What’s Bad for the U.S. is Bad for Canada
Stephen Harper
David Frum writes that what he deems poor U.S. economic policy could be good news for Canada:
At recession’s end, the U.S. will be forced to raise taxes heavily just to pay the interest on Obama’s debts; Canada will be positioned to maintain and even reduce taxes. Obama’s indebtedness will exert unending downward pressure on the U.S. dollar, while higher energy prices and superior economic management cause the Canadian loonie to rise.
A decade ago, incomes per capita, even in wealthy Ontario, trailed those of every U.S. state except Mississippi. Obama’s poor economic management offers the opportunity for a stunning reversal of fortunes.
For one thing, I think Frum’s wrong about the merits of the Obama economic agenda. But beyond that, if you grant Frum that premise it strikes me as extremely unlikely that poor economic performance in the United States could possibly be good news for Canada. Exports account for $461.8 billion of Canada’s $1.3 trillion economy. Of that $461.8 billion, 79 percent—or $365 billion—goes to the United States. Unless Canada wants to go through a truly wrenching transition to a completely different economic orientation (ask the Finns about this) then Canada’s economic prospects are going to be very closely linked to America’s. It’s true that poor economic performance in the U.S. could lead to an improvement in Canada’s relative standing (though if I were number three on the Human Development Index the way Canada is, I wouldn’t be too upset about it) but ultimately a rising America is likely to lift Canadian boats, and it’s very hard for Canada to sustain robust growth in the face of a sluggish United States.
43 Responses to “What’s Bad for the U.S. is Bad for Canada”
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June 29th, 2009 at 3:20 pm
Three words: Canada’s got oil.
That’s all you need to know about how the Canadian economy is going to turn out.
June 29th, 2009 at 3:23 pm
Yeah, Frum is just whipping up some Canadian Resentment in preparation Jeb Bush’s 2020 invasion.
June 29th, 2009 at 3:25 pm
Not to mention that the decade during which Canada surpassed the U.S. in per capita in many provinces was the decade during which Republicans were largely and control and Frum got exactly the economic policies he wanted.
June 29th, 2009 at 3:27 pm
And this is something Canadian policymakers would do well to stick to:
Canada will avoid reckless spending, avoid accumulating debt, hold the line on taxes and reduce the burden of government regulation, all to achieve, for the first time in Canadian history, higher average incomes on the Canadian side of the border than the American.
(David Frum)
Who doesn’t like higher incomes? Raise your hands.
June 29th, 2009 at 3:28 pm
A decade ago, incomes per capita, even in wealthy Ontario, trailed those of every U.S. state except Mississippi. Obama’s poor economic management offers the opportunity for a stunning reversal of fortunes.
It has already happened, because the US dollar declined over that period. What a doofus.
June 29th, 2009 at 3:31 pm
Between the “per capita income that only beats Mississippi” and the “millions of people die while waiting months for a government doctor to patch their aortas at the DMV” bits, you’d think Canada were some sort of third-world hellhole instead of a reasonably functional country. It suggests that there might be room for a few more Canadian public figures to join Hugh Segal in stepping up and saying, “No, fuck you.”
June 29th, 2009 at 3:31 pm
Other Frum’s prediction: Obama’s poor national security managements could endanger the World Trade Center.
June 29th, 2009 at 3:32 pm
We have nothing to fear from Canada. I have it on good authority that their health care system will kill off most of them and bankrupt the rest.
June 29th, 2009 at 3:33 pm
“Unless Canada wants to go through a truly wrenching transition to a completely different economic orientation (ask the Finns about this) then Canada’s economic prospects are going to be very closely linked to America’s.”
Exports to the US account for 30% of Canada’s economy according to your economy. That’s a lot, but not enough to create a “wrenching” transition if growth in the U.S. is stagnant. They at least have something the rest of the world wants to buy.
June 29th, 2009 at 3:39 pm
In fairness to Frum, he does not actually say that poor US economic fortunes would be good news for Canada – only the headline suggests this.
I’m hard-pressed to fault you, Matt, given your extraordinary output on this blog, but more careful reading was required here.
