WhatFinger


Canada awash in debt

Unfettered Spending Indicative of Moral Deficiency



Sadly most Canadians display little financial discipline, whether in their personal affairs and or in the finances of their state. Although politicians have ultimate pull on the nation’s purse strings, blame for our collective debt is equally shared by an enabling and entitlement-hungry citizenry, which demands profligate spending from its elected officials. Ultimately bad choices are being made that will have serious repercussions for our children and grandchildren.

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The nation of Canada is awash in an almost unimaginable sea of red ink. Currently our combined public debt - federal and provincial - sits at about $1.1-trillion (1) or nearly $33,000 for every man, women and child. But the bad news doesn’t end there. To get an honest accounting of our obligations we must also consider the unfunded liabilities that are crippling various entitlement and public service pension plans. These dirty little secrets are very difficult to account for since government doesn’t like to talk about them and the media is too busy reporting on sports and fashion. Accordingly we’ll do our best to lift the veil of lies and ignorance in an attempt to understand just how bad our situation really is. Three of the largest – and most troubling – unfunded liabilities reside with the Canada Pension Plan (CPP), Old Age Security (OAS) and Medicare which are holding $516-trillion, $360-billion and $370-billion respectively in unfunded debt obligations. Over the period of 2000 – 2004 these debts have increased by over 20% and the situation will get even worse as the baby boomers reach retirement age and start to draw on these programs. Estimates of the total unfunded liabilities held by various Canadian entitlement programs are currently estimated at $1.3-trillion dollars. Next we must consider the unfunded liabilities that the countless public sector pension plans are carrying, including those of governments on all three levels including Crown and Departmental Corporations and so-called Shared-Governance Organizations. These are especially difficult to track given their sheer number (there are 80 of these quasi-government agencies alone and the Federal government on its own employs around 500,000 civil servants). Current estimates peg these unfunded pension obligations at $200-billion. But the bad news keeps on coming since we haven’t yet discussed the mountain of private household debt that most Canadians are carrying. According to a 2010 Globe and Mail article, based on a study done by the Certified General Accountants Association of Canada, household debt in Canada has reached record levels at $1.41-trillion. When spread over the entire population that amounts to $42,000 per person; an amount that is 2.5 times greater than in 1989. There is also no indication that spending beyond our means will abate any time soon, however, since the study indicated that 60% of respondents who experienced debt increases as a result of the recession were willing to take on even more debt. As a result Canada now ranks first among 20 OECD nations for debt-to-financial assets with a debt-to-income ratio hitting 144% at the end of 2009. If Canadians are incapable of restraining their irresponsible personal spending habits there is little wonder why they allow their elected officials to carry that philosophy over to public spending. When we combine the public debt, unfunded liabilities and personal household debt the total is a staggering $4.01-trillion. That amounts to $119,000 per capita or $476,000 for a family of four. Given that the average annual income for a four-person household in Canada is just $70,000 one cannot imagine how this debt can ever be repaid. And what about living expenses, saving for the future or putting a little aside for our kids’ university fund? Not likely since our entitlement spending frenzy and poor overworked, underpaid civil servants will require payment first. It seems we are getting drunk on spending and unfortunately our children and grandchildren will feel the hangover. For anyone who has held debt, whether to a bank, finance or utility company, it’s pretty clear that obligations don’t magically vanish. Since the government has no money other than what it takes from taxpayers all these public debts will fall squarely on the shoulders of ordinary Canadians, who themselves are struggling with unprecedented levels of personal debt. High debt levels also mean a greater proportion of revenues are spent on interest payments rather than on value-adding activities such as social programs or roads. In 2009 the Federal government spent an astonishing $31-billion dollars on interest payments alone. Furthermore this rate will rise dramatically if the many credible predictions of rising interest rates hold true. In spite of the dire financial situation facing our country we seem to be suffering from collective denial – after all, it’s always easier to put problems off until tomorrow. For our politicians this is a viable plan given their limited terms, executive protection and golden parachutes courtesy of their government pensions. Most politicians are completely willing to bankrupt our nation, promise any entitlement whether affordable or not for just one more term in office. We’ve come to expect such immoral behavior from our politicians but unfortunately the buck stops with us, the citizens. There is no bail out for us, no debt relief programs or rich government pensions. Rather the future holds tax increases, lower standards of living, rationed government services and unrelenting revolving debt. It is an immoral society that foists upon its children and unborn the financial burden it has created. We have the responsibility – as did our parents – to leave a promising and hopeful legacy for our children. Instead we’ve spent beyond our means, searching for the illusive Canadian dream that is fuelled by materialism, selfishness and an insatiable appetite for massive public entitlement programs. If we cannot get our personal financial houses in order we have little hope of reining in our feckless politicians. For the sake of our children and nation we must introduce federal balanced budget legislation to immediately halt the spending epidemic that’s gripping our nation. Programs such as the CPP, OAS and Medicare must undergo massive changes if they are to survive and public service pension plans will need similar overhaul. Simply put there is no more money to fulfill these pie-in-the-sky promises and the sooner we face reality the better – if not for ourselves, then for our children. (1) Sources: 1. CIA World Fact Book (2010) - open the "economy tab and scroll down to "external debt" 2. TD Economics (TD Canada Trust) (2011) 3. Winnipeg Sun 10/20/2010 Granted a current 2011 figure would have to be estimated but I think the various sources nail it down pretty closely at $1.1-trillion. Perhaps adding a qualifier such as "nearly $1.1-trillion" or "over one trillion dollars" may be safer. Also the 1.1 figure accounts for all debts including municipal (according to the Sun article) which I forgot to point out in my article. The figures seem high but using additional sources for federal and provincial estimates show this:
  • Canada's debt: $563B Canadian Taxpayer Federation (other sources show similar amounts)
  • Ontario: $220B Globe and Mail, Aug 2010
  • Quebec: $238B Montreal Economic Institute -based on Quebec Department of Finance 2011-2012 Budget Plan
  • Manitoba: $ 14B Winnipeg Sun March 2010
  • Nova Scotia: $ 13B 2010/11 TD Economics
  • British Columbia:$ 31B 2010/11 TD Economics
  • Saskatchewan: $ 4B 2010/11 TD Economics
  • Newfoundland: $ 8B 2010/11 TD Economics
  • New Brunswick: $ 10B 2010/11 TD Economics
  • Total: $1.100T (not including municipal debt is this addition)


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Tom Barak -- Bio and Archives

Tom is a Canadian-based freelance marketing consultant and writer and has been a long-time member of the Conservative movement. He received his MBA accreditation from the University of Manitoba and splits his time fundraising for community centres and mentoring and consulting with local and national businesses.


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