Canada’s Prospects Outshine Realities Challenging U.S.

(The Globe and Mail)

A smaller deficit leaves Canada in a better position to take advantage of the rebound in the global economy Canadians have long tended to define themselves by what they are not: Americans. As Finance Minister Jim Flaherty prepares to deal with the fiscal cost of the recession, that distinction is taking on new meaning.

Facing the biggest budget deficit since the Second World War and none of the spirit of political compromise necessary to fix it, prospects for the United States. Fiscal reality limits the Obama administration’s options, and it remains uncertain whether the economy is strong enough to reverse an unemployment rate of about 10 per cent without government spending.

As a general rule, what’s bad for the United States is worse for Canada. Exports account for about a third of Canada’s gross domestic product and more than 70 per cent of those shipments are destined for buyers in the country’s southern neighbour. In 1982, the U.S. economy contracted 1.9 per cent, compared with a 2.9-per-cent slump in Canada, according to the International Monetary Fund; in 1991, U.S. gross domestic product dropped 0.2 per cent, compared with a decline of 2.1 per cent in Canada.

But Canada appears destined to do better during this period of American economic woe, which has come to be typified by that stubbornly high unemployment rate and a budget deficit that is 10.6 per cent of gross domestic product… Read more here.