Thursday, February 18, 2010

The "Demographic Time-bomb"

Be afraid people, be very afraid. We need to increase taxes on businesses immediately or 70 years from now we will be in great peril! I just finished watching an interview with Kevin Page on the Soloman Show, and once again he is advocating raising taxes. This time the impetus for raising taxes is our aging population demographic, and it is correct that at some point in the future we are going to have a large increase in the number of people living on pensions with a shrinking work force (offset by immigration).

I don't disagree that this is something that we have to focus on in the medium term. Neither Evan of Kevin mentioned the Canada Pension Plan adding 128 billion dollars in equity value over the last 3 quarters. Neither discussed ways to trim the budgets of government ministries. No the focus was on raising taxes for businesses. Page said that for each 1% we lower business tax, we lose 1 billion dollars in annual tax revenue, and that the Tories have dropped the business rate from 20% to 15%.

The contradiction comes where he admits that cutting tax rates to businesses attracts more business to our country and that jobs are added to the economy as a direct result of government taking less money from business. He admits that cutting taxes adds jobs at the same time that he is demanding that we raise taxes. Obviously adding to the tax burden on business is going to have a negative effect on employment, but we must do it anyway in the interest of long term stability? How come it always seems to be bureaucrats demanding higher taxes instead of spending cuts, elected or otherwise?

Eventually we are going to have to start putting more money away to the CPP, but as it exists right now we are in much better shape than a lot of western countries with similar population demographics. The United States is in a lot bigger trouble than we are. Again Kevin Page is making long term GDP forecasts which is a virtually unpredictable statistics given how much of our GDP depends on global resource prices which fluctuate independently of our structured system.


  1. The socialists forget, and scare you young people, that lots of we older people are reasonably wealthy and pay the most tax. It is not like your great grandparents' day. The boomers both worked and now we help buy our kid's houses. The Liberals stole $$ from the CPP, and fueled a culture of entitlement, so that is the problem! The problem was the design of the program by the pre-boomer Liberals to be pay-as-you-go (so they could collect).

  2. How about a simpler solution with government:

    a) getting back to the basics like infrastructure, health, justice and defense;
    b) stopping all the pork-belly and luxury initiatives that are better taken care of by the public sector;
    c) use half of that extra money they are tinkling into the wind to put towards mandatory individual contributions to one's own pension; and,
    d) use the other half to cut personal taxes so we can take care of ourselves much better than we are today.

    We waste so much tax money on bureaucracy and politically motivated pet projects that could be going to what the taxes originally were designed to take care of and letting us take care of ourselves. We truly live in a nanny-state when the government takes over more and more of our personal responsibility for us.

  3. All very interesting points

    Here's one that is like touching a third rail.

    Nobody lives forever.

  4. Given that the government is looking at cost-containment in the next budget, and the CBC is really low-hanging fruit in that department (OK maybe it is rotting on the ground) it's hard to give the CBC any credibility in a discussion of the budget or federal finances.

  5. Of course Evey and Kevey wouldn't talk about something as horrid and diabolic as spending cuts, now would they!! Gulp!

    Probably because they know deep down what a waste of skin they are to the taxpayers of Canada and if spending cuts were brought forward, it could be them walking the plank.

    Now that would be a shame, wouldn't it! Or maybe not !!

  6. Kevin should read up on the CPP, in 2004 it was 4.95% it is now 9.9%, this was done because even a Liberal government realized that baby boomers would be retiring soon.

    So, the adjustment has already been made. Is Kevin even an accountant?

  7. We don't have "decades" to make the adjustment, Japan is due to go off the cliff in the early 2020's. Russia and China will soon follow (so much for China ruling the world),and the EU will be in deep trouble by the 2030's, along with Canada.

    The United States has a demographic profile which is not only younger but also still going at replacement value (2.1 children per couple). By the 2030's, Americans might be migrating to Canada in great numbers to take advantage of the high wages we will be forced to pay for labour, and import their cultural and political values with them.

    Imagine the rage of aging Libs, Dippers and Greens in the ruins of Toronto, Montreal and Vancouver as Canada becomes a Republic in the late 2040's...

  8. Can retirees, with all their life long experience, consider starting up businesses of their own?

    Japan should be fine if they manage to successfully create enough robots to make up the difference.... you heard me... robots.

    By the way, just about every couple I know is having babies!

    I think we're all be okay. Old school baby boomers are too self centered... Always trying to invent new ways to claim that the world is ending since they're all so seemly afraid of growing old..... "DAD"!