U.S invades Canada--Trigger event?

Dingbat · Tar Sands Joined: Apr 11, 2005 Posts: 24

Frankly deMolay sounds like he suffers from accute schizoprenia with severe paranoia mixed in - I mean, last time I read such paranoid drivel was when I tried to chat with a NeoNazi during BBS days 10 years ago. They really live in their own world.

Canada's federal debt is currently at 500 billion. If you add provincial debt, maybe you can crank it up to a trillion. But FOUR trillian dollars? You're out of your farking mind.

Actually deMolay is probably right. The Rest of Canada really is out to fark alberta over. Yes deMolay - we really are out to get you, rape and pillage your cities, steal your women and take all your oil.

Run away now, Run away! Twisted Evil

Dingbat in Montreal
Twirling his Evil mustache.

sklump

Hold on a sec, you can't govern from 3000 miles away?

China's been making a go of exactly that for millenia. Kamchatka is way further from Moscow. Perth is about as far from Canberra.

Within 5 years Alberta will be well into the depletion arc, and won't be able to afford luxuries like constitutional navel-gazing, unless they diversify, now, fast and intensively. This is not politically feasible while there is an easy short-term answer.

Most Canadians are not as libertarian as deMolay, or else the Libertarian Party would be a force, or else the Conservatives could crack 30% in polls. I find it as baffling as anyone that the Liberals are still near majority country. Bloody 905.
_________________
As Canadian as ... possible, under the circumstances

deMolay · Intermediate Crude Joined: Sep 04, 2005 Posts: 594

Dingbat the total tax increase on Canadian Taxpayers since 1961 is---Tax Burden Up 1,286 Percent Since 1961
Tax bill accounts for more of the family budget than shelter, food and clothing combined
Contact(s):
Joel Emes, Senior Analyst
BC Progress Board, Tel
Email:

Release Date: March 11, 1999

Vancouver, BC - The total tax bill of the average Canadian family has increased by 1,286 percent since 1961, according to a new book released today by The Fraser Institute.

Tax Facts 11 is the latest edition of a biennial study which looks at how the average Canadian tax bill has changed since 1961. Between 1961 and 1998, for example, the average Canadian family's tax bill rose from 33.5 percent to 46.4 percent of its income.

Tax Facts 11 also includes a non-technical do-it-yourself manual for taxpayers to estimate how much tax they pay, and an update to the Canadian Consumer Tax Index, which measures changes in the price that Canadians pay for government.

"The purpose of this book is to provide a basic tool kit of knowledge about taxation in Canada in order to enhance the opportunity for rational debate about these issues," says co-author, Michael Walker, Executive Director of The Fraser Institute.

deMolay · Intermediate Crude Joined: Sep 04, 2005 Posts: 594

Dingbat total public debt from all sources in Canada as of 1995 from government public ledgers. I lost my link to the later data, will try to find the updated info. Chapter 1: Understanding All-Government Debt

The government sector as a whole

For the taxpaying public to understand the extent and severity of its all-government debt problem, it is important to adopt the broadest possible measure of government debt. Coverage should be for "the government sector as a whole" and attempt to measure total all-government debt wherever it is possible to obtain this statistic.

The "government as a whole" measure of total all-government debt includes the debt of federal, state or provincial and local governments in each economy, including tax-supported government business enterprises (GBEs). It should also include the unfunded liabilities of public pension and workers' compensation plans.

Provision for contingent liabilities such as aboriginal land claims and loan guarantees to business, students, and other groups in society should also be included in this comprehensive measure of total all-government debt.

Figure 1 shows Canada's total all-government debt, estimated as of March 31, 1995, based on federal budget estimates, statistics recently released by Statistics Canada, and our own methodology described in table 3.1 of chapter 3 of this study. Total all-government debt in Canada has now risen to over $3 trillion ($3,098,252,000,000 as of March 31, 1995), representing a debt obligation of $104,919 per person or $419,675 for a family of four.

An example from Saskatchewan

The "government as a whole" concept can be applied to any level of government as well as for all governments in any country. A recent Canadian example from the provincial auditor's Office of the Province of Saskatchewan provides a good illustration for the provincial level of government of the "government as a whole"concept and how it can improve the public's understanding of the magnitude of its government debt problem. Report of the Provincial Auditor to the Legislative Assembly of Saskatchewan for the Year Ended March 31, 1992, Regina, Saskatchewan, March 30, 1993.Note

In 1991-92 the Saskatchewan provincial government, at the urging of its provincial auditor and a Financial Management Review Committee (The Gass Commission), took an important step toward providing more complete and reliable information for its "government as a whole." The provincial government not only adopted the accounting principles for government recommended by the Canadian Institute of Chartered Accountants, but presented its information so that its important government business enterprises (referred to in the Auditor's financial accounts as "user fee enterprises") might be compared with the government's general programs in a meaningful manner. The presentation also included a first-time estimate of $3 billion of unfunded liabilities of public service pension plans and $1.5 billion in loan guarantees outstanding at March 31, 1992.

