As Washington's fiscal profligacy is debated, few have pointed to a tremendous budgetary turnaround achieved in the mid-1990s.
Over just a few years, between 1995 and 1998, Canada transformed a $32 billion federal deficit, equivalent to 4 percent of its gross domestic product, into a $2.5 billion surplus. This achievement was followed by a full decade of surplus budgets, with debt, tax and poverty rates all falling as growth, investment and employment rose.
Yet the most important lesson isn't what Canada did but how the Canadians did it. Listen to the debate between Republicans and Democrats, and it is clear that neither major U.S. party understands what took place in Canada. No one is proposing Canadian-style reform. This is a pity: Not only did reform work north of the border, but it was politically popular, too.
Here are six lessons from that success:
First, while all three major political parties claimed to want to repair Canada's deteriorating fiscal position, politically speaking it was almost impossible for any of them to tackle it alone.
Attempting to do so would have allowed the other parties to outflank them, claiming that this or that policy was too extreme.
Washington is still caught in this mentality. Democrats mount a lopsided defense of social programs and higher taxes on "the rich," while Republicans typically denounce any tax increases or cuts in military spending.
In Canada, progress on the deficit became possible only when the parties ceased to treat it as a matter of partisan contention and, instead, saw it as a vital national interest.
It helped that the left-leaning New Democratic Party of Saskatchewan was the first government in Canada to discover the limits of deficit financing. Its realization that someday the bill for massive government borrowing would come due was soon followed by the conservative government of Alberta and then by the center-left liberal government in Ottawa.
Governments of every stripe came to sing from the same song sheet, the most famous refrain of which came from Paul Martin, then the federal finance minister, who pointed out when announcing reforms that the deficit is not an invention of ideology but a fact of arithmetic.
Eventually, every political party came to see that it had skin in the game. No one could attack one party as too extreme because each owned some part of the process.
Lesson No. 2: Politicians quickly learned that they couldn't play favorites, carving out exemptions for friends and socking it to their opponents.