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Busch: Canada Sounds A US Warning Bell

Over the last two years, many government officials have critiqued the United States for their handling of the crisis. The problem with most of the comments is that they come from countries that are engaging in similar behaviors. Therefore, the validity of their analysis is similar to a family advice column by a golfer.

This is not the case with Canada. The Canadian banking system is held up by many as the shining example of how to avoid financial disaster. (FULL DISCLOSURE: I WORK FOR A CANADIAN BANK.) So when the Canadians offer advice or voice concerns, I think the US might want to take a moment and listen.

In an interview in Canada's Financial Post, Finance Minister Jim Flaherty warned, "The situation in the United States is serious in terms of the size of their deficit." Flaherty said that the deficit is a "persisting concern" for the Canadian economy, as the United States is by far Canada's largest trading partner."

Here's the key point: "We want the U.S. economy to return to health [because] it is good for our economy. We need to see that once American governments, including U.S. states, are through the crisis that there be indications as to how they will manage this huge deficit – because it has consequences both within and [outside of] the United States."

The Canadians see the looming problems of not only a 2009 $1.4 trillion budget deficit (40% financed by debt), but also the debt-to-GDP ratio surpassing 100% by 2012. They are concerned over what their American counterparts will do to address this as tax increases will reduce US consumers demand for Canadian products.

What must be adding to the Canadian and global concerns are any new promises the US government makes that would aggravate the already precarious fiscal position. As a Senate vote nears tomorrow morning, the conservatively estimated $1 trillion health care plan is front and center. The Associated Press details the major issue: "The costs of health care reform being pushed through Congress by Democrats will be felt long before the benefits."

Here's an interesting intellectual exercise: try to think of something that the US could do that is fiscally worse than this bill. Can't? You're not alone and we can expect more nations to join the Canadians in expressing their concerns. We just may not have anyone with similar gravitas we can trust.

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Andrew B. Busch is Global Currency and Public Policy Strategist at BMO Capital Markets, a recognized expert on the world financial markets and how these markets are impacted by political events, and a frequent CNBC contributor. You can comment on his piece and reach him hereand you can follow him on Twitter at http://twitter.com/abusch.