In the opinion of the provincial auditor, "The Government moved from providing what the Financial Management Review Commission viewed as the weakest and least useful financial statements in Canada to providing one of the most useful financial statements issued by a senior government in Canada." Ibid., p. 7.Note

The balance sheet presented in table 1.1 shows what the government of Saskatchewan owed at March 31, 1993 (i.e., its liabilities or "debts") and what the government had available to pay off what it owed (i.e., its assets). For example, the statement shows that at March 31, 1993 total assets of the province of Saskatchewan were $10.3 billion; total liabilities were $21.6 billion and the accumulated deficit was $11.4 billion.

Click here to view Table 1.1 Government As A Whole Approach-A Comprehensive Statement of the Assets and Liabilities of the Province of Saskatchewan and Its Government Business Enterprises (millions of dollars as at March 31, 1993)

Table 1.1 also shows the assets and liabilities of the government as a whole organized by two types of activities--general programs and government business enterprises. The general programs of the government are carried out through government departments i.e., education, health, etc., and organizations funded through government departments i.e., hospitals, regional colleges, etc. These programs are financed primarily by appropriations approved by the Legislative Assembly.

Government business enterprises include Sask-Power, SaskEnergy, SaskTel and the Saskatchewan Liquor Board, amongst others, and raise revenue through direct charges for goods and services. Some of these enterprises compete in the marketplace with private sector companies selling similar goods and services.

Table 1.2 shows the revenue and expenditure of the government as a whole for the fiscal year ended March 31, 1993, also organized by general programs and government business enterprises.

Click here to view Table 1.2: Government As A Whole Approach: A Comprehensive Statement of Revenue, Expenditure, Annual Deficit and the Accumulated Deficit of the Province of Saskatchewan and its Government Business Enterprises (millions of dollars as at March 31, 1993)

Some important definitions

Some important definitions emerge from a study of tables 1.1 and 1.2 which will help in our understanding of government debt.

First, it is important to understand the difference between debt and deficit as these two terms are often confused. Debt means "that which is owed or due." In its broadest sense, government debt refers to any future financial obligation on the part of the level of government being considered. The total debt of the Government of Saskatchewan at March 31, 1993 is its total recorded liabilities--$21.6 billion including loan guarantees and unfunded employee pension plan liabilities.

There are two types of deficit--an annual deficit and an accumulated deficit. The annual deficit shows the extent to which expenditures made during a period exceed the available revenues of that period. Table 1.2 shows that the annual deficit for the province of Saskatchewan for 1992-93 was $765 million. It also shows that the deficit originated entirely in the general programs of the government, since the government business enterprises enjoyed a small surplus in that year.

The accumulated deficit is the difference between the total assets and the total liabilities of the government at a particular date. It is the sum of all annual deficits accumulated to the accounting date and measures the future revenue required by the government to pay for its past transactions. The accumulated deficit at March 31, 1993 for the province of Saskatchewan was $11.4 billion, as shown in table 1.1. It is also referred to by the provincial auditor as "the amount owed by future taxpayers." The provincial auditor of Saskatchewan reports the 1992-93 accumulated deficit as $10.2 billion and footnotes another $1.2 billion of loan guarantees. The Fraser Institute includes loan guarantees in its measurement of government indebtedness. By this measure, the province of Saskatchewan's overall debt was $11.4 billion as of March 31, 1993.Note

Second, table 1.1 shows that assets are classified as "financial" or "physical," and that financial assets are either "short-term" or "long-term." This is a useful analytical distinction for a study of government indebtedness. Some of the assets owned by the government are more readily available than others in the event of a need to repay debt. The ability to quickly convert an asset into cash is referred to as its "liquidity."

The assets which are the most liquid are referred to in table 1.1 as "financial assets." These include cash, loans, and investments which can be used to discharge existing liabilities or finance future programs. Other assets referred to as "physical assets" (government business enterprises) and "investment in infrastructure of roads, dams and other public works" and may also include investments in revenue-generating equipment, buildings and other structures.

Third, table 1.1 also shows that liabilities are classified as "short-term" or "long-term." Short-term liabilities are usually those that come due within one year; long-term liabilities are those outstanding for longer than one year.

Although not shown in table 1.1, it is also possible to show the extent to which government debt is funded or unfunded. Debt is funded where it is backed up by notes and debentures. Debt is unfunded when there is no specific term to maturity and no security instrument such as for pension plan obligations.

