Tales from the Mouth of the Fraser: Unfounded Liabilities
The Fraser Institute says the debt monster is gonna getcha:
The study, Canadian Government Debt 2008, shows that federal, provincial, and local governments have accumulated $791.2 billion in direct debt and more than $2.4 trillion in total government liabilities. Total liabilities include direct debt and programs that the government has committed to provide such as Old Age Security and Medicare (Canadaâ€™s public health care system).
The objective of the report appears to be coming up with a really big number to scare people about â€œbig governmentâ€. Total liabilities are estimated over 100 years.
Should we share the Fraser’s concern? According to the latest fiscal reference tables, the federal debt as a percent of GDP fell from 68.4% in 1995/96 to 32.3% in 2006/07. Total provincial debt has fallen from a high of 28.4% in 1999/00 to 19.0% in 2006/07. Because of economic growth, both debt-to-GDP ratios will continue to fall even if there are modest deficits, up to the point where a deficit was equal to the growth rate of nominal GDP.
Whatâ€™s missing from their scary picture? The uncounted income we will have in the future. Even if one accepts that their calculations are useful on the expenditure side, they are meaningless without the context of projected future income. And we should expect income to grow â€“ in absolute dollars, and in per capita real terms.
By the one-sided Fraser measures, my household has an unfunded cable bill liability of several hundred thousand dollars. And my mortgage is also an unfunded liability because I (like almost everyone) have borrowed against future income and do not have financial assets in the bank right now. Even the payroll of the Fraser Institute is an unfunded liability running in the hundreds of millions of dollars. (I wonder if management makes this latter point when trying to defeat staff requests for higher salaries.)
The other missing piece is that governments table budgets every year looking one to three years forward and can make adjustments as need be. They can even do “crazy” things like raise taxes or run a deficit if need be. But this is not likely necessary as programs are generally on a stable footing.
PS. I recycled some of this content from a previous post that touched on the previous iteration of the Fraser report. The quoted text above is from the current press release but it too is recycled material.
It is reports such as these that will result in debt forfieture on the grandest of scales.
If we don’t start spending on “greening” the economy now, there will eventually be a whole lot of debt that gets written off and/or never repaid.
It is such cultural backwardness we suffer some of the greatest challenges in initiating the requisite changes.
It is places like the Frazer Institute where the nutjobs hang out, the economic lunatics lounge all day, and the fringe monkeys that swore we should never have come down from the trees sit and eat their seemingly never ending supply of bananas.
We have spent how many years fighting over the concept of convincing these types that we need to have a social along with the economy. It would seem quite rational if these brainiacs could realize that both of these civilization requirements need to be situated in a sustainable environment. 300 odd years of taking the the environment as a freebie, will now have to paid for, in full. We can’t amortize over 100 years, we don’t have the time.
You wanna see some deficits, wait for 20 years to pass, without any change to the current ways and means it will balloon like the biggest of bubbles as those in charge try and keep civilization bound together in a its quite delicate and thinly veneered package of consumption and want amidst the twisting nether of collapse.
Its gonna take some serious cash either way. So why not do it now and start getting beyond some frivalous notion of debts and deficits, and instead of using and justifying them on wars and such, try changing the production base.
So sad to see those people actually near a printing press or a web server.