction.Tax Relief.Tax Relief.

Free Trade.Free Trade.

Engagement with the U.S. and others.Engagement with the U.S. and others.


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Questions & AnswersQuestions & Answers

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