Our large and growing public debts should be paid off by those Canadians who have most benefited from them.
By Michael Borrelli
Published April 28, 2011
In mid-May I will turn thirty, and this impending collision with an arbitrary chronological marker combined with the ongoing Federal Election has got me thinking a lot about the future.
Lately, I've become increasingly focused on some of the inter-generational inequalities that have been growing over the past decades and wonder how they will influence what type of country my son will live in.
Three key issues concern me most when thinking about the legacy of the choices Canadian governments have made: 1) the ever-rising national debt; 2) the environmental deficit that will also be left behind; and, 3) the educational bubble that has been burdening young people with long-term debt and providing declining returns.
I hope to write more on the latter two items as the year goes on, but for now please indulge me in a brief discussion of the national debt and the abdication of generational responsibility in managing it.
When I was born in 1981, Canada's national debt stood at around $100 billion dollars. Since then it has expanded more than 450% to something greater than half a trillion dollars. The rate at which Canadians have spent beyond their means has grown at about 20% a year since the 1970s, save for a short time in the 1990s when the Liberals eliminated the deficit.
While this explosion of spending has paid for some very important social programs and helped turn Canada into one of the world's best places to live, it has done so at enormous cost to those who had little or no say in decision-making. Attention was not seriously directed at how to pay back this "investment" beyond the lazy conviction that economic growth would cover it.
Now, with young people facing a low-growth economy, their parents will continue to benefit from good services and low tax rates while also passing along the bill for their sprawling lifestyles, their pensions, and their old-age health care.
We could debate the pros and cons of individual budget line items until the debt clock reaches one trillion dollars and never come to any conclusions, but a fundamental issue of responsibility will remain: these debts should be paid off by those Canadians who have most benefited from them.
This means rejecting the constant refrain heard from the wealthiest generation in human history - the Baby Boomers, those born from the 1950s to mid-60s that may control upwards of 70% of Canada's wealth - that they are over-taxed.
It also means eliminating the scores of exemptions and tax credits that overwhelmingly benefit older, wealthier Canadians but which further weaken our ability to pay off what we owe.
A case in point is the much-lauded tax-free savings account (TFSA), introduced by the Conservative government in 2008. Canadians have been convinced that these accounts are excellent ways to retain their dwindling savings, but really they are a mechanism for wealthy individuals and families to avoid taxation on larger and larger portions of their income.
The government's own numbers suggest TFSAs have already added up to about $200 million in foregone revenue, and other pundits suggest the total cost could be more than $6.6B if our government continues to increase the TFSA contribution limits annually.
Most Canadians using TFSAs are suckers: they put whatever pittance they can sock away during the year in a low-yield savings account generating about 2% interest, but the real use of TFSAs is for sheltering investments such as stocks or mutual funds, which are overwhelmingly the playthings of Canada's wealthy.
As such, they can act as tax-sheltered gambling accounts for folks with wads of disposable income. How? Because TFSAs allow you to withdraw and re-contribute, providing a fantastic vehicle for the wealthy to protect growing amounts of investment capital from taxes.
Consider this: an individual making six-figures can use his $5,000 annual TFSA room to shelter a high-risk investment. By the end of the year if that investment is worth two, three or fifty times what it was worth before, our lucky investor can sell it and withdraw the returns from the account totally tax free.
Worse still, he won't lose contribution room in the TFSA. So someone fortunate enough to have a $5,000 investment grow to $10,000 now has double the TFSA space to protect wealth from the taxman the following year.
As you can imagine, young people saddled with enormous education debts, and facing inflation and wildly rising costs of living will mostly be shut out of this financial bonanza, since they have very little income leftover to save or invest.
This unjust state of affairs is compounded by the reality that these young people will ultimately shoulder the burden of these tax cuts once the Boomers are retired and drinking margaritas on the beach.
This is just one example of a system of governance that leans heavily towards the immediate interests of the wealthiest generation in human history, at the expense of the well-being of future Canadians.
It isn't just happening at the federal level. The abdication of responsibility for national fiscal security is occurring at the provincial and municipal levels too, as we see politicians pander to wealthy, older homeowners to lower their property and provincial taxes while leaving infrastructure deficits or rising health care costs to others to worry about.
When will tomorrow's leaders finally wake up and take charge of their collective future? If declining youth voting is any indicator, then perhaps not anytime soon.
But if you're like me and look for light at the end of the tunnel, then maybe the recent surge of the NDP in this federal election is a sign that, like the tenacious Arab youth who are risking their lives to better control their destinies, Canada's young people are ready to demand their fair share.
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