Funded debt is usually direct or guaranteed. A portion of the definition of funded versus unfunded public debt was from the excellent definition by D.A.L. Auld, "The Ontario Budget Deficit: A Cause for Concern?" in David W. Conklin and Thomas J. Courchene, eds., Deficits: How Big and How Bad? (Ontario, Economic Council, 1983), pp. 70-107, at 97-98. Direct debt involves the issue of a bond, note or security in the name of the Province of Saskatchewan, while guaranteed debt, issued in the name of a government business enterprise or municipality but guaranteed by the province in the event of default. This is explained more fully in chapter 3 of this study.Note Direct debt involves the issue of a bond, note, or security in the name of the province of Saskatchewan, while guaranteed debt is issued in the name of a government business enterprise or municipality, but guaranteed by the province in the event of default. Guarantees are explained more fully in chapter 3 of this study.

"Unfunded Pension Liabilities" are shown as a separate category and are long-term in nature. Chapter 2 of this study considers this category of government debt in more detail.

All-government debt illusion illustrated

The provincial auditor of Saskatchewan refers to the 1992-93 accumulated deficit of $11.4 billion as "the amount owed by future taxpayers." It is true that this is the amount of debt directly attributable to the inability or unwillingness of provincial politicians to balance the provincial budget over a number of years. But is this really the complete story insofar as Saskatchewan taxpayers are concerned? No.

The broader measure of government debt shown in table 1.1 for the government of Saskatchewan as a whole shows the total debt to be $21.6 billion as at March 31, 1993. But again, is this the complete story? Thanks to the provincial auditor, this figure includes $3 billion for unfunded pension liabilities and $1.2 billion in government loan guarantees. We have added the unfunded liabilities (in Saskatchewan's case, a surplus of $59 million) of the Saskatchewan Workers' Compensation Board. But again, is this the complete story? No.

The Saskatchewan taxpayer owes some portion of the debt of the government of Canada and its government business enterprises. What portion of Canada's aboriginal claims will Saskatchewan taxpayers have to pay? What about the Saskatchewan taxpayers' share of the unfunded liabilities of the major components of Canada's social security system: the Canada Pension Plan, Old Age Security and Medicare? And what about the debt of Saskatchewan municipalities, hospitals, and universities? These, too, are amounts owed by future taxpayers living in the province of Saskatchewan.

The need for further research

There is a need to review the financial statements of every province and territory, as well as the government of Canada and restate them as on the basis shown for Saskatchewan in table 1.1 and 1.2. Taxpayers would clearly benefit from seeing how government business enterprises compare with the government's general programs in terms of the scope of overall government involvement in each provincial and territorial economy. The approach used by the provincial auditor of Saskatchewan shows the contribution of both components of the provincial government to the annual provincial deficit. There is too much media focus on the annual deficit as narrowly defined by government programs, thereby making it relatively easy for politicians to shift what are essentially general program responsibilities to its less closely scrutinized government business enterprise sector.

Chapter 2: Unfunded Pensions, Old Age Security, and Medicare Liabilities

Public service pension plans

It has been correctly stated that "an unfunded public pension plan is a political time bomb that should be emphasized, not hidden." J. Bossons and D.P. Duggan, "A Reply," Canadian Tax Journal, Vol. 31, No. 3 (May-June 1983) p. 405. Bossons and Duggan were replying to the critique of their article "The Government Deficit: Too High or Too Low?" Canadian Tax Journal, Vol. 31, No. 1, pp. 1-29 by A. Asimakopulus and Louis Ascah, "Public Pension Plans and the Public Deficit," Canadian Tax Journal, Vol. 31, No. 3 (May-June 1983) pp. 400-404.Note

Most Canadian governments now record the unfunded liabilities of employee pension plans as footnotes to their annual financial statements. Table 2.1 lists the most recent information available in this regard for employees of provincial governments including, where available, unfunded pension plan liabilities of elected officials, teachers, and municipal workers. Unfunded liabilities of employee pension plans of provincial government business enterprises are not shown in table 2.1.

Click here to view Table 2.1: Unfunded Pension Liabilities of Canada's Provincial Governments ($ millions)

The Quebec unfunded pension liabilities of $21,337 million shown in table 2.1 as reported in the provincial public accounts excludes an unreported amount of $10,377 million as noted by the auditor-general of Quebec. This unreported amount represents the difference between the Quebec government's estimated actuarial liability and the net liability recorded in its balance sheet.

In our measurement of total all-government debt for Canada in chapter 3, this study includes the unfunded employee pension liabilities of all governments not included by Statistics Canada in each government's FMS balance sheet. The totals for all provinces shown in table 2.1 are included, with the Quebec figure being the unreported amount as measured by the auditor-general of Quebec so as to avoid double counting with Statistics Canada.

Government employers are gradually coming to appreciate the benefits of fully-funded pension plans. Providing greater financial security for employees in their retirement years is not the only reason for this attitude. Accounting considerations are also an important factor. It is generally accepted as good business practice to require that pension obligations be provided for in advance of an employee's retirement.

