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  • Time to Reverse Canada’s Sharp Competitive Edge against the U.S.

    Early this year, the 2010 Index of Economic Freedom, the Heritage Foundation’s data driven policy guide, reported that our economy is no longer in the top tier of economically free countries.  Worse, still, we slipped behind our northern neighbor Canada for the first time in the Index history. This disappointing news is vividly echoed in KPMG’s just released study, Competitive Alternatives 2010

    The report provides an updated comparison of global business locations, focusing on costs of conducting businesses. According to the report, “Canada now holds a 5 percent business cost advantage over the United States—an improvement over the virtual break-even position reported in the previous edition of the biennial study, last released in 2008.”

    Among other factors that contributed to Canada’s high level of competitiveness, the KPMG study pointed out that “a variety of tax cuts and reforms that have been implemented, or are in the process of being implemented, by both the federal and provincial governments, are also assisting the cost competitiveness of Canada for global business. Indeed, business taxes are now lower in Canada than in any of the other G7 countries.”

    By contrast, America’s current complex and investment-squashing tax code is a major factor in reducing our competitiveness. Other countries are not standing still. As the 2010 Index reveals, since July 2008 more than 30 countries have introduced reforms in direct taxes or have implemented tax cuts as previously planned, despite the challenging economic and political environment caused by the global economic slowdown.

    Governments’ policy choices shape business environments in the short term, but more importantly, over the long haul. Economies whose governments have responded to recession with higher stimulus spending are trading long-term competitiveness for short term gains that are proving ephemeral at best. Based on some of the early data available for the members of the Organization for Economic Development, the 2010 Index shows that higher government spending during the recent economic slowdown has not resulted in greater economic growth. When you add in the cost of ever increasing government deficits and ballooning public debts, the long term effect can be catastrophic.

    Canadians have moved their economy to the direction of lower deficit, lower taxes, and lower debt. Canada’s relatively prudent federal budget management, coupled with sound fiscal reforms, has enabled the economy to sharpen its long-term competitiveness with better fiscal position.  It’s time for the U.S. to follow suit.

    A good first step would be for Congress to consider actions such as those proposed by Senators Wyden and Gregg.  At a time when we are losing competitiveness, rhetorical promises or feeling-good slogans are not enough.  We need real policy actions to loosen the grip of government and restore our economic freedom. That’s a change that would carry real benefits for the American people.

    Posted in International [slideshow_deploy]

    6 Responses to Time to Reverse Canada’s Sharp Competitive Edge against the U.S.

    1. Drew Page, IL says:

      Perhaps it's time we ask ourselves a few questions about Canada's competitive edge.

      How much does Canada spend on national defense, as a percentage of its gross nation product? Or is this something they leave to their neighbors to the south?

      How much does Canada save by telling cancer patients to look south if they want treatment sooner than 6 to 12 months from time of diagnosis?

      How many Americans would be employed, pay taxes and receive health benefits if GM and other American businesses pulled their manufacturing plants back onto U.S. soil?

      How would working Americans like to have the U.S. income tax structure replaced with Canadfa's?

      I've got nothing against Canada or its people, but please don't try to compare the two countries.

    2. Ray,Ontario,Canada says:

      I'm tired of hearing aboutCanadians having to goto the U.S.formedical treatment.Thissortofmisinformation is based on afew isolatedinstances which happenedyears ago.I've had 3 major operations inthe last few yearsincludingcoloncancer,prostatecancerandakidney lesion removaland eachtimethe surgeon wanted to knowwhen I wanted thesedone.ICHOSETHETIMESTOHAVETHESEDONEWITHINTWOMONTHS!Ourtaxstructurepaysforourwonderfulhealthcarewhetherwecanfindajobornotandarenotdeniedhealthcareforpre-existingmedicalconditions!$1200peryearintaxesfromeachpersonpays for thissystem!Every weekaCanadiansoldierdiesinAfghanistanfor the lastfewyears.WEsupply ourownmilitaryhardwareandwarshipsthroughouttheworldandourmilitarybudgetis$2Billionayearoutofapopulationof33million!Andwedon'tbuy$250hammersliketheydoattheU.S.pentagon.InWW2canadasentonetenthofourpopulationofonemillionmentofight2yearsbeforetheU.S.enteredthewar.Canadahadthe3rdlargestnavyintheworldthen!Wesent200,000pilotstoeurope.Youareright-wecan'tcompareourcounties.

    3. Ray,Ontario,Canada says:

      I'm tired of hearing about Canadians having to go to the U.S. for serious medical treatment.

      This sort of misinformation is based on a few isolated instances that happened a few years ago.

