8 MB - University of Toronto Magazine

For the U.S., Rosenberg believes strongly that only
Republican “one-party rule” would produce the
political consensus necessary for sweeping reforms
He doesn’t have to reach too far back into history to find
examples of other countries or regions that have reversed
their fortunes when confronted by the ugly prospect of economic
chaos. Not surprisingly, Canada in the early 1990s is at
the top of his list. Recalling the early years of Jean Chrétien’s
three-term Liberal majority, Rosenberg says the Grits and
finance minister Paul Martin ignored the party’s pricey
1993 election promises and eradicated a federal deficit that
was running, by that point, at well over $40 billion a year.
Chrétien and Martin repeated their trick a few years later
with drastic pension reforms that boosted payroll deductions
but put the country’s retirement savings pool on a far more
financially stable foundation.
His other example: Southeast Asia in the wake of the
calamitous currency devaluations of the late 1990s. Unable
to borrow their way out of the crisis, countries such as Thailand
and South Korea radically restructured their political
and economic systems, allowed major banks to fail, and
endured a wrenching contraction. “The phoenix rose from
the ashes,” he says. “In 2001, no one would have believed
that the next decade would belong to Asia.”
For the U.S., Rosenberg believes strongly that only Republican
“one party rule” – a Mitt Romney victory, combined
with majorities in both the House and the Senate – would
produce the political consensus necessary for sweeping
reforms to both the country’s costly entitlement programs
(such as Social Security) as well as a tax code that produces
an over-supply of housing but not nearly enough business
investment in manufacturing and research and development.
“I think this is actually a tremendous opportunity,” he
says, brightly. “In a period where you have a crisis, you need
effective leadership and it’s tough to do when you’re constantly
compromising.”
He declares himself encouraged by the contentious,
though successful, campaigns by some U.S. state governors
and mayors to wrestle down costly public sector wage and
benefits settlements. Rosenberg also points out that the
housing sector is showing signs of a pulse, while the country’s
unexpectedly productive oil and gas sectors suggest the
U.S. could actually become an energy exporter.
“Maybe austerity is a dirty word in Europe,” he muses.
“But maybe it just means, ‘live within your means.’ It doesn’t
mean stop spending.” It means stop excessive borrowing
beyond what you can reasonably afford. This is advice he
was selling on Wall Street in the heady days of the housing
bubble, and the principles still apply.
In the (not entirely negative) world according to David
Rosenberg, America won’t become a fiscal basket case. After
all, even bad times cannot go on forever.
Journalist and author John Lorinc (BSc 1987) writes about politics and business
for the Globe and Mail and Spacing magazine.
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