Canadian taxpayers are each responsible for C$150,000 of debt
Each Canadian taxpayer is on the hook for C$150,211 (about R845,300) that their government has racked up in debt and unfunded programme obligations. The combined total debt is C$1.3 trillion (about R7.32 trillion). The problem stems from the fact that the governments in each province have committed themselves to programmes that are not fully funded or that have been updated in the last four decades, says the Fraser Forum.
Consider the Old Age Security (OAS) programme Canada's retirement income system. Pensions are available to all citizens 65 years or older and are to be paid from federal tax revenues. Unfortunately, the programme is based on demographic assumptions from the 1960s that do not ring true today, says Fraser:
In 1956, only 7.7 per cent of Canadians were over 65 years old; in 2006, that proportion increased to 13.3 per cent, and is expected to rise to 26.5 per cent by 2040.
This change in Canada's demographic makeup has increased and will continue to increase the portion of federal revenues needed to fund OAS benefits.
The difference between the stream of promised benefits and the expected future stream of revenues is estimated to currently be C$356 billion (about R2.0 trillion).
Moreover, Canada's Medicare obligations suffer the same ills:
In 2006-2007, Medicare consumed 19.1 per cent of total federal, provincial and local government revenue.
Given that those 65 years old account for approximately 44 per cent of all health spending, and the fact that the percentage of the population over 65 will increase dramatically, the portion of revenue currently used to fund Medicare will not be sufficient.
As such, Medicare's unfunded liability stands at C$364 billion (about R2.05 trillion).
The good news is that Canadians have, for the most part, come to realise the seriousness of continually increasing government debt. Indeed, most governments are making an effort to balance their books and some are paying down debt. At the federal level, many consider running a deficit a sure way to commit political suicide, says the Forum.
Source: Niels Veldhuis and Milagros Palacios, Another $150,000 please, Fraser Forum, July/August 2008.
For more on International Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=26
FMF Policy Bulletin/ 09 September 2008
Publish date: 18 September 2008
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.