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Human Events...
The Money Hole
by John Stossel
06/15/2011
America is falling deeper into debt. We’re long past the point where
drastic action is needed. We’re near Greek levels of debt. What’s going
to happen?
Maybe riots -- like we’ve seen in Greece?
We need to make cuts now.
Some governors have shown the way. You know about Chris Christie, Scott
Walker, Rick Scott, John Kasich, etc. But you probably don’t know about
Luis Fortuno.
Fortuno is governor of Puerto Rico. Two years ago, he fired 17,000
government workers. No state governor did anything like that. He cut
spending much more than Walker did in Wisconsin. In return, thousands
of union members demonstrated against Fortuno for days. They clashed
with police. They called him a fascist
Fortuno said he had to make the cuts because Puerto Rico’s economy was
a mess.
“Not just a mess. We didn’t have enough money to meet our first
payroll.”
Fortuno’s predecessors had grown Puerto Rico’s government to the point
that the state employed one out of every three workers. By the time he
was elected, Puerto Rico was broke. So the new conservative majority,
the first in Puerto Rico in 40 years, shrank the government.
What was cut?
“Everything. I started with my own salary.”
The protesters said he should raise taxes instead of cutting spending.
“Our taxes were as high as they could be, actually much higher than
most of the country. So what we’ve done is the opposite.” Fortuno
reduced corporate taxes from 35 percent to 25 percent. He reduced
individual income taxes. He privatized entire government agencies.
“Bring in the private sector,” Fortuno said. “They will do a better
job. They will do it cheaper.”
Fortuno’s advice for leaders who want to shrink the state: “Do what you
need to do quickly, swiftly, like when you take off a Band-Aid. Just do
it. And move on to better things.”
Canada did that years ago.
When I think Canada, I think big government. I’m embarrassed that I
didn’t know that in the mid-’90s, Canada shrank its government. It had
to. Its debt level was as bad as ours is today, almost 70 percent of
the economy. Canada’s finance minister said: “We are in debt up to our
eyeballs. That can’t be sustained.”
Economist David Henderson, a Canadian who left Canada for the United
States, remembers when The Wall Street Journal called the Canadian
dollar “the peso of the north.” It was worth just 72 American cents.
“Moody’s put the Canadian federal debt on a credit watch,” Henderson
said.
The problem, he added, was that Canada had a government safety net that
was more like a hammock.
“When I was growing up in Canada, people who went on unemployment
insurance were said to go in the ‘pogie.’ You could work as little as
eight weeks, taking the rest of the year off.”
So in 1995 Canadian leaders cut unemployment benefits and other
programs. It happened quietly because it was a liberal government, and
liberals didn’t want to criticize their own. The result was that
Canada’s debt stopped increasing. As the government ran budget
surpluses, the debt went down.
“The economy boomed,” Henderson said. “Think about what government
does. Government wastes most of what it spends, and so just cutting
government and having that money in the hands of people means it’s
going to be used more valuably.”
Canada fired government workers, but unemployment didn’t increase. In
fact, it fell from 12 percent to 6 percent. Canadian unemployment is
still well below ours. And the Canadian dollar rose from just 72
American cents to $1.02 today.
Canada also raised some taxes. But the spending cuts were much bigger,
six to one: agriculture was cut 22 percent; fisheries, 27 percent;
natural resources, almost 50 percent.
“We should learn from Canada’s experience that you can cut government
substantially,” Henderson said. “It is so wasteful. There’s so much to
cut, without causing much real pain -- not causing pain, but helping
your economy grow, helping people become better off.”
Henderson added, “We need to move more quickly than the Canadians did.
Unfortunately, we’re moving more slowly than the Canadians did.”
If we’re moving at all.
While Canada thrives, we pour more money down the hole.
Read it at Human Events
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