Loading ...Another Day Older and Deeper in Debt: The Fiscal Implications of Demographic Change for Ottawa and the Provinces
Rapid population aging will put the fiscal position of Canadian governments in a squeeze, with slower revenue growth on one side, and the overall rising cost of demographically sensitive public programs on the other. Over the next four decades or so, they face an implicit liability of $2.03 trillion. There are ways to lessen the blow.
- Canada’s changing demographics matter for public finances. Canada’s baby boom from the late 1940s through the mid-1960s was large. The subsequent decline in the national fertility rate was steep. As a result, some 65 years after the baby boom’s peak, Canada’s population is aging fast.
- Rapid population aging creates challenges for public finances. Departures from the workforce dampen economic growth and, therefore, government revenues. At the same time, an older population means increased spending on income supports and healthcare.
- For Canada, these challenges have an extra dimension. The direct impacts of aging affect the provinces and territories more than the federal government, and some more than others. This Commentary quantifies these pressures and discusses their implications for budgets at both levels of government, in particular the pressure that rising healthcare expenses will put on provincial taxes and other programs.
- Higher federal transfers to the provinces and territories are one potential response to demographically driven budgetary pressures. However, federal transfers blur accountability for taxes and program quality – and in this context also threaten to undermine the fiscal discipline Canadians need from provincial governments. Efforts to get more bang for the buck in program spending, especially in healthcare, and an increase in the share of consumption taxes levied by the provinces are better responses to the fiscal pressures of aging.
Ever wonder why CANADA has the largest and fastest growing euthanasia (MAID) program in the world!!