When financial analysts start pronouncing on the economy 75 years into the future, it’s time to put a grip on your wallet.
Kevin Page is Canada’s Parliamentary Budget Officer, and last week he released a 42-page report essentially warning that it will be impossible for the government to ever balance its budget, unless it takes big steps now to address the coming Demographic Apocalypse.
We’ve heard the scenario: our population is aging, reaping the benefits of better health care and nutrition, while having fewer children. The longer the status quo continues, the more retirees will be present in the population per working taxpayer. The health-care system will groan with the influx of elderly people who just won’t die. The national pension program will collapse under the weight of a population that constantly takes out more than is being put in. The retail sector will be devastated by a consumer population that just shuffles through the stores, wrecking the displays, before going to the food court to occupy a table with friends while nursing a single cup of coffee for three hours.
If the government acts now, says Page, we will only need to alter budget plans with $20 billion a year in either tax hikes or spending cuts — just to keep the status quo. The longer the government waits, the closer that annual tab will creep to $40 billion a year.
The Harper government has already done a lot of waiting. They commissioned a report on this issue back in 2007, promising to make it public two years ago. So far, no release. Critics, like former finance minister Ralph Goodale, say it won’t be released because it foresees the provinces making bigger demands on the feds for tax transfers (mostly for health care) — something current Finance Minister Jim Flaherty declared a dead issue in 2007.
Well, that’s just the problem with the status quo, it never stays the same as it was predicted to be.
Flaherty said looking 75 years into the future is a nice “academic exercise,” but we’re just coming our a recession here and nobody’s seriously talking about spending cuts of $20 billion a year, just to get to the spending cuts that will actually reduce the deficit.
You can believe what you want, but boosting taxes or cutting spending by $20 billion a year in real money now, to avoid a catastrophe based on actuarial tables, doesn’t seem like good planning.
The language used in news reports of Page’s document sounds an awful lot like a sales pitch for mutual funds. You’re talking to a 30-something wage slave with two kids in daycare, a mortgage, a car loan and a student loan — and saying you need to save half a million dollars over the next 20 years or you’re doomed.
No wonder many Canadians don’t save for retirement — the financial advice industry has made the goal so impossible for some that they don’t even try to achieve it.
It’s the same concept with Page and his report.
The math is correct: these are the cuts you’ll need today to avoid catastrophe in the future — if the status quo holds for 75 years.
But recessions, wars, pandemics, earthquakes, tsunamis, baby booms, plus societal and technological changes keep altering the outcome.
If you’re a young worker, pay your debts and live on something less than what you take home in a year, and you’ll be fine.
If you’re a government budget watchdog, do your job with integrity and leave politics to the politicians.
If you’re a finance minister, just tell Canadians the truth. If you restrict yourself to that, then you’ll have to do the right thing for the economy or people will know you’ve lied to them.
If you’re a mathematician, stay away from my money.
Greg Neiman is an Advocate editor.