lessons for the u.s. from canadian reforms at the economic club of phoenix monthly luncheon on oct....
TRANSCRIPT
Jason ClemensExecutive Vice President
The Fraser Institute
Presentation Outline1)State of the U.S. Union
2)Canada: Pre-Reform
3)1990s – Era of Reform
4)Economic Results: The World Didn’t End
5)Welfare Reform – Two Approaches
Everyone loses their way…
Purposefully larger deficits…rising debt
Higher taxes
Higher levels of government spending
Much more activist intervention by the federal government
Everyone loses their way…
State of the U.S. Union
Federal Revenues & Spending(1975 – 2040)
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
2017
2020
2023
2026
2029
2032
2035
2038
10.0
12.0
14.0
16.0
18.0
20.0
22.0
24.0
26.0
28.0
Revenues Spending
Perc
ent o
f GDP
Source: CBO, 2016.
17.6%
26.9%
Federal Deficits/Surpluses(1975 – 2040)
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
2017
2020
2023
2026
2029
2032
2035
2038
-12.0
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
Perc
ent o
f GDP
Source: CBO, 2016.
9.8%
7.9%
Federal Debt (Held by the Public)(1975 – 2040)
1975
1978
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
2014
2017
2020
2023
2026
2029
2032
2035
2038
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
Perc
ent o
f GDP
Source: CBO, 2016.
122.3%
73.6%
32.6%
Federal Interest Costs(Current to 2026)
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 20260
200
400
600
800
1,000
1,200
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Interest Costs (Dollars) Interest Costs (Share of GDP)
Billi
ons
of D
olla
rs
Perc
ent
of G
DP
Source: CBO, 2016.
Canada: Pre-Reform(Pre-1993ish)
Federal Revenues and Spending(1961 – 1993)
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
10.00%
12.00%
14.00%
16.00%
18.00%
20.00%
22.00%
24.00%
26.00%
Spending Revenues
Perc
ent o
f GD
P
15.0%
23.5%
Federal Deficit / Surplus(1966 – 1993)
1966
-67
1968
-69
1970
-71
1972
-73
1974
-75
1976
-77
1978
-79
1980
-81
1982
-83
1984
-85
1986
-87
1988
-89
1990
-91
1992
-93
-9-8-7-6-5-4-3-2-101
Perc
ent o
f GD
P
Deficits in Canada
Feder
al
BC AB SK MB ON QC NB NS PEI NL
-6
-5
-4
-3
-2
-1
0
Government Deficits (1992-93), as a Share of GDP
Perc
ent o
f GD
P
Federal Accumulated Debt(1966 – 1995)
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Perc
ent
of G
DP
18.4%
67.1%
State of Canada: Pre-Reform
BC AB SK MB ON QC NB NS PEI NL
020406080
100120140
Government Net Debt (1992-93), as a Share of GDP
Federal Provincial
Perc
ent
of G
DP
Federal Interest Costs(1961 – 1994)
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
Perc
ent o
f Rev
enue
s
10.2%
34.6%
Total Government Spending(1965 - 1992)
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
United States Canada
Perc
ent o
f GD
P
29.7%
53.1%
1990s: A Period of Reform
Capital markets start worrying
Interest rates increase (3.6% to 8.2% in one year)
WSJ Editorial: Canada as a Northern Peso
Domestic polls start shifting
Political alignment: rise of the Reform Party
NDP reforms in SK (1991) and Conservative reforms in AB (1992)
1990s: A Period of Reform
Federal Spending (Nominal)
1990
-91
1991
-92
1992
-93
1993
-94
1994
-95
1995
-96
1996
-97
1997
-98
1998
-99
1999
-00
2000
-01
2001
-02
2002
-03
2003
-04
2004
-0550000
70000
90000
110000
130000
150000
170000
190000
Federal Revenues and Spending(1990 – 2008)
1990
-91
1991
-92
1992
-93
1993
-94
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
-099.0
11.0
13.0
15.0
17.0
19.0