June 29th, 2009 at 3:40 pm
“And maybe that’s the issue Prime Minister Harper should be sharpening as he prepares for his ultimate contest against Michael Ignatieff. Ignatieff’s goals as prime minister are hazy and maybe non-existent. Perhaps Harper could counter with one national goal: simple, clear and confident:”
Wow. Wasn’t Samantha Power a disciple of Ignatieff?
June 29th, 2009 at 3:47 pm
A decade ago, incomes per capita, even in wealthy Ontario, trailed those of every U.S. state except Mississippi. Obama’s poor economic management offers the opportunity for a stunning reversal of fortunes.
What an effing idiot. Is he not aware that this “stunning reversal” has largely already taken place, and that it has transpired during Bush’s low growth high debt lost decade? Remind never to take anything this what-I-thought-was-a-reasonable conservative says seriously again.
June 29th, 2009 at 3:50 pm
If 30% of your economy going down the crapper isn’t wrenching, I don’t know what would qualify.
June 29th, 2009 at 3:58 pm
The fact that Ontario’s “income per capita” was roughly equal to Mississippi’s tells you everything you need to know about how bullshit these economic indicators are. Yeah, Ontario, whose universities and health care system are the envy of the world, is comparable to America’s shithole. Frum is an excuse for a Canadian.
June 29th, 2009 at 3:58 pm
I haven’t heard the plan to raise taxes to pay off the debt. It must be his insider info coming from his close relationship with the Obama WH.
June 29th, 2009 at 3:59 pm
“If 30% of your economy going down the crapper isn’t wrenching, I don’t know what would qualify.”
You’re assuming that lost demand from the U.S. couldn’t be made up elsewhere. Yes, if U.S. trade dropped by 50% they would see 15% drop in exports provided nobody else wants to buy what they are selling. But whatever happened to us that caused that kind of drop would be wrenching to them while being something like economic armageddon for us. That’s why I was assuming stagnant growth in the U.S.
June 29th, 2009 at 4:00 pm
Exports to the US account for 30% of Canada’s economy according to your economy. That’s a lot, but not enough to create a “wrenching” transition if growth in the U.S. is stagnant. They at least have something the rest of the world wants to buy.
Who? And don’t say the Chinese, they make stuff for Americans to buy.
June 29th, 2009 at 4:00 pm
Wasn’t Samantha Power a disciple of Ignatieff?
Samantha Power is way smarter than Ignatieff. The Liberals deserve to lose if he’s the best they can come up with.
Three words: Canada’s got oil. That’s all you need to know about how the Canadian economy is going to turn out.
More to the point, Canada’s got fresh water.
June 29th, 2009 at 4:02 pm
At recession’s end, the U.S. will be forced to raise taxes heavily just to pay the interest on Obama’s debts; Canada will be positioned to maintain and even reduce taxes.
Wow, Canada and the U.S. might even end up with the same level of taxation. Advantage Canada?
By the way, I believe petroleum products only make up around 20% of Canadian exports to the United States. So even if you assume Canada could find another market for those products (probably at a lower price), that still leaves a gaping hole in the Canadian economy.
June 29th, 2009 at 4:17 pm
According to the Cato Institute, Canada already has lower taxes than the US. I believe I just read that Canadian incomes are higher too, though that was probably a temporary blip during the lag before Canada followed the US into recession.
Anyway, I guess Frum’s point is that (from his perspective) Canada has an opportunity to be the “good” North American country that will lure corporations and talented workers. And he has a point—we (in Canada) can’t do much about American budget policy, but we can set up contrasts with our own.
The part Frum leaves out is that a higher loonie is actually WORSE for us because our commodities are priced in American dollars. So for example, having a dollar at par is like slashing our oil export revenues by $20 or $30 a barrel.
And the really delicious part Frum ducks is that he’s actually advocating a return to the LIBERAL government policy of balanced budgets and tax cuts, in contrast to the orgy of spending perpetrated in the past couple of years by the Conservative Harper government. Maybe Frum should be exhorting Ignatieff to pummel Harper with a call for austerity and not the other way around.
