I thank you, Mr. Chair, for the invitation to appear before the finance committee, but first I'll state my disclosures. I do not consult to anyone or anything anywhere in the world, directly or indirectly. I do not belong to or contribute to any political party or post lawn signs for any political party.
Unlike almost all the witnesses before the finance committee for pre-budget consultations, I'm not appearing on behalf of any organization, any interest group or any lobby, and not my university and not my school. Consequently, I'm not going to argue that the government ought to provide a particular benefit for some particular interest group, such as an environmental group or a business group, etc., because I'm not a lobbyist.
Indeed, my presentation in the next few minutes could be characterized as an “anti-lobbyist presentation”, for I'm going to argue that the government should do less and spend less—not more—in the 2020 budget.
Now I'll provide the logic. Canada, as with all western countries, is facing an aging tsunami coming straight at us in very short time, one that is inexorable, inevitable and transformative, and not in a good way. We are transforming very rapidly from about 12%—roughly one in 10—of the total population over 65, which is very manageable, to 25%—or one in four—over 65, which is extremely challenging and may not be manageable.
Worse, the dependency ratio of workers to retirees or, as I like to colloquially refer to it, millennials to boomers—not completely accurate, but good enough—will drop from what it was in 1970, at seven to one, or seven workers to one retiree, to two and a half to one in about 10 years or less. These driving forces will significantly reduce the overall Canadian economic growth rate. Note that from 1981 to 2016 per capita income grew on average by 1.3% per year for all of us, but it is forecast that from 2017 to 2045, per capita income is only going to grow by 0.9%, which is a roughly 50% reduction from what we're used to.
In plain English, the growth of all government revenues will significantly decline relatively, while government expenditures, principally health care, will skyrocket, per CIHI stats. Very quickly, the average per person government spending on people from ages 15 to 64 is $2,600 per person per year, but for us over 65, our annual average per capita health care cost is $11,600 for every person over 65. That's 4.4 times bigger than it is for younger people. Also, the number of taxpayers to pay the bills is going to collapse from 7 to 1 to 2.5 to 1, meaning that we cannot continue to steadily increase taxes.
For the first time in Canada since the Depression, we're going to be faced with very hard choices due to the emergence of relative scarcity. Yet in the last election, every political party competed with promises to spend far more money, but with no serious meaningful discussion concerning the funding of these promises of very large permanent future commitments, such as universal pharmacare.
Moreover, there was no serious discussion of the very high standard of living in Canada that already exists, notwithstanding that Canada is one of the 10 wealthiest countries in the world on a per person basis amongst 200 countries; notwithstanding that Canada has an average income per person higher than Germany's, which is the wealthiest country in the EU, which is one of the two wealthiest regions in the world; notwithstanding that poverty in Canada has collapsed to the lowest level in Canadian history at 8.8%; notwithstanding that elder poverty, once the core and face of poverty until the mid-1960s, has collapsed in Canada today; notwithstanding that Canada has a sharply progressive income tax system, unlike the U.S., where, contrary to another urban legend that the top two quintiles don't pay their fair share, the top two quintiles, per Philip Cross of StatsCan, pay approximately 80% of all personal income taxes, while the bottom quintile, after transfers, pays less than 5%; notwithstanding that the OECD data reveals that Canada is below—I'll repeat “below”—the OECD average for income inequality and below all other English-speaking countries; and, finally, notwithstanding the steady rise in real incomes of the middle class for the last two decades, per Stats Canada and Professor Stephen Gordon's multiple op-eds in multiple media—newspapers.
However, the aging tsunami, an enormous iceberg in a very strong current, is coming straight at us in less than 10 years, and it's going to change everything. Yet successive Ministers of Finance—Liberal and Conservative—steering the ship have told us repeatedly that we have nothing to fear, that Canada, like the Titanic, is unsinkable because, as we are told, we have the lowest federal debt-to-GDP ratio in the G7. But they have neglected to tell Canadians that we have the worst total government debt— federal, provincial and municipal—in the G7 as a percentage of GDP, at roughly 90%, and two of our provinces are de facto insolvent: New Brunswick and Newfoundland and Labrador.
Going forward, ministers of finance must provide leadership by preparing Canadians for the inevitable collision with the monster iceberg just in front of us by lowering, not raising, our expectations concerning the false belief that the future will be just like the last 70 years, and confronting uncritically unanalyzed promises for extraordinarily expensive programs such as universal pharmacare, which will provide free drugs for such high-income Canadians as professors like me, MPs like you, senior public servants and superior court judges making a third of a million dollars a year and, worst of all, medical doctors making half a million to a million dollars a year.
We cannot continue to go forward like this.
Thank you.