OTTAWA — Ottawa needs to face the harsh economic reality posed by Canada’s aging population if it wants to avoid handing over massive, chronic deficits to future generations, Parliament’s watchdog warns in a report.
With an ever smaller percentage of the population working and paying taxes, the federal debt will keep increasing unless the government cuts spending or raises taxes, Kevin Page said Thursday.
Acting to fix the problem within a few years will be relatively painless, amounting to finding about $20 billion in structural fiscal changes, Page said.
Waiting 10 years means the fix will cost close to $30 billion, and it will cost $40 billion by waiting two decades.
And the sobering news for future governments is that they also won’t be able to get away with balancing the budget for just a few years, then return to old spending ways as happened after the Liberals slew the deficit in the late 1990s.
That’s because the growth that fuelled government expansion in the past won’t be available this century because there won’t be enough workers around to pump up production.
For instance, growth in real gross domestic product has been on a sliding scale since the 1960s, averaging about two per cent a year when it used to be around five. That will keep dropping even with strong productivity gains of 1.2 per cent a year, Page said.
“We do not have a fiscal structure to deal with aging demographics. You have to make changes,” Page said. “It requires permanent actions over the long term, not like the one-time actions of the 1990s.”
A spokesman for Finance Minister Jim Flaherty called Page’s report — the first in Canada to look 75 years into the future — “an academic exercise.”
“Canadians expect their government to focus on today’s economy and securing the fragile economic recovery,” said Chisholm Pothier.
Page and Liberal critic Ralph Goodale, a former finance minister, said the government has looked at the same data. Goodale said Prime Minister Stephen Harper would rather Canadians didn’t know.
“Whether he can’t grasp the topic or is afraid of the topic, he just behaved like an ostrich, stuck his head in the sand and has not prepared Canadians for this massive social change that is on its way,” Goodale said.