Total Canadian Debt Stands at $3.4 Trillion
Each Canadian is on the hook for $114,000, according to Fraser Institute study
Contact:
Michael Walker, Executive Director
The Fraser Institute, (604) 714-4545 Email: michaelw@fraserinstitute.caRelease Date: 17 September 1998
VANCOUVER, BC>>> According to the Fraser Institute’s yearly debt study, federal, provincial, and local governments have accumulated $785,261,000,000 ($785 billion) in direct debt and $3,401,884,000,000 ($3.4 trillion) in total liabilities. This translates into each man, woman, and child in Canada owing $113,532 in total liabilities – almost four times the average Canadian salary.
The study, Canadian Government Debt: A Guide to the Indebtedness of Canada and the Provinces shows that from 1993 to 1997, direct debt – what most people and governments refer to as "the debt"– has grown from $616 billion to $785 billion. Total liabilities have increased from $2.8 trillion to $3.4 trillion during the same period.
The allocation of federal liabilities is based on the contributions made to the federal treasury.
Ontario owes the most. Federal, provincial and local liabilities add up to $125,056 for each Ontarian. Albertans are next at $119,503, followed by Quebecers at $110,544, and British Columbians at $107,831 (See Tables). Maritimers owe less than the average Canadian because of their lower contributions to the federal treasury.
Total liabilities include direct debt, indirect debt, and obligations. Direct debt includes the accumulated net debt incurred by a government and all its agencies. Indirect debt is the net amount owing of quasi-government entities, such as government business enterprises. Obligations include programs and benefits that government has committed to provide in perpetuity, such as Old Age Security, Canada Pension Plan and health care.
Unfunded Liabilities are the Most Serious Concern
Most of the total liabilities are due to the unfunded liabilities of the health care system, Old Age Security, and the Canada Pension Plan. At their inception, these programs were based upon the assumption that the population demographics, economic growth rates, and wage increases prevalent in the 1960s would continue indefinitely. It was considered favourable social and economic policy to transfer a small amount of money from a large group of younger workers to benefit a small group of relatively poor retirees.
These assumptions were wrong. Fertility rates have declined, income growth has stagnated, and mortality rates have decreased. In 1966, the ratio of Canadians under 20 to Canadians over 65 was 5.5 to 1. This relationship decreased to 2.3 by 1995, and is expected to decline further to 1.1 by 2030. A more alarming trend is the relationship between workers and retirees. In 1995, seniors represented 19.8 percent of the working age population, this figure is expected to increase to 38.9 percent by 2030. These demographic changes have, and will continue, to undermine the ability of these plans to provide the intended level of benefits.
By the year 2000, the federal and many provincial budgets should be in surplus. Now is the time to look at the current structure and long term viability of our health care system and income support programs. "As a start, Canada’s debt burden and tax levels should be decreased to make current taxpayers better off and lessen the enormous pressure on our public finances implied by demographic trends and the current structure of these programs," says Dr. Michael Walker, Executive Director of the Fraser Institute.
Canada Compared to the World: The Severely Indebted Country (SIC) List
International comparisons allow Canadians to get an idea of the relative severity of Canada’s debt burden. A standard feature of the Fraser Institute’s annual debt study is a ranking of 139 countries based on their debt as a percent of discretionary income.
More important than Canada’s overall debt ranking is our relative ranking against other high income OECD (Organization for Economic Cooperation and Development) nations, where Canada ranks third lowest – only Italy and Belgium rank lower. Among G-7 nations, Canada is second last. While Canada is considerably above Italy, it is also significantly below other G-7 nations. Japan ranks fourth overall and first in the G-7 with a debt-to-discretionary-income-per-person ratio of 11.9 percent. Canada ranks sixth among G-7 nations with a ratio of 70.3 percent and ranks 81st overall among the 139 nations in the SIC List.
Established in 1974, The Fraser Institute is an independent public policy organization based in Vancouver.
For further information:
Suzanne Walters, Director of Communications,
The Fraser Institute, (604) 714-4582,
Email suzannew@fraserinstitute.ca
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