Last year, Richard Saillant, the former director of the Donald J. Savoie Institute at the Université de Moncton published A Tale of Two Countries, How the Great Demographic Imbalance is Pulling Canada Apart. His argument centers on how provincial governments must change the way they are doing business or the burden of our demography will eventually prove unbearable.
His is but one of what is becoming a cavalcade of documentation outlining the oncoming demographic and financial crisis to which our provincial politicians seem oblivious. The idea of the Nova Scotia government spending its way to future prosperity borders on immoral.
The mysterious “debt to GDP ratio of 36.6%” getting floated as some reasonable economic milestone, conveniently ignores the Sword of Damocles current day politicians are hanging over the heads of millennials who are being forced to pick up the tab twenty or thirty years hence.
Yes, there are several $175,000 per year, publicly funded economics professors with defined benefit pensions who seem quite happy to promulgate this idea however, the small business operators who are already picking up the tab through higher taxation, constricted growth projections and puny margins aren’t quite as enthused.
Given a robust economic growth rate over the next 30 years, perhaps we could swallow the theory of absorbing more debt, but there is nothing indicating that is even remotely in the cards in most sectors. RBC pegs the economy expanding by meagre 0.8% in 2017, and this with massive infusions from construction including the Nova Centre and the Maritime Link.
It is mind-boggling to think there are politicians still willing to say, if only the government spends more money, things will be better. It is even more amazing there are people who still believe it. What is that saying about repeatedly doing the same thing and expecting different results?
What magical productivity unicorn are we collectively expecting will appear to provide the kind of economy that will sustain several billion more dollars in debt? Pile on top of this the vastly higher costs of a bubble of aging baby boomers siphoning off hundreds of millions more in pension and healthcare liabilities as they live into their 80s, 90’s and 100’s.
Optimism is one thing, delusion is quite another.
If anything, we should be saving right now, not looking for new ways to spend every dime that comes in and borrow more. There is a fiscal and demographic bill coming due and unless government dramatically changes the way it does business, the burden on all those fresh young faces graduating high school will, in the years ahead, become simply unbearable and they will leave. If they’re not already gone.
Meanwhile, federal and provincial politicians are skipping around the province espousing the virtues of borrowing cheap money. “It’s almost free!” they say. Except it isn’t. It has to be paid back, and when interest rates rise, as they inevitably will, there will be people down the road staring at debt servicing charges asking themselves, what were we thinking? Even at current bargain basement interest rates, we have spent over 4.5 billion in debt servicing charges alone in the last 5 years. That would build a lot of hospitals and highways or if you’d rather, green infrastructure and bike paths.
There are fewer than a million people in this province now. Despite some very long overdue attention to immigration and population retention, Statistics Canada projections over the next 20 years, which take into account real things like birth rate, mortality rate and net interprovincial migration, show a rapidly aging and shrinking population which will completely reshape our labour supply.
So where in this election are we actually discussing how a smaller, older population will bear not only the additional costs of this higher debt burden but also support the healthcare and retirement needs of, in military parlance, five or six full armies of seniors? Many of these 300,000 or so seniors, incidentally, will not have the resources to pay for these necessary services. This too will put additional pressure on the tax base.
Our current tax load is already the highest in the country, how do we expect to attract and retain people to this region when we are constantly looking for ways to put ourselves at a competitive disadvantage through taxation? And make no mistake, today’s deficits are tomorrow’s taxes.
The size of a government’s tax base is dependent on the size of its business sector. If we want to prepare for a better future, we need to provide a tax environment which will encourage businesses to set up and operate in Nova Scotia, not continually look for ways to drive them and our already shrinking labour force elsewhere.
There are those who may like the sound of a 15 dollar minimum wage, free tuition, free groceries, free drugs and free everything else, but I would ask them to stop and think for a moment about who’s spending the money, why they are spending it, when the bill gets paid and who gets to pay it?