Tuesday, October 25, 2011

Canadians 2nd Most ... Uh-Oh!

The gap is too big, Stephen.
Just when we thought everything was going so well, this, from The National Post: "Canada’s parliamentary budget officer ... Kevin Page calculates that the provincial and federal governments’ fiscal structures aren’t sustainable over the long term due to an aging population and current economic trends.  In its assessment, the PBO says increasing government debt over the medium and long term is expected to outpace economic growth. The result is a mushrooming “fiscal gap” where spending is outstripping revenues and corrective financial actions are needed to remedy it.  The consolidated fiscal gap among the federal, provincial and territorial governments currently sits at 2.7% of gross domestic product — or a whopping $46-billion for the 2011-12 budget year.  “We do not have a sustainable fiscal structure. It’s not sustainable at the federal level and it’s not sustainable when we look just at the provinces and territories,” Mr. Page told reporters Thursday, following the release of his report.  A greying of the Canadian population will put downward pressure on revenues as growth in the tax base slows, while spending demands will mount as more retirees tap seniors’ benefits.  Even if the economy fully recovers over the next few years, the additional spending on health care and elderly benefits is expected to erode public finances, taking governments from surpluses over the medium term to “sizable deficits” over the long term, the spending watchdog estimates.  “PBO estimates that permanent and immediate fiscal actions — either through increased taxes or reduced program spending, or some combination of both … would be required to ensure the net debt-to-GDP ratio does not ultimately rise above its current level,” the report says.  It also notes that any significant delays in closing the funding gap, either through program cuts or tax hikes, will “substantially increase the amount of corrective measures” needed down the road.  The federal government’s projected shortfall would be eliminated, the study says, if Ottawa trimmed the size of annual increases in provincial health and social transfers to the rate of nominal GDP, rather than the current escalators of six and three per cent, respectively.  But doing so would place a greater financial burden on provincial governments, the report adds, and force the provinces to take more drastic measures to get their fiscal houses in order."

The Good News:  The Gap north of here on the Oldman River is as beautiful as ever!