June 29th, 2009 at 4:19 pm
Yeah, Ontario, whose universities and health care system are the envy of the world, is comparable to America’s shithole. Frum is an excuse for a Canadian.
There is no Harvard in Ontario. Nor Stanford, nor Duke, nor MIT. You are asserting a bald lie.
June 29th, 2009 at 4:25 pm
It’s a testament to the staggering idiocy of David Frum that an obvious own-goal in this article has gone largely unnoticed amongst all the other inanity.
Obama’s alleged “economic mismanagement” consists not merely of scrapping the wreckage caused by policies Frum supported, but also making painful and expensive adjustments to our financial and health sectors to make them more closely resemble Canada’s. Canada is a relative economic success story now, in no small part because they long ago made the down payment on structural reforms that were far more ambitious and expensive than anything Obama has proposed.
June 29th, 2009 at 4:37 pm
# Myles SG Says:
There is no Harvard in Ontario. Nor Stanford, nor Duke, nor MIT. You are asserting a bald lie.
According to Times Higher Education World University Rankings (2008) : University of Toronto, #41 ; McMaster, #117; Queen’s #117; Waterloo, #129; University of Western Ontario, #159. Quebec’s McGill is #20. Mississippi doesn’t have a single university in the top 200. Even Tennessee is better off, with Vanderbilt at #101.
And the reason I say Ontario universities are the envy of the world is that if you graduate from a Canadian college or even MD program, you have absolutely no problems transferring to the American system and can find American jobs easily. If you’re coming out of the European or any other system, no such luck, you have to take some classes in an American system first before they’ll consider you for many graduate programs.
June 29th, 2009 at 5:08 pm
There is a very obvious way in which American stupidity is to Canada’s benefit. As far as I can tell, Canada is, of every country on earth, the one that will do the best (by far) out of global warming.
They have a huge land area, and a tiny population, so there’s ample scope for everyone to have larger houses and larger yards, if that;’s what they want. There’s ample scope to extend agriculture northward. There’s mineral wealth that gets cheaper to extract as the climate is less cold. There have to be various spinoffs from the Northwest passage.
(In many ways Russia is in the same position, but, let’s face it, we all believe Russia will fsck up whatever chance they get in this respect.)
June 29th, 2009 at 5:28 pm
In the bad old days, when Canada was so poor it resembled a frozen version of Mississippi (we are talking the 1990’s), Canada ranked number 1 on the Human Development Index for seven straight years. Canadians may have been destitute, but they were living large, larger than any other country on the planet.
Sadly, as Canada grew richer, they lost the top perch on the HDI and have settled for being either the number 2 or number 3 best country in the world for the last 10 years.
As for their much maligned university system, Canada has the second most top 500 universities in the world per one million inhabitants -only Scotland’s university system ranks higher in this very meaningful category.
If I might be so bold as to add one more point in defense of our sad, broken neighbors to the north, Canada has a smoothly functioning BANKING SYSTEM, which most advanced countries, including the United States, simply cannot lay claim to having.
June 29th, 2009 at 5:30 pm
No Canadian university was prepared to let braying fop Miley in, so that’s saying something for them.
June 29th, 2009 at 6:05 pm
Three words: Canada’s got oil. That’s all you need to know about how the Canadian economy is going to turn out.
No, Canada has modest amounts of oil and a vast amount of bitumen. Even more unfortunate, that bitumen is heavily comingled with soil. As a result, it takes a large amount of energy (which is a big reason why Canada’s CO2 emissions are off the charts) and an even larger amount of water to extract useable quantities of oil (6 barrels of water for every 1 barrel of oil produced).
If you knew anything about Alberta’s hydgrography (and given your long documented track record of stupidity and ignorance on all subject, I doubt you do), you would know that Alberta’s rate of expansion of the tar sands is entirely unsustainable. The *current* rate of development of the tar sands is a virtual environmental Armageddon: it involves clear cutting huge swaths of forest and then simply strip mining the soil, which is then chemically washed to extract oil*. This produces unbelievably large amounts of sludge that is fed into huge pools (visible from space, check out Google Earth near Fort McMurray) that are anticipated to sit in virtual perpetuity at ticking time bombs of chemical waste.
