More on the Myth of Big Government – Canada vs US
Erin’s recent post http://www.progressive-economics.ca/2007/09/12/government-size-canada-us/ prompted me to read Ferris and Winer’s interesting piece on the size of government in Canada and the US. The underlying data for the article have been usefully posted by the authors at http://http-server.carleton.ca/~winers/ (You’ll have to find the spread sheet posted at that site under author’s papers, and then look at the sheet for functional structure.)
As Erin corectly notes, the big message here is that the huge cuts to government spending in Canada in the 1990s – combined with modest increases in the US under Clinton – markedly cut the government spending gap between Canada and the US to the point where it is now close to non existent. If one accepts the authors’s adjustments to the commonly cited government spending as a share of GDP data, which I have no reason to quibble with, the gap comes close to disappearing. I agree with Erin that this is a fact that Canadian progressives have to take seriously, and that it is obscured by our tendency to invoke mythically large Canadian distinctiveness vis a vis the US.
Two caveats, however.
First, non defence related government spending is, according to the authors estimates, still more than 5% of GDP higher in Canada than in the US (37.5% vs 32.7% in 2004.) That’s a pretty significant difference, though it is very, very sharply down from the huge 16% of GDP (50% vs 34%) peak gap in 1994.
Second, I’d be inclined to second guess the ‘fact’ that transfers to persons are now higher in the US than in Canada- 11.9% vs 10.1% in 2004. (Canadian transfers to persons have fallen from a peak of 13.5% in 1993.) That’s a bit hard to square with the fact that Canada still has a much more sigificant set of social assistance programs than the US, and that OAS/GIS and the C/QPP as well as EI are at least broadly comparable to US programs. US military pensions and allowances may play a role here. Also, it is important to take into account that recent expansions to transfer programs in Canada – notably child benefits – take the form of refundable tax credits which are functionally identical to spending but are treated in the public and I think national accounts as a debit from tax revenue rather than as an addition to government expenditure.