GOP presidential candidate Rep. Michele Bachmann (R-MN) is now boasting the value of conservative economics, with a tweet noting that Canada’s economy has performed much better than the United States in the global recession, and that it had no stimulus spending.
Just think –Â a Republican who wants the U.S. to be more like Canada!
One problem: Canada did undertake a major stimulus program.
Bachmann’s campaign tweeted earlier on Monday:
It is true that Canada’s unemployment in May 2011, the most recent month for which data is available, stood at 7.4%, compared to 9.1% in the United States. But the absolute fact of the matter is that Canada undertook a thorough stimulus program under Prime Minister Stephen Harper and his Conservative Party — one that was relatively smaller than the one here, but given the apples and oranges situation of having different economic needs, it was still a very considerable one. In addition, it should be explained that even this stimulus was undertaken under some very high-profile political circumstances.Indeed, this issue was a major cause of a political crisis in late 2008 and early 2009, when the incumbent Conservatives, shortly after an election in which they had only won a plurality of seats in Parliament, put forward a budget that the opposition parties collectively attacked as too stingy. The three opposition parties then threatened to put their differences aside, vote no-confidence in the government, and form their own coalition to replace the Conservatives. Harper survived by successfully dividing the opposition again, chiefly by waging a strong public campaign against the involvement of the left-wing secessionist Bloc Quebecois — and by working out a stimulus package with the leaders of the moderate-progressive Liberal Party.
As Bloomberg reported in January 2009, this stimulus was CAN$40 billion, equal in then-current exchange rates to US$32.6 billion, over two years (a similar period as Obama’s US$787 billion stimulus). If we make further adjustments, using IMF data for each country from the year 2008 for purchasing-power parity, per-capita GDP, and the much larger population of the United States, this would work out as very roughly equal to a stimulus of over US$360 billion if it were done here.
That stimulus is still less than half of the $787 billion stimulus under Obama — but it’s a whole lot more than no stimulus at all. And it should be noted, Canada did not have a need for as extensive a package of stimulus spending.
In fact, the recession did not hit Canada anywhere near as severely as the U.S. — after all, the economic collapse in many ways started here, and other countries were caught up in the financial hangover. In light of that, it must also be noted that one reason for Canada’s resilience was having years of strict banking regulations, which fostered a more stable financial system. As the Economist reported in 2010:
Jim Flaherty, the finance minister, attributes Canada’s strong performance to its “boring” financial system. Prodded by tight regulation, the banks were much more conservative in their lending than their American counterparts. Those that did dabble in subprime loans were able to withdraw quickly. This prudence kept a lid on house prices while those in America were soaring, but it paid off when the bust hit.
Many American liberals have argued that the U.S. stimulus should have been even bigger. But given Canada’s much less severe set of problems, they appear to have probably gotten things about right for their country’s needs with their own stimulus.
As a special bonus, here is a February 2009 report from the Toronto Globe and Mail, of Harper promoting his stimulus program with a visit to an infrastructure project in the swing province of New Brunswick:
“The reason this government has proposed such a massive economic plan and such a massive deficit-spending stimulus is our anticipation of significant economic challenges, including significant job losses in the year to come,” he said.
“That’s why we’re doing what we’re doing,” Mr. Harper added at an event in Miramichi, N.B., to highlight federal infrastructure funding for hockey arenas.
Hmm…in a wintry, hockey-loving country like Canada, a new hockey arena sounds an awful lot like a shovel-ready project.
Ed Note: The original version of this post stated Canada’s unemployment number at 7.6%. It is in fact 7.4%