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Government liabilities add up to $150,211 per taxpayer: Fraser report


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OTTAWA - Canadians are becoming increasingly "indebted" by commitments to social programs made by past governments, says the Fraser Institute.

 

The think-tank, which advocates lower tax rates for Canadian individuals and companies, says in a report that the three levels of government have taken on unfunded liabilities valued at $2.4 trillion over the next 100 years, or $150,211 per taxpayer and $75,942 per person.

 

The biggest part of the liabilities is not what Canadians traditionally associate with government indebtedness - federal and provincial debt - but what the Fraser Institute estimates will be the additional costs Canadians will have to pay for social programs like Old Age Security and Medicare going forward.

 

Assuming currently known demographics of aging, inflation and the current relative levels in government budgets, the two programs will require an additional $1.3 trillion to finance over the next 100 years, or $13 billion a year on average in today's dollars.

 

"We haven't solved the net debt problem, but at least most governments in Canada are balancing their books," said Fraser senior economist Niels Veldhuis.

 

In fact, traditional net government debt has slid from $800.4 billion in fiscal year 2000-01 to $791.2 billion in 2004-05, as most governments began balancing books and paying down debt.

 

"But increasingly now we have to turn our attention to other liabilities and program obligations that are growing rapidly and that's where the attention should be put," Veldhuis added.

 

"The problem is that governments have made promises they cannot afford and it's going to fall on younger generations to pay."

 

The report's conclusions were disputed by economist Marc Lee of the Canadian Centre for Policy Alternatives, which describes itself as a voice for "progressive" public policies.

 

"They are trying to imply that we have all these expenditures in the future that we haven't figured out a way to pay for, but the reality is we do that every year when we table a budget," Lee said.

 

He agrees that health care and old age security costs will rise as the baby boomers move into retirement, but noted demographic projections forecast fewer children under 18, so governments should face reduced education costs.

"The system is sustainable," Lee said.

 

Veldhuis believes the problem is serious, saying unless governments move to address the shortfall Canadians will be left with fewer benefits from social programs, or higher taxes to pay for them, or both.

 

He said the social programs, which are paid out of tax revenues, were created half-a-century ago based on the assumption that a large group of young workers can easily finance benefits for a small group of relatively poor retirees.

 

But since then, birth rates have plummeted, income growth stagnated and more people are living longer - putting a greater burden on publicly funded services now and into the future.

 

In 1956, only 7.7 per cent of the population was over 65 years old, the report states. By 2004, that number was 13.1 per cent of the population and will balloon to 26.5 per cent by 2040.

 

"The data are crystal clear," the report states. "Obligations stemming from the promises Canadian governments have made to this country's citizens are not sustainable and must be restructured."

 

Provincially, the study says Quebec has the largest per capita liabilities at $81,820, followed by Ontario ($80,580) and Alberta ($76,870). Prince Edward Island comes in lowest at $58,028 per person.

 

(Courtesy of The Canadian Press)

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