Tags: Canada | recession | US | Lesson

Canada Offers Lesson in Recovery

By Fran Tarkenton   |   Wednesday, 10 Oct 2012 08:26 PM

When something works, you should see more of it. When something doesn’t work, it should — and will — go away. To end our economic slump and make it easier for entrepreneurs to get small businesses off the ground, we should look at how other countries successfully solved problems similar to ours.

A great example, believe it or not, is Canada!

Canada in the early 1990s was in a similar place to where we are now. In 1994, its debt-to-GDP ratio was around 80 percent; ours today is higher, closer to 100 percent.

Canada’s unemployment rate peaked in 1993 at 11.4 percent, and was above 10 percent for four years in a row — worse even than our own, disastrous unemployment crisis.

To solve their problem, Canada’s leaders made tough choices. Mary Anastasia O’Grady tells the story in The Wall Street Journal. Jean Chretien and Paul Martin eased the burden of government on business and citizens alike, with spending cuts that make even Paul Ryan’s proposals look like chump change, and then massive tax cuts on both individuals and corporations.

The results were impressive, and should be a lesson for us. Unemployment steadily declined the entire period until the 2008 global recession. And when that recession hit, it was less severe than in the U.S.; unemployment never reached 9 percent, a level the U.S. was above for nearly 2 years!

Even factoring in the recession and its impact on the debt, Canada’s debt-to-GDP ratio is under 60 percent, well better than our situation.

And, unsurprisingly, a strong economy based on Chretien and Martin’s reforms has been great news for small business in Canada. Even using a stricter definition of small business, one with 100 or fewer employees, small business represents 98 percent of employer businesses in Canada.

Small businesses employ 48 percent of all Canadians, and make up 42 percent of the country’s GDP.

The U.S. Small Business Administration is able to cite similar statistics for small business in America — but only by expanding the definition of a “small business” to include up to 500 employees.

I don’t know about you, but that’s not how I would define small business.

And the outlook for Canadian entrepreneurs is far more positive than here in the United States. The Canadian Federation of Independent Business is bemoaning declining optimism, as the “Business Barometer” has declined for five straight months — but the barometer still shows small business optimism 10 points higher than average, even after that decline.

Meanwhile, the U.S.’s National Federation of Independent Business’s survey of small business optimism remains close to 10 percent below average, and it has been below average for more than five years.

The lessons for the United States should be obvious. A good step to curing our economic problems and helping small business is to use Canada’s experience as a model. Deep spending cuts might be unpopular with various interest groups — every program has its beneficiaries and defenders, after all — they work.

Tax reform is too complicated to put on a bumper sticker — but it works.

There is no magic button the President and Congress can press to get entrepreneurs creating businesses and jobs — but a long-term focus on improving the business environment works.

It’s easy to moan about our problems and just say they’re unprecedented and no one knows what to do. But the truth is that our problems are not unique, and there are good examples we can follow and bad examples we can avoid.

I’m sick of pundits and politicos harping on trivial issues — What’s Mitt Romney’s tax rate? Who made some ridiculous YouTube movie about Mohammad? — and bashing any attempt at discussing real solutions.

Bad news does not get better with age. It’s time to see what works, and just do it. There are no excuses.

Fran Tarkenton is the Founder and CEO of OneMoreCustomer.com, a web resource for Small Business Advocacy and Education. After his Hall of Fame football career, Fran had a successful career in television and then turned to business. He has founded and built more than 20 successful companies and now spends his time coaching aspiring entrepreneurs. Read more reports from Fran Tarkenton — Click Here Now.

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