An aging population is the biggest challenge facing Canada's health care system. As Fraser Institute studies have shown, if Canada's population today had the proportion of seniors that it will have in less than 50 years, the taxation rate for the average Canadian family would have to increase by between 48 and 95 percent. While demands for health care are increasing, governments make it virtually impossible for Canadians voluntarily to pay more for their own health care.

Virtually every industrialized nation has allowed parallel private systems to develop, which have relieved some of the cost pressures on their public system. Once private and community health providers can respond to increased demand, people should be allowed to put aside money in tax-free Medical Savings Accounts. This would inject a badly needed dose of competition, and help in restoring market incentives to the system.

The supposed danger of evolving toward a two-tier system where quality care is available only to the financially well-to-do is a misconception, unsupported by other countries' experiences. In any case, the vast majority of Canadians would choose to remain in the public system.

Employment and Unemployment Insurance

In the matter of unemployment, Canada has imported the European disease over the last 30 years. Prior to the 1970s, unemployment in Canada stood at around 4 percent, close to the US level. Since that time, unemployment has taken on what appears to be an irreversible upward trend. We have witnessed a whole succession of tax and regulatory interventions that have made the labour market unable to adjust to changing conditions. The cost to employers of hiring workers has risen, while social policies have tended to reduce the returns that workers can expect from being employed relative to being inactive and dependent.

Here again, budget surpluses could be used to remove one important policy impediment to a healthy labour market: the unemployment insurance public monopoly. Individuals should be allowed to save for unemployment rather than insure against it. All workers would contribute a minimum amount to a personal unemployment-support account. In order to provide the incentive to work rather than tap the account, workers would be allowed to transfer any remaining balances into their retirement account.

Big government and slow growth

Of itself, removing public monopolies would improve the performance of the sectors concerned, but, as importantly, it would help Canada to realize its full potential, which it has failed to do over the last 25 years. The average family pays 48 percent of its income in taxes, an increase of some 1,200 percent since 1961. To paraphrase Mark Twain, the news about the era of big government being over has been vastly exaggerated. The evidence suggests that once governments' share of the economy exceeded 30 percent of the economy around 1966, further government spendings impeded economic growth and failed to contribute to socio-economic indicators of social welfare, such as infant mortality, life expectancy, income distribution and human development. Yet Ottawa already is talking about new spending initiatives, including the baseless Millennium Scholarship, that will waste most of the projected budget surpluses.

As a country burdened with high taxes and widespread regulations, Canada is not a good place to invest. Not surprisingly, our dollar has lost over 30 percent of its value since the early 1970s. This persistent drop in our currency conceals our anti-growth policies of indebtedness, regulation and ever-increasing taxes. Canadian industry was not competitive when the dollar stood at 90 cents; it is not competitive at 69 cents. Rather than treating the problem at its root, we have counted on the permanent decline of the dollar in the vain hope that it will offset the burden of our policies. The suggestion to replace or at least supplement the whole gamut of public insurance monopolies by letting people put aside money in tax-free accounts should be viewed as a first step in breaking the vicious tax-and-spend circle.