21.0
Revenues Spending
Perc
ent o
f GD
P
17.1%
12.9%
Federal Deficit / Surplus(1983-2008)
1983
-84
1984
-85
1985
-86
1986
-87
1987
-88
1988
-89
1989
-90
1990
-91
1991
-92
1992
-93
1993
-94
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
-09-10
-8
-6
-4
-2
0
2
4
Perc
ent o
f GD
P
Federal Accumulated Debt(1990 – 2009)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Perc
ent
of G
DP
67.1%
28.2%
Federal Interest Costs(1990 – 2010)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
Perc
ent o
f Rev
enue
s
35.2%
12.8%
Reforms Across the Country
Fede
ral
AB MB QC NS NL
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
Percentage Reduction in Nominal Program Spending
Perc
ent
Chan
ge
-21.6%
-8.9%-9.7%
-8.8%
Canadian Reforms:Time Period for ReductionsJurisdiction Percent Reduction Number of YearsFederal -9.7 3BC -1.5 2AB -21.6 3SK -8.9 3MB -3.1 2ON -3.8 3QC -8.8 3NB -0.9 2NS -3.0 2PEI -5.0 2NL -3.5 2
Total Government Spending(1990 - 2008)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
20.00
25.00
30.00
35.00
40.00
45.00
50.00
55.00
United States Canada
Perc
ent o
f GD
P
53.3%
39.7%
Big Time Tax ReliefPersonal Income taxesCorporate Income taxes (28% to 15%)Capital Gains Taxes (50% reduction)Sales Taxes (2-percentage points)Expansion of equivalents to 401(k) and Roth IRAs.
Debate 1997-2012 has been which taxes to cut,not whether to cut them!
And the World Didn’t End…
Real GDP Growth
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080
1
2
3
4
5
6
Canada G7 Average - Canada
Perc
ent
Chan
ge
Real GDP Per Capita Growth
1998 1999 2000 2001 2002 2003 2004 2005 2006 20070
0.51
1.52
2.53
3.54
4.55
Canada G7 Average - Canada
Perc
ent
Chan
ge
Job Creation
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20080
0.5
1
1.5
2
2.5
3
Canada G7 Average - Canada
Perc
ent
Chan
ge
Gross Fixed Capital Formation
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008-5
0
5
10
15
20
Canada G7 Average - Canada
Perc
ent
Chan
ge
Myths About Canada’s Success
Jan-90 Jul-91 Jan-93 Jul-94 Jan-96 Jul-97 Jan-99 Jul-00 Jan-02 Jul-03 Jan-05 Jul-060.50
0.60
0.70
0.80
0.90
1.00
1.10
US Dollar Per Canadian Dollar
Depreciating Currency…
0.0%5.0%
10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%
31.9%38.3%
28.9% 32.4%
Total Exports
Shar
e of
GD
PBooming US Markets…
All industr
ies
Servic
es (A
ggregat
e)
Natura
l Res
ource
s
Ener
gy & M
ining0.0%
10.0%20.0%30.0%40.0%50.0%
10-Year Growth Rates, By In-dustry
It’s All About Energy…
Social Policy Reform
• Welfare Reform• K-12 Education
• Pension Reform• Health Reform
Welfare Reform:Canada-U.S. ContrastsFederal reform in 1996 in both countries
Varying degrees of decentralizationCanadian federal government almost completely
removedU.S. federal government imposes reforms on the
states
Social Transfers in Canada
Welfare Reform:Canadian Provincial ContrastsSome common provincial reforms
Administrative reformsAligning benefits rates with low-income wages
Provincial innovation:ON – WorkfareAB – DiversionBC – Time Limits
Welfare Reform Results
1975
19771979
19811983
19851987
19891991
19931995
19971999
20012003
20052007
20090
500
1000
1500
2000
2500
3000
3500
0
2
4
6
8
10
12
Number of Welfare Beneficiaries (Including Dependents)Welfare Recipients (and Beneficiaries) as a Percent of the Population
Num
ber
of P
eopl
e in
Tho
usan
ds
Perc
ent o
f the
Pop
ulat
ion
Conclusions
1990 Reforms transformed Canada.
Less government spending, lower taxes, and more decentralized.