      In past years I've had 3 major operations for colon cancer,prostate cancer and the removal of a lesion from my kidney. Each time the surgeon wanted to know when I wanted these procedures done. I chose when I wanted to have these procedures done within 2 months!!! The care was first rate and I've been cancer free for 10 years!

      Our cost for this wonderful system is about $1200 per year per person paid through our personal income taxes and no business has to pay for this system except if they want to as a hiring incentive.

      Every week a Canadian soldier dies in Afghanistan for the last few years. We supply our own military equipment (tanks, armoured cars,howitzers,warships) throughout the world.

      Our military budget is over $2 billion a year for a population of 33 million. And we don't waste money buying $250 hammers like the U.S military does.

      During World War 2, Canada sent one million men to fight out of a population of about 10 million 2 years before the U.S. entered. Canada trained and sent 200,000 pilots to the war.

      And Canada had the 3rd largest navy in the world then.

      Last year Canada had it's first budget deficit in years during last years economic crisis caused by the U.S. unregulated banking system.

      You are right. We can't compare our countries.

    4. Kathy Florida says:

      Well, for starters, Americans may notice that ther is a country to the North. We are visiting Florida and very few people have ever heard of the Province where we live. Rather than blaming Canada for being prosperous…why don't so many Americans look beyond their borders to see if there might be something to learn instead of writing non truths as in the first comment.

    5. Drew Page, IL says:

      To Ray in Ontario — I am sorry to learn of your past illnesses and am happy that you were able to get good and timely treatment in Canada and have been able to beat cancer. I'm glad the system worked for you. Unfortunately, there are more than a few of your countrymen and women for whom the system doesn't work so well. Be that as it may, my comments were not intended as insults to Canadians. If you have the system you want, more power to you.

      My comments were directed at the author of the article who decided to write about "Canada's sharp competitive edge against the U.S.". Like you, I am also tired of having my country unfavorably compared to other nations, especially by my own countrymen.

      With respect to the article comparing Canada's "competitive edge" to the U.S., I felt it important to point out some of the factors involved. Let's take a look at the differences in the defense budgets. Canada's defense budget for 2009-2010 amounts to about $21.3 billion, or 1.14% of GDP. The U.S. defence budget for 2009-2010 amounts to about $800 billion (exclusive of expenditures in Iraq, Afghanistan and Homeland Security) representing about 4% of GDP. Yes, there are idiots in the U.S. Pentagon that will spend $250 on a hammer. They also spend billions on a nuclear defense shield that shelters the Western hemisphere (including Canada). We also face a problem with our southern neighbors that Canada does not have with its southern neighbors, that being illegal immigration. If the U.S. did not have to spend the amount it does on a defense budget (not just for ourselves) and on illegal aliens, perhaps we too would have the luxury of reducing the taxes on our businesses so that they might be more competitive in the world marketplace.

      We have in the U.S. a growing schism between those who choose to be dependent on a bigger government for the necessities of life, because they can't or won't work, and those who believe in a greater degree of self reliance and lesser government intervention and control of their lives. Our problems in the U.S. are of our own making and are not the fault of other countries and it is up to us alone to solve them.

      As for Canada's alliance with the U.S. in the prosecution of the war in Iraq and Afghanistan, this is one American who appreciates the sacrifices of any and all Canadians who lend support to that effort. The death or maiming of any soldier fighting our common enemies is equally loathsome and abhorrent to me and most right thinking Americans. The mothers, fathers, sisters and brothers, wives and husbands who have lost loved ones are equally devastated, whether they be from north or south of our borders.

    6. Bob Nelson, TX says:

      I enjoyed the exchange between Drew and Ray. Born in the USA, my family moved to Canada when I was 11 and we stayed there until I was 17. I benefitted from learning both Canadian and American history and forms of Government, served in the USAF, and enjoyed living and raising my family in the USA. I still have relatives in Canada and we seem to share a general dissatisfaction with Government Bureaucracies and onerous taxes. These relatives do not share Ray's respect for their healthcare system, however, and warn me to be wary of what is happening with the new healthcare laws in "the States". Those against the new laws state it is tending toward Socialized Medicine and will make health care as hard to get as in Canada and Britain. Those for the new laws tend to pooh-pooh those arguments but don't state they are false. Using my relatives as the only reference I have, I too tend to dislike the new laws.

      Regarding the subject of the article, it is time to reverse OUR approach to competing in the world economy and quit shipping our valued manufacturing industries outside North America. At one time, iron ore was mined in Michigan, shipped to steel mills in the US and Canada to supply manufacturing in both countries. Now, the US is looked upon as a "Service Economy" country. We won't enhance our economic position by denigrating that of our neighbor to the North.

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