If America's debt crisis is spreading like a lethal cancer, then the nation only has to look as far as Canada for a possible cure, says David Rosenberg, a chief economist with wealth management firm Gluskin Sheff + Associates
Rosenberg argues in a new article that Canada in the early 1990s faced a debt crisis similar to America's current economic woes.
He says, the important thing is Canada is now back in the black after spending "years of painful austerity as taxes were raised, spending was cut," and apparently many government operations were privatized. Other high-dollar "untouchables like means testing and claw backs for social security were not just touched, but squeezed," Rosenberg writes.
Canada now is doing well, Rosenberg argues. But, he says, America's northern neighbor hit its own debt wall nearly two decades ago as it faced deficits and debts that, much like America's current fiscal crisis, seemed "difficult to reverse."
Canada even underwent its own version of a credit rating scare. In fact, it was more than a scare. Rosenberg says, "Canada endured not just the ignominy of credit downgrades but also recurring financial market gyrations that frequently disrupted business activity."
The hero of Canada's tale of fiscal constraint and redemption is former finance minister Paul Martin, according to Rosenberg.
Rosenberg says Martin "was so successful at turning the bloated deficit around, not to mention reversing Canada's long-standing reliance on big government, that he has since been hired as a consultant to the Cameron-led Coalition in the U.K."
Rosenberg finishes his advocacy of Martin's turn-around-plan with an opinion that does not look favorably on America's current crop of top economic operators. "So if you’re wondering why it is that global financial markets have responded favorably to the financial plan unveiled by the U.K. government, now you know," he said. "Notice that Hank Paulson and Larry Summers weren’t offered any postings."
Write to Kerri Panchuk