Generally positive results.
Specific lessons for welfare reform and provision of K-12 education.
Economic Freedom in the U.S. & Canada
1980 1990 2000 2005 2010 2013 20147
7.27.47.67.8
88.28.48.68.8
Inde
x of
Fre
edom
Source: Fraser Institute, 2016.
Provincial Revenues and Spending(1961 – 1993)
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
-
5.00
10.00
15.00
20.00
25.00
30.00
Revenues Spending
Perc
ent o
f GD
P
9.3%
24.0%
Provincial Deficit / Surplus(1961-1993)
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
-4.00%
-3.00%
-2.00%
-1.00%
0.00%
1.00%
2.00%
3.00%
Perc
ent o
f GD
P
Provincial Accumulated Debt(1970 – 1996)
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
Perc
ent
of G
DP
15.5%
49.7%
Provincial Interest Costs(1961 – 1995)
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
Perc
ent o
f Rev
enue
s
4.4%
14.9%
Provincial Revenues and Spending(1990 – 2008)
1990
-91
1991
-92
1992
-93
1993
-94
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
-0913.0
14.0
15.0
16.0
17.0
18.0
19.0
20.0
21.0
Revenues Spending
Perc
ent o
f GD
P
19.7%
15.3%16.6%
Provincial Deficit / Surplus(1983-2008)
1990
-91
1991
-92
1992
-93
1993
-94
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
-09-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
Perc
ent o
f GD
P
Provincial Net Debt(1990 – 2008)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Perc
ent
of G
DP
29.2%
20.8%
15.6%
Provincial Interest Costs(1961 – 1995)
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
Perc
ent o
f Rev
enue
s
13.9%
7.8%
K-12 Education:Canada-U.S. ContrastsNo federal role in K-12 education, including transfers
Provinces have complete autonomy
Higher levels of innovation and choice
Lower costs and better results
Canada-U.S. Contrasts
Canada U.S.3.23.33.43.53.63.73.83.9
44.14.2
3.5
4.1
Education Spending as a Share of GDP
Canada U.S.0
2000
4000
6000
8000
10000
12000
8,388
10,995
Education Spending in Dollars, USD 2009
PISA Results, 2012
Mathem
atics
Avera
ge Sc
ore
Readin
g Ave
rage S
core
Scien
ce Av
erage
Score
450470490510530 518 523 525
481498 497494 496 501
Canada United States OECD Average
Scor
e
BC AB SK MB ON QC NB NS PEI NL0.0
10.020.030.040.050.060.070.080.090.0
100.0
Anglophone - non-religiousFrancophone - non-religiousAnglophone and Francophone - religious
Perc
ent
of T
otal
Enr
olm
ent
Choice in the Public System
Choice from Independent Schools
BC AB SK MB ON QC NB NS PEI NL0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
Perc
ent o
f Tot
al E
nrol
men
t
Public vs. Independent School Enrolment
1980
-81
1982
-83
1984
-85
1986
-87
1988
-89
1990
-91
1992
-93
1994
-95
1996
-97
1998
-99
2000
-01
2002
-03
2004
-05
2006
-07
2008
-09
2010
-11 -
0.500
1.000
1.500
2.000
2.500
3.000
Public Enrolment Independent Enrolment
Nom
inal
Enr
olm
ent
as a
n In
dex 2.72
1.07
Wait Lists for Independent Schools in BCSince 1997-98 peak, public enrolment is down
11.3% while independent enrolment is up 22.4%
57.3% of independent schools reported wait lists
78.2% reported wait lists were normal
Thank you,Jason!
The Owl Kachina symbolizes intelligence, wisdom and excellent resourcing abilities.