[*Even after this extraction, Alberta tar sands oil is still of abysmal quality. They have to pump refined oil from Southern Alberta back up to Fort McMurray simply to facilitate the flow of the poor grade bitumen back south for refining].
Even now, the current water usage is stretching capacity to the limit. There is simply no water available for future expansion of the tar sands – and there is an irony to all of this: climate change has affected Alberta very dramatically, so that water scarcity there is now a huge and growing problem. Climate change is accelerated by the huge quantities of CO2 produced by the tar sands. So, one might say, the tar sands are fueling their own demise.
Demise may be a bit strong, because it is likely the tar sands will be in production for a long time into the future, precisely because they are vast, yet cannot be exploited quickly – because of the water shortage. The notion that tar sands oil will replace the 9+ million barrels of oil a day coming out of Arabia is pure folly.
June 29th, 2009 at 6:08 pm
As a U of Toronto grad, I feel I have to defend my institution from Myles above. Toronto is an elite institution in terms of research done in a variety of fields. Just because Americans don’t tend to know this, doesn’t make it not true. Moreover, I am guessing it is one of the most challenging North American universities to attend. It is known for grade deflation and high-quality students, which breeds a very competitive environment (perhaps similar to a MIT or a Cal Tech). Believe me, getting good grades at Toronto takes a lot of work as well as intrinsic ability.
According to Times Higher Education World University Rankings (2008) : University of Toronto, #41 ; McMaster, #117; Queen’s #117; Waterloo, #129; University of Western Ontario, #159. Quebec’s McGill is #20. Mississippi doesn’t have a single university in the top 200. Even Tennessee is better off, with Vanderbilt at #101
I think that #41 is too low a spot for U of T. Somewhere from the teens to late 20’s seems more fitting and I think that U of T is definitely ahead of McGill.
June 29th, 2009 at 6:28 pm
No Canadian university was prepared to let braying fop Miley in, so that’s saying something for them.
I was admitted to every single one (that includes Toronto, Trinity College to boot). I simply did not care to take my education among plebs; grand Trin is elite, but Univ of Toronto is a commuter school.
June 29th, 2009 at 6:29 pm
For those who don’t know, Trinity College is the college where they maintain the Oxbridge tradition of the High Table.
June 29th, 2009 at 6:37 pm
I would have gone to St Andrews, in Fife, but I missed the deadline. Have you got any snark also for that celebrated institution, pseudonymous in nc?
I thought not.
June 29th, 2009 at 6:47 pm
I was admitted to every single one (that includes Toronto, Trinity College to boot). I simply did not care to take my education among plebs; grand Trin is elite, but Univ of Toronto is a commuter school.
It is true that it is not that hard to get into U of T (besides Trin), but it is much harder to stay in U of T and even harder to be in the elite (in terms of GPA) within U of T.
It is also true that U of T is basically a commuter school, which makes it have much less of a community than most schools. But, I don’t think that this affects the quality of education.
(Actually, I felt that commuters tended to be particularly serious students. Hence, night classes tended to be more focused, better attended, etc. than day classes. Of course, this is anecdotal, so it may be incorrect).
June 29th, 2009 at 7:05 pm
There is no Harvard in Ontario. Nor Stanford, nor Duke, nor MIT. You are asserting a bald lie.
Uh, Myles, there is no Harvard… nor Stanford nor Duke nor MIT in Mississippi. The point is Mississippi, not rhe onwe between your ears.
June 29th, 2009 at 7:35 pm
It is also true that U of T is basically a commuter school, which makes it have much less of a community than most schools. But, I don’t think that this affects the quality of education.
There is a school of thought holding that undergraduate education is as much an experience as tuition, if not more. I hold it that you are not among them. It’s not what you learn, it’s learning how to learn.
Alas, the difference between Toronto and Queen’s, I guess. One wonders why Canadian collegiate sports is a wash.
