New Report: Is Today’s Government Financially Sustainable?

According to a new report released by the Parliamentary Budget office, the current financial structure of the government is not sustainable, and the national debt is expected to increase substantially if the government continues to operate in the manner they are currently. The report, authored by Parliamentary Budget Officer Kevin Page, suggests that for long term financial sustainability, some type of permanent fiscal action such as increased taxes, reductions in program spending or a combination of the two needs to be put in place.

The document titled The Fiscal Sustainability Report, is an independent report released for the first time and advises that Canada's aging population will be the government's top priority over the next few decades.

The report predicts that the shift of baby boomers moving from working age to retirement is currently right around the corner and the government better be prepared to take action in the very near future to ensure that the Canada's economy is sustainable. The impact of the demographic shift will be in two areas: health care funding and elder benefits and the smaller tax base the government will have to collect from.

The sustainability report advises that "although it is important to acknowledge that many elements of a long-term projections are uncertain, the demographic transition underway in Canada is notî. The report also goes on to say that as of 2008 there were five prime age working Canadians (aged 15-64) for every one person aged 65 and over. This ratio is expected to drop to one in four by the year 2019 and to 2.5 to 1 by 2033. This considerable decline is part of trend that has existed for the past several decades, for example, in 1971 there were just under eight workers for every retiree.

Gross domestic product (GDP) growth is also projected to decline over the next few years, which goes against the current trend of GDP growing annually by approximately 2.1 percent. This amount is expected to decline to an average growth rate of .9%.

The report warns "The fiscal action required to achieve sustainability does not need to be taken immediatelyÖ however, a significant delay in implementing fiscal actions substantially increases the required amount of corrective measures,î

On March 4th Canadians will see first hand what the Federal government has planned for the future when they present their annual budget.