Full funding has yet another important advantage over pay-as-you-go pension plans. When a funded pension plan is set up, contributions begin at once. Similarly, if a decision is made to increase benefits, there has to be an immediate increase in contributions. Under a pay-as-you-go scheme, only a small part of the ultimate cost is incurred immediately, so that contributions in early years can be very small and build up only gradually. A funded scheme thus enables those who set it up to see the full consequences of their actions and so provides a safeguard against extravagant promises.

A final important advantage of full funding is that it corrects the intergenerational inequities of pay-as-you-go plans.

Politicians' pensions

There has been a genuine reluctance by most governments to move toward full funding of the pension plans of their elected officials. Saskatchewan, however, has provided a good model for MLA pensions since 1979. Taxpayers contribute equally dollar-for-dollar with their MLAs' contributions to their pension plan. Other provinces would do well to do likewise.

Trillion dollar time-bombs

Canada's social security system is unsustainable in its current form. Table 2.2 demonstrates this using a measure called the "unfunded actuarial liability." This liability amounted to $1.7 trillion ($1,745,000,000,000) or 233 percent of GDP at December 31, 1994 for the Canada and Quebec Pension Plans, Old Age Security, and Medicare.

Click here to view Table 2.2: Unfunded Actuarial Liabilities of Canada's Social Security Programs ($ billions, unless otherwise stated as at December 31)

The unfunded actuarial liability is calculated by the chief actuary of Canada as the amount that theoretically would be required to be invested on the valuation date if all of the future promises of benefits of the plan were to be honoured. Costs are calculated in Canada for a "closed group," which is for a cohort of people aged 18 on average on their nearest birthday on December 31, 1994.

The projection period of 105 years (1994-2100) is very long, and involves a host of assumptions about population, labour force, inflation, unemployment, interest rates, earnings, age at retirement, and other variables. Projections are very sensitive to some of the assumptions.

These unfunded actuarial liabilities represent "promises to pay" rather than legal obligations such as government bonds and Treasury bills. As such, they are political time-bombs waiting to explode since there will have to be major changes such as reductions in services being offered, increases in contribution rates and/or taxes, and, in the case of the Canada and Quebec Pension Plans, postponement of the age of retirement. Whether or not these promises are kept or broken, and the choice of what policies to adopt, are some of the major public policy issues facing Canadians today.

Canada Pension Plan

The unfunded actuarial liability of the Canada Pension Plan represents an amount of money which, if invested at December 31 of the year indicated, and taking into account: (a) the actual size of the fund at that date, (b) the investment earnings, and (c) future contribution rates, the resultant amount of money would be just sufficient to pay all future benefits and administrative expenses in respect to those aged 18 and over on December 31 of the year indicated.

This amount--the unfunded actuarial liability--although not a legal obligation, nevertheless is a concrete indication of a contribution to future revenue requirements either as future tax increases, future increases in CPP contributions, and/or future government borrowing. The large amount of unfunded CPP liabilities dramatically demonstrates that CPP contributions are far below what would be required to fund current pension liabilities in the future, and that CPP contributions and/or taxes will have to increase dramatically if benefits are to continue at current levels.

Table 2.3 illustrates what must happen to contribution rates to the year 2030 if the Canada Pension Plan continues as a "pay-as-you-go" plan. These projected contribution rates are taken from the CPP Fifteenth Annual Report as at March 31, 1993.

Click here to view Table 2.3: CPP Contribution Rates Projected by the Chief Actuary of Canada if the Canada Pension Plan Continues as a Pay-As-You-Go Plan

Quebec Pension Plan

Since no public estimate exists of the unfunded liability of the Quebec Pension Plan (QPP), an estimate was made for this study on the advice of the chief actuary of the province of Quebec. Table 2.2 shows the results of this calculation.

In the absence of better information, the QPP estimated unfunded liability is used in chapter 3 of this study for Quebec. It is better than no estimate at all if all-government debt illusion is to be dispelled for Quebec taxpayers.

Quebec taxpayers should insist that their provincial government regularly calculate and publish the unfunded liabilities of the Quebec Pension Plan as does the government of Canada for the Canada Pension Plan.

An international perspective

The international comparisons of government indebtedness contained in chapter 4 do not contain the unfunded liabilities of public pension systems like the Canada and Quebec Pension Plans because of the difficulty of obtaining comparable figures for other industrialized countries. All of the major industrialized countries except the United States and Japan rely primarily or exclusively on pay-as-you-go public pension systems which are already incurring large deficits--as in Italy and the United Kingdom--or are expected to do so soon--as in Canada, Germany and France. The United States and Japan have reformed their social security systems and are seeking to implement partially funded systems.

A recent study by the International Monetary Fund (IMF) points out that future pension liabilities depend on the number of retired people relative to the number of people of working age--the so-called "old-age dependency ratio." International Monetary Fund, World Economic Outlook, Washington, D.C., October, 1993, p. 56.Note This ratio is expected to rise sharply in the next 20 years in Canada and elsewhere. The strains that higher dependency ratios will impose on budget policies in the future can be seen by examining the present value of future net liabilities of the pension systems of the major industrialized nations, as shown in table 2.4. In all the major industrialized countries, regardless of the system in operation, the present values of net pension liabilities are estimated to be as large as current debt levels, even under favourable assumptions.

