Intergenerational Dimensions of Canada’s Fiscal System

Intergenerational equity has been used as a rationale for debt repayment in Canada.  This paper addresses this issue by evaluating a set of economic and fiscal projections.  The results show that future generations can expect the same growth of real GDP per capita as were experienced during the past 20 years.  They also show that the existing fiscal structure is capable of handling the projected spending pressures from population.  The current fiscal structure in Canada does indeed have important intergenerational implications.  It is projected to lead to higher aggregate tax rates about 15 years from now, not because of spending pressures from population aging but because the fiscal structure is unbalanced and tends to generate surpluses of increasing amounts over time.  The authors conclude that debt repayment cannot be justified on intergenerational equity grounds and suggest that what is needed is re-balancing of the fiscal structure, not debt repayment.

ISBN – 1-55382-160-2