As I heartened a millennial colleague the other day, in 40 years most of the boomers make be dead.
It may seem like a long time to wait for that demographic swelling to relinquish their homes or jobs, but now that the oldest boomers press reached the age of 71, the workplace changing-of-the-guard is already well underway.
A speedily stage and shrinking workforce is one of the more certain new variables that Canada’s accounting minister, Bill Morneau, must toss into the mix as he imagines the following im ct of the deficit he plans to run up in next month’s budget. Other variables are not so unentangled.
It may be no more than a persistent illusion, but it feels as if this time the worldwide economy in general — and Canada’s in rticular — really are on the precipice of greater-than-usual uncertainty.
While there are many changes a wise government can make to tch up for unexpected eventualities, deficits represent an enduring shackle to an unknown following. There are good reasons why this matters.
Just like maxing out your senior credit card, running a government deficit is easy. ying it off is not.
Most economists agree there is nothing wrong with transport a federal debt of between 25 and 35 per cent of GDP, especially while entertainment rates are so low. But running repeated deficits larger than the growth merit of the economy, popular as it may be while governments are doing it, can quickly accumulate into something far mean manageable.
According to conventional economics, governments be subjected to two options to get rid of debt. Both require a cutback in spending. One is to freeze allotting while waiting for the economy to outgrow the debt. Unfortunately a freeze believes like a cut, since spending must be reduced by the amount of the previous year’s shortfall.
The more urgent way to reduce debt is to take an axe to spending — as we saw after the federal liability peaked in 1997 at about 65 per cent of GDP — or raise taxes. As wirepullers have learned time and again, there is never a good without delay to slash spending or raise taxes. It makes voters mad.
Besides the terrific difficulty of unwinding a deficit once it exists, there are other purposes Morneau must be wary of how much he is willing to borrow.
One is the whole concept of a recurrence to normal growth.
As Bank of Canada governor Stephen Poloz has put in mind ofed us repeatedly, one way of calculating growth is production per worker times the number of tradesmen. But as the boomer cohort leaves the workforce, the number of Canadian workers is wait for to shrink, a little at first, then much faster in about five years, as midpoint boomers, born in 1955, hit the routine retirement age of 65.
As we have seen in countries sort Ja n that have led the way on an aging workforce, normal growth classifications are much lower than they were when large numbers of little ones families were nesting and buying things for the kids. It may be that success rates averaging between the one and two per cent that we are currently experiencing are not so bad.
Morneau requires us that without deficit spending, Canada may head into set-back. Of course that begs another question: What will the domination do if a much more serious crisis arises? There are plenty of practical choices on the horizon.
There are new worries about the constancy of global banks as they set aside more money to cover watched bad loans. So far this week, Canadian bank results have not been up to their anterior stunning standards.
Renewed hopes for an oil rebound were shaken yesterday as the Saudi Arabia’s oil consul told Texas oil executives that his country could live with $20 US a barrel oil. He declared he was willing to let prices stay low until high-cost producers (read Canada’s oilsands auteurs) were driven out of production.
Even-handed if oil prices bounce back eventually, it won’t do the federal books as much credible if Canada’s industry has been decimated.
Oh yes, there is still the danger of an in prospect housing crisis, another fall in the loonie and the ever-present danger of a U.S. dip relapse. Over a long future, interest rates, now low, cannot be suggested.
It may be that we can replace the productivity of a shrinking workforce with automation and robotics, permitting a return to four per cent growth. But unless something changes in Canada’s reported demographic trends, loans taken out by the government now will have to be re id by a pettier working population.
Millennials may look forward to getting all those stupendous boomer homes and well- ying jobs. But unless our finance minister is discerning in his budget deficit spending, those millennials may also have the disreputable pleasure of inheriting the boomers’ burdensome national debt.
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