Click here to view Table 2.4: Major Industrial Countries: Estimated Unfunded Liabilities of Public Pension Plans (Present Value of Current and Future Rights and Future Contributions as a Percent of 1990 GDP)

The IMF study concludes that "In the absence of policy adjustments--possibly including increases in retirement age--existing debt levels and unfunded liabilities will continue to grow and will require costly policy adjustments in the future when benefits are paid, in the form of either higher taxes or sharp cuts in expenditures and benefit levels. The projected need for many governments to borrow heavily in the future to fulfil pension obligations clearly reinforces the perception that current budgetary trends are unsustainable." Ibid., pp. 56-57.Note

As an example of the effects of such a policy change, table 2.4 clearly shows the positive impact of reducing Italy's unfunded pension liability assuming the full implementation of the announced increase in retirement age by five years. Net liabilities would be reduced from 233 percent of 1990 GDP to 101 percent as a result of this policy decision.

Table 2.4 also shows the seriousness of Canada's unfunded CPP/QPP pension liability problem in relation to other major industrialized countries. Canada's net liabilities, at 250 percent of 1990 GDP, are the highest of any G-7 country and almost 6 times higher than the United States.

Canadian governments should begin now to seriously explore how to fully fund these deficient plans or they may soon be forced to adopt the Italian solution of reducing benefits and/or postponing benefits by 5 years or even more.

The need for further research

In accounting for the total indebtedness of all Canadian governments and helping to dispel the all-government debt illusion, the unfunded liabilities of all government pension plans (public service, government business enterprise, MP/MLA, CPP/QPP) should be taken into account to the fullest possible extent. Further work is needed to identify unfunded pension liabilities for employees of federal and provincial tax-supported government business enterprises, as well as for hospital, university, and local government employees across Canada.

Chapter 3: Total All-Government Debt in Canada

One taxpayer, many governments

"All-government debt illusion" arises in part because there are so many levels of government in Canada, often with overlapping programs and financial requirements. It is often very difficult for taxpayers to discover how services received from government are funded, whether by fees or taxes, or by increased borrowing or, in the case of the federal government, by printing money, that is, the "monetization" of the public debt.

Just as there is a need for "disentangling" government spending, there is a corresponding need to disentangle government borrowing. Table 3.1 shows the categories of government debt that are used to measure total all-government debt in this study.

Click here to view Table 3.1: Selected Indicators of Total All-Government Debt ($ millions, unless otherwise specified)

By seeing the large number of debt categories within this comprehensive framework, the taxpayer can begin to appreciate the tremendous burden of all-government debt and the potential for future tax and fee increases imposed by federal, provincial, and local governments and government business enterprises in Canada.

Debt burden indicators

Table 3.1 shows that Canada's total all-government debt and other obligations (including unfunded Canada and Quebec Pension Plan, Old Age Security and Medicare liabilities), when all levels of government are taken into account, was just over $3 trillion ($3,098,252,000,000) at March 31, 1995. This represented $104,919 for every man, woman, and child in Canada, or $419,675 for a family of four.

Excluding the unfunded liabilities of the Canada and Quebec Pension Plans, Old Age Security, and Medicare, Canada's all-government net debt-to-Gross Domestic Product (GDP) ratio rose sharply to 135.9 percent in 1994/95 from 97.3 percent in 1990/91. This demonstrates the sensitivity of this commonly-used indicator to the health of the Canadian economy. As Canada's economy moved into recession in 1990-1993, Canadian GDP showed minimal growth. All-government debt, however, continued its relatively rapid rate of increase, thereby causing the net debt-to-GDP ratio to rise by 39 percentage points over this five-year period.

About 55 percent of the Canadian taxpayers' debt burden is represented by their share of the federal debt and other obligations; 43 percent by provincial and hospital debt and other obligations; and 2 percent by local government debt.

Affordability indicators

The all-government "interest bite" ratio (ratio of total debt charges to total government revenues) for Canada was an estimated 20.3 percent at March 31, 1995, up moderately from its level of 19.4 percent at March 31, 1991.

In the international comparisons in chapter 4 of this study, an interest bite over 15 percent in combination with the other indebtedness indicators, qualifies an economy as "severely indebted" as far as its government sector is concerned; between 9 percent and 15 percent qualifies it as "moderately indebted" and under 9 percent as "less indebted."

The interest bite on the federal debt at March 31, 1995 was an estimated 32.5 percent; 16.9 percent on the provincial debt; and 5.7 percent on the local government debt.

