The corruption that fiscal dependency has wreaked on EU member-states is highlighted by Greece’s temper-tantrum over raising its state-mandated retirement age from 61 to 63, all the while German taxpayers – who retire at 67 – are expected to bail that country out after decades of reckless spending that rivals even Quebec’s provincial government.

A McLean’s piece by Mark Steyn paints a pretty picture of the whole scheme and why Germany’s own problems at home will mean that it will soon be unable to carry the EU’s (even) less frugal members.

Canada’s demographic issues are not as acute as Europe’s, but still fatally serious if issues like healthcare and public sector pension obligations are not brought under control.

The following article appears in the June 2009 issue of Report Magazine.

“People try to put us d-down.”  That opening line from The Who’s 1965 hit ‘My Generation’ sums up, in reverse, the situation in which young and middle-aged taxpayers will soon find themselves.  In fact, it is a lack of people paying taxes that will put ‘My Generation’ down.

As the federal government ratchets up spending and saddles future generations with an even larger debt, the issue of “who will pay for all of this?” needs to be back on the table.  Indeed, paying down the debt – or even balancing the books – will become progressively more difficult as the baby-boomers move into retirement.

The birth rate required for a population to merely replace itself – let alone grow – is 2.1 children per woman.  Canada’s currently stands at 1.6.  Today, those aged 14 and under constitute only 17 percent of the population – a staggeringly low figure. Further, the “working age cohort” (those between 15 and 64), will also see steady declines.  What’s alarming is that those aged 65 and up currently make up 13 percent of the population, growing to 16 percent in 2016 and 19 percent in 2031, using modest projections that include a very high rate of immigration.

A society with normal demographics usually looks like a pyramid when sketched out visually, with a large number of young people at the bottom with an ever narrowing top.  A society that has an upside-down population pyramid is one that cannot sustain itself.

As the baby-boomers leave the workforce, the costs of pensions, healthcare and a vast array of other social services will skyrocket. Coinciding with this will be a shrinking base of taxpayers from who this system will be supported.

Simply put, this is unsustainable.

Currently, those that are net-contributors to government revenues make up 60 percent of the population. However, this figure is a best-case scenario as it includes all employed individuals (including part-time workers), regardless of income, instead of just taxpayers.  In contrast, a minimum of 40 percent of the population are currently net-beneficiaries of government.

By 2016, those that are net-beneficiaries will reach 43 percent, by 2021, 45 percent, and by 2032, a staggering 50 percent.  And that figure is likely much larger than stated due to the broad definition of “net-contributor”.

Faced with this, there will be only two options: raise taxes or significantly cut the size and scope of government.  The status quo simply will not suffice.

Canada is already a high-taxed jurisdiction, and if federal and provincial governments decide to impose higher taxes, it will not only reduce productivity and make our economy less competitive, it will drive young taxpayers into other, lower-tax jurisdictions.  Losing these taxpayers will only compound the problem, further narrowing the tax base.

Governments today already plead to the public that they cannot balance their books.  Even with eventual economic recovery on the horizon, the long-term trend will not allow for Canada’s bloated welfare state to continue in its present form.

Without significant cuts to expenditures and not imposing progressively higher taxes, ‘My Generation’ will f-fade away.