Last year, I reported that the United States fell from sixth to eighth place -- behind Canada -- in the Heritage Foundation/Wall Street Journal's 2010 Index of Economic Freedom. Now, we've fallen further. In the just-released 2011 Index, the United States is in ninth place. That's behind Hong Kong, Singapore, Australia, New Zealand, Switzerland, Canada, Ireland and Denmark.
The biggest reason for the continued slide? Spending as a percentage of gross domestic product. (State and local spending is not counted.)
The debt picture is dismal, too. We are heading into Greece's territory.
Are we doomed? Not necessarily. Economist David R. Henderson points out that our neighbors to the north faced a similar crisis. In 1994, the debt that Canada owed to investors was 67 percent of GDP. Today, it's less than 30 percent.
What did Canada do? It cut spending from 17.5 percent of GDP to 11.3 percent.
This wasn't merely a cut in the growth of spending, a favorite trick of congressional committees. These were actual reductions in absolute spending.
"If a cabinet minister wanted a smaller cut in one program, he had to come up with a bigger cut in another program," writes Henderson in "Canada's Budget Triumph," published by the Mercatus Center. All but one of Canada's 22 federal departments experienced real cuts in spending. While Canada raised taxes slightly, spending was cut six to seven times more.
These supposedly painful cuts didn't cause terrible pain. In fact, there was much more gain than pain. Unemployment dropped, the economy boomed, and the Canadian dollar -- then worth about 71 cents U.S. -- today is about equal to the American dollar.
If Canada can do it, we can, too. But the signs aren't good. New Speaker John Boehner, leader of the Republicans who now control the House, says he wants to cut spending. When he was sworn in last week, he declared: "Our spending has caught up with us. ... No longer can we kick the can down the road."
But when NBC anchorman Brian Williams asked him to name a program "we could do without," he said, "I don't think I have one off the top of my head."
Give me a break! You mean to tell me the Republican leader in the House doesn't already know what he wants to cut? I don't know which is worse -- that he doesn't have a list or that he won't talk about it in public.
The Republicans say they'll start by cutting $100 billion, but let's put that in perspective. The budget is close to $4 trillion. So $100 billion is just 2.5 percent. That's shooting too low. Firms in the private sector make cuts like that all the time. It's considered good business -- pruning away deadwood.
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