Foreign exchange exposure

The Canadian taxpayer is much more exposed to foreign exchange risk on the provincial portion of government debt than on the federal debt. About 17.3 percent of the provincial debt at March 31, 1995, was was held in foreign currencies, compared with only 2.6 percent of the federal debt.

Estimation methodology and the Statistical Annex

In making estimates for March 31, 1995, all debt categories were changed at the average rate of increase (or decrease) of the most recent three years. An exception was made for debt categories for which there were actual figures. This included the unfunded liabilities of the Canada and Quebec Pension Plans (table 3.1, line Cool

, unfunded liabilities of Old Age Security (table 3.1, line 9), federal government balance sheet (table 3.1, line 11), and the unfunded liabilities of the provincial Medicare system (table 3.1, line 20). Another exception was made where only one or two year's data were available. In these cases, the most recent year was used as the March 31, 1995 estimate.

Table 3.1 provides the format for total all-government debt tables for each Canadian province and territory shown in Appendix A. A 5 year Statistical Annex of these tables has been prepared by The Fraser Institute's International Centre for the Study of Public Debt. This 65- table Annex contains tables for each year from 1990-91 to 1994-95 for Canada as a whole, and for each province and territory showing total all-government debt by level of government and category of debt, together with the economic indicators and indebtedness ratios as shown in table 3.1. The Annex may be purchased for $19.95 plus GST from The Fraser Institute and will be updated annually.

The source of government debt statistics

All of the debt and public debt charges (mostly interest) information comes from Statistics Canada's Financial Management System (FMS) for Public Institutions with the exception of hospital debt, the unfunded liabilities of the Canada and Quebec Pension Plans, Old Age Security, and Medicare, provincial/territorial employee pension plans, and federal and provincial commitments and contingent liabilities.

The FMS adjusts source data to provide a standardized presentation of the various government accounting systems in the federal, provincial, and local governments in Canada. For this reason, FMS data will not accord precisely with figures released from government's public accounts, budgets, financial statements, and other reports. All "estimates" are based on the budgets tabled each spring by the respective governments.

The quality of the data from the FMS is high. For the federal and provincial/territorial governments, the balance sheet statistics up to and including March 31, 1994, are based on a census of administrative records and so are not subject to sampling error. Occasionally, complete data are not available for a special fund or agency, and an estimate is used instead. The total size of such estimated data is less than one percent of the balance sheet totals.

Self-supporting and tax-supported government business enterprises (GBEs) were identified by the Public Institutions Division of Statistics Canada in a special report done for The Fraser Institute for this study.

Hospital debt data for 1987-1991 was obtained from a special study for The Fraser Institute of 916 reporting public hospitals by the Canadian Centre for Health Information of Statistics Canada. There were about 1,200 operating hospitals in Canada in 1991.

Estimates for the unfunded liabilities of the Canada Pension Plan, Old Age Security, and Medicare were provided by the chief actuary from the Office of the Superintendent of Financial Institutions.

Net debt versus gross debt

The figures used for comparative purposes in this study are net debt, not gross debt. The gross debt statistics measure the total liabilities of a particular government and for the government as a whole. Net debt is gross debt, or total liabilities, minus total financial assets.

Table 3.2 shows Canada's debt in recent years measured on a gross debt and a net debt basis, excluding the unfunded actuarial liabilities of the Canada and Quebec Pension Plans, Old Age Security, and Medicare. It also excludes other obligations such as loan guarantees, commitments, contingent liabilities, unfunded liabilities of civil service pensions and worker's compensation boards, hospital debt, and the net debt of tax supported GBEs.

Click here to view Table 3.2: Gross Debt versus Net Debt: Canada's All-Government Debt 1990/91 to 1994/95 (Financial Management System Basis, $ billions, unless otherwise stated)

Both gross debt and net debt are shown in this study. They each have different analytical purposes. For example, gross debt is most appropriate in measuring the overall government debt burden on Canadian taxpayers. It is the amount that will eventually have to be paid off through higher taxes and fees and/or reduced government services and/ or sale of physical and financial assets. Gross debt statistics also provide information on the term structure of the debt, that is, how much is long-term and how much is short-term.

Net debt takes into account the financial health of the government in so far as the size of its financial assets are concerned. Financial assets include such categories as cash on hand, receivables, advances, and securities. A jurisdiction with substantial financial assets may be in a better position to support a larger gross debt. One of the most dramatic examples of this is Japan as is shown in table 4.3 of chapter 4. Japan's gross debt-to-GDP ratio was 81.7 percent in 1994. Taking financial assets into account, Japan's net debt-to-GDP was only 9.2 percent.Note

Province A may have sizeable financial assets whereas Province B may not. The taxpayers of Province A, therefore, may be financially better able to support a larger gross debt than the taxpayers of Province B. By deducting financial assets, net debt provides a much better indebtedness indicator for comparative purposes than gross debt when relating government debt to economic indicators such as GDP and exports of goods and services.