June 29th, 2009 at 7:36 pm
Uh, Myles, there is no Harvard… nor Stanford nor Duke nor MIT in Mississippi.
Well, there is Ole Miss, which has got to have among the most attractive cheerleaders in the country.
A moment of levity.
June 29th, 2009 at 7:38 pm
Southern girls are awesome.
Are you ready?
Hell yeah! Damn Right!
Hotty Toddy, Gosh almighty
Who the hell are we, Hey!
Flim Flam, Bim Bam
OLE MISS BY DAMN!
Another moment of levity. Hotty Toddy!
June 29th, 2009 at 9:36 pm
Why Oh Why nailed it. This is an incredibly clumsy attempt to make Pres Obama responsible for Pres Bush’s mistakes. Frum seems to think if he says “Obama’s debt” and “Poor economic management” enough everyone will believe it. Actual facts be damned.
June 29th, 2009 at 11:26 pm
There is no Harvard in Ontario. Nor Stanford, nor Duke, nor MIT. You are asserting a bald lie.
Our preferences lean more towards high-quality, reasonably affordable education for everyone, rather than excellent education for a few and nothing/heaps of debt for the rest.
As for the topic of the post – Matt is right, what’s bad for the US economy will never be good for Canada’s.
June 29th, 2009 at 11:27 pm
There is a very obvious way in which American stupidity is to Canada’s benefit. As far as I can tell, Canada is, of every country on earth, the one that will do the best (by far) out of global warming.
They have a huge land area, and a tiny population, so there’s ample scope for everyone to have larger houses and larger yards, if that;’s what they want. There’s ample scope to extend agriculture northward. There’s mineral wealth that gets cheaper to extract as the climate is less cold. There have to be various spinoffs from the Northwest passage.
I’ve been saying that for ages. We in Canada are the last people in the world who should be concerned about global warming. The northwest passage is a gold mine if we’ve got the guts to hold on to it.
June 30th, 2009 at 3:16 am
Ah, but the problem, Katherine, is that Canada is not equipped to deal with the influx if, say, The populations of Central America and Mexico start streaming northwards in earnest to avoid widespread famine. To keep with the theme, the collapse of the US economy under the weight of tens of millions of climate refugees cannot possibly be good for Canada. And they won’t be stopping at the 49th parallel either.
Guts won’t suffice to hold on in the face of that. Nukes, perhaps.
June 30th, 2009 at 3:36 am
Although there is a sense of national pride when the loonie gets on par with the USD, it is quite bad for the Canadian economy. Exports, especially to the US are simply too big a part of the economy (and, some of the things they export, like oil, are priced in $US, so a falling dollar just means they’re getting paid less for the same stuff.
But, on a personal level, its also really annoying when you go into a book store and the book says, “$12.95 US, and $18.50 Canada,” and you’re like, “wait? our dollars are equal so why do I have to pay 50% more?”
June 30th, 2009 at 12:56 pm
Exports, especially to the US are simply too big a part of the economy (and, some of the things they export, like oil, are priced in $US, so a falling dollar just means they’re getting paid less for the same stuff.
Yes, but here’s the catch; when you have a more potent Canadian dollar, it provides an incentive, and in fact a subsidy, for capital upgrades, because purchasing foreign capital goods (mainly German and Japanese) has become cheaper, leading to long-term productivity gains.
But even beside that, a stronger loonie is very good for Canadian overseas banking, as it gives the major banks serious firepower in buying up the banking systems of entire countries, like they have already done with Peru and most of the entire Caribbean. And overwhelming Canadian ownership of foreign banking systems can only mean economic advantage for Canada, as this means serious economic rents to be extracted.
I am looking forward to the day when Canada owns the entire Latin American financial system. Oh, it will be a truly glorious, joyous day. Suck on it, Latin Americans!
June 30th, 2009 at 12:56 pm
And it has just made Canadian companies less immune to takeovers, and more capable of takeovers by themselves of foreign firms. A strong Canadian dollar could mean the world mining industry being headquartered in Toronto.