Using net debt to calculate total all-government debt for comparative purposes between governments is the most conservative way of doing this type of analysis. It assumes that the government entity being considered gets full book value for all its financial assets, and then applies these funds to reducing the gross debt.

Alternative measures of Canada's all-government debt burden

Besides Statistics Canada's Financial Management System, there are two other primary sources of government assets and liabilities: a) the System of the National Balance Sheet Accounts (SNA) published annually by Statistics Canada, and (b) the Public Accounts (PA) of Canada published by the Receiver General of Canada. Each system uses different accounting procedures and is used for different analytical purposes. For a complete description of these differences, see Robin M. Richardson, "The Public Debt of an Independent Quebec (Pre-Referendum Edition)," Fraser Forum Critical Issues Bulletin, May, 1995. Vancouver, B.C.: International Centre for the Study of Public Debt, The Fraser Institute, pp 12-13.Note

Although the FMS and the PA yield roughly comparable levels of government debt, the SNA gives a much lower amount since it does not recognize the liabilities of civil service pension plans. This treatment leads to a considerably lower net debt in the SNA than exists in either the PA or FMS.

Table 3.3 shows the difference between the FMS and the SNA measures of government debt. The most commonly used measure of all-government debt is the FMS which approximates the PA. As of March 31, 1995, Canada's net debt using the FMS was $779 billion, or 104.1 percent of GDP. The comparable SNA measure was $533.2 billion, or 71.2 percent of GDP.

Click here to view Table 3.3: Alternative Measures of Canada's All-Government Debt Burden Excluding Unfunded Actuarial Liabilities of Canada's Social Security System ($ millions as of March 31, 1995 or estimated March 31 unless otherwise specified)

Chapter 4 presents Canada's government debt problem in an international context. With respect to the OECD countries, the comparisons are made using the lower SNA figures since the other OECD countries report their debt statistics on an SNA basis.

Table 3.3 also shows the impact on all-government debt for both measures of adding the other obligations that are measured in this study. Net debt-to-GDP rises to 135.9 percent on an FMS basis and to 104.4 percent on the SNA basis.

Most of the categories of debt and other obligations contained in this study's measure of net debt are certain to result in a future burden on Canadian taxpayers unless the government undertakes offsetting policy measures such as those recommended in chapter 5. Table 3.3 shows the level of certainty that the taxpayer will have to assume for each obligation. Debt guarantees and contingent liabilities will likely result in less actual obligation than is recorded in the public accounts. The probabilities indicated are notional only and do not represent any studies of actual loss experience at this time. This is an area for further research.

Government business enterprises

Government business enterprises (GBEs) in this study have been divided into those that are self-supporting in so far as they receive no government subsidy, and those that are tax-supported in so far as they receive subsidies. The major publicly-owned hydro-electric utilities all qualify as "self-supporting," as do a number of other GBEs. Self-supporting GBEs are profitable without receiving financial assistance from their parent government. Financial assistance includes subsides, covered loss payments, and substantial infusion of contributed capital. Self-supporting GBEs would be good candidates for privatization in order to reduce the debt of Canada's federal and provincial governments.

GBEs that continually incur operating losses funded through loans from their parent government are referred to as "tax-supported" GBEs in this study, and their debt is included in our measure of total all-government debt. They represented about 23 percent of the net debt of all federal government GBEs and 7 percent of the net debt of all provincial/territorial GBEs in fiscal 1994-95.

Government guaranteed debt

Government guaranteed debt is issued by an entity outside the government (Crown corporation, municipality, etc.) making the guarantee but upon default, the government that makes the guarantee (federal or provincial/territorial) assumes responsibility for it. Taxpayers are therefore fully liable for these debts whether or not the entity whose debt is being guaranteed is "self-supporting."

In this study, government guaranteed debt is included as part of total all-government debt excluding some special funds which, on an FMS basis, are consolidated with the general funds of the federal and provincial/territorial governments.

Table 3.4 shows the various categories of guaranteed debt. Taxpayers should question the logic of the government offering loan guarantees to anyone. Loan guarantees are a dangerous form of lending whereby the taxpayer frequently has had to assume the debt when things go wrong.

Click here to view Table 3.4: Federal, Provincial and Territorial Guaranteed Debt as at the End of the Fiscal Year Nearest March 31, 1994 ($ millions)

Provincial/territorial allocation of the federal debt

All categories of federal debt and other obligations as well as the unfunded liabilities of the Canada and Quebec Pension Plans, Old Age Security, and Medicare are allocated to the provinces and territories by their share of federal taxes paid. These figures were obtained from various issues of The Fraser Institute study, Government Spending Facts. The author wishes to thank Ms. Isabella Horry of The Fraser Institute for providing these allocators.Note

The rationale for using federal tax share as an allocator is that total all-government debt represents deferred taxes. Fundamental to dispelling the all-government debt illusion is recognition and acceptance of this basic fact. The practical way in which this deferred taxation enters into the government budgetary process is via interest payments on past borrowing. Thus, the geographic incidence of debt charges and the underlying debt which it represents will bear a close correspondence to the geographic distribution of federal tax collections.

The need for further research

Total all-government debt was calculated for each of Canada's 10 provinces and two territories for 1991, 1992, 1993, 1994, and was estimated for 1995 in order to obtain the indebtedness indicators and construct The Fraser Institute SIC List--1995 (Worldwide All-Government Debt--Severely Indebted Category) comparison indicator presented in chapter 4 of this study.

The challenge for further research includes measuring total all-government debt for earlier years, say 1981 to 1990, preparing a comparative trend analysis for every provincial and territorial boundary, and broadening the analysis to include the following categories of government debt:

information on aboriginal land claims
Canadian universities and their endowment and special purpose funds
unfunded pension liabilities of hospital workers and university employees
local government business enterprises
unfunded pension liabilities of local government workers
Another interesting question to ask is whether or not the division of the liabilities of tax-supported GBEs should take into account the specific nature of each enterprise, its location, and its activities. This is an area for further research and refinement of the methodology used in this study.

The unfunded liabilities of the Canada Pension Plan were allocated by federal tax share to all provinces and territories, excluding Quebec, which received the totality of the Quebec Pension Plan unfunded liability. Further research would include studying the implications of using other allocators such as population, labour income, net farm income, and other measures of allowable earnings upon which CPP contributions are made.

Old Age Security and Medicare could be analyzed using different allocators. More research needs to be done on the impact of aging on medical expenses and per capita medical costs excluding the impact of aging.

The unfunded actuarial liabilities of the Canada and Quebec Pension Plans, Old Age Security, and Medicare could be presented using "pessimistic," "optimistic," and "intermediate" assumptions expressed as a percentage of taxable payroll with projections to the year 2100. This would highlight the coming crisis and help to pinpoint when the public policy "time bombs" might "explode" in the sense that dramatic policy changes will have to be made.

As provincial and territorial budgets, public accounts, and auditors' reports become available, new estimates for total all-government debt can be made for each provincial and territorial boundary along the lines set forth in Appendix A.

Timely communication of this information will alert people living in all parts of Canada as to the seriousness of their all-government debt problem and what they can do about it

deMolay · Intermediate Crude Joined: Sep 04, 2005 Posts: 594

Dingbat I will write you off as another uneducated Liberal fool. One good thing about peak oil is it will end entitlements in Canada, as a lot of people will follow a crow's ass for their next meal. You will probably be leading the pack as you are not aware of what is going on around you.

nero

deMolay,

(I'll ignore the silly 1000% increase in tax remark, compared to the increase in the cost of a home since the 60s it's a steal.)

I didn't read all of the article, but it seems like it's a bit out of date especially with respect to CPP. Canada's long term financial health has improved significantly since the mid 90s, and when compared to the general trend of the past 5 years Canada stands out as a paragon of financial rectitude.
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Biofuels: The "What else we got to burn?" answer to peak oil.

deMolay · Intermediate Crude Joined: Sep 04, 2005 Posts: 594

The point is whether the data is current it is very close, according to Ontario figures. Ontario will be a welfare Province within 5 years just at a time when China and Asia manufacturing really kicks in, over 100,000 textile workers in Ontario and Quebec have lost their jobs this year when the tarriff came off Chinese textiles. The same is going to happen with cars etc. The point is with only about 15/18 million taxpayers out of 30 million people, Canada is in trouble. And the CPP is far from being out of trouble. They just raised their rates double and clawed back on those who will be collecting. They spend all the money from the CPP already and can only hope to stabilize the fund by extorting more and paying less. Canada has nothing to be smug about. The fact that taxes consume more of the family budget than food shelter clothing and transport combined should set off alarm bells. In order to survive as a country we need less government not more. Far too many people in Canada work for government which is hurting families. Way to many useless programs that we cannot afford.

sklump

I think pretty much anyone with a clue agrees that:
* taxes are too high, especially personal income taxes
* there are too many ad-hoc gov't cash giveaways.

I don't believe that separatism will fix any of that. It is chauvinism to say that my lot is any less corrupt than your lot. Generally, the smaller the pie, the worse the politics. The better politicians gravitate upwards - if you want to see true petty political vapour-lock, check out school boards, or local co-op boards of governance. A step up to municipal-level is gives a bit higher grade, then the same to Provincial, then to Federal. Unfortunately, the grade of Federal politician has eroded badly since the Quiet Revolution. Seriously, is Paul Martin the ablest politician in the nation? Is Stephen Harper the ablest Tory? That's Hallowe'en-scary.

If anything will snap us out of our fiscal malaise, it will be the end of easy short-term answers. If that doesn't do it, we will deserve what's coming to us.
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As Canadian as ... possible, under the circumstances