Friday, December 22, 2006

Why Ontario will go broke

In my previous post, I looked at Michigan's economic and fiscal woes, and after a little digging, I found this chart from the Canadian Taxpayer's Federation that shows how the Stalinist single payer model will bankrupt Ontario. If in a mere ten years health spending doubled, and went from consuming 31.5% of provincial expenditures to around 40%, what will happen in the next ten years in light of the baby boomers retiring? Some of this spending is due to population, with the population increasing to over 12.3 million (estimated) in 2006 from 11.4 million in 1991. Also considering that this ten year period was one of low inflation, we can discount that as a major contributing factor as well.

So here are the facts as it stands:
  • Health care spending is the fastest growing part of the provincial expenditures on a per-capita real basis. At current rates, health care will eat up over 50% of government expenditures if the status quo is maintained.
  • With an aging population, and the baby-boomers starting to retire, you'll have additional demands for health care resources. These people will be retired and will not be contributing the much less in taxes as they're not working. So you're looking at lower revenues and increased expenditures going down the road.
  • Since this is a government run system, it automatically makes it a political system. They baby-boomers want all the bells and whistles (costs be dammed), and will not tolerate tax increases to pay for it. They will be become a large voting bloc that politicians ignore at their peril.
  • We haven't mentioned that since it is government run, it is inherently inefficient, and featherbedding for self serving unions and health care bureaucrats takes precedence over patients. This accelerates the problems above.
So what is a politician to do? Especially a politician who treats single payer, government run health care as an article of faith? The options for such a politician are as follows:
  • Start cutting all other expenditures. Education? Kids don't vote and there are more retirees than parents with school age children. Won't get much love from the teacher's unions, but the retirees are more powerful by this point.
  • Ration as much health care as possible. But then there is a tipping point when the voters revolt over this.
  • Raise taxes. Retirees on fixed incomes are really ornery over taxes, and it has to be done where it soaks everyone but retirees. So business taxes and income surtaxes are increased, which leads to;
  • Every major employer moving shop somewhere else. No workers and no business equals no revenues.
The vicious circle of socialism in a nutshell. Demographics + supply & demand + governmental inefficiency + status quo thinking = bankruptcy.

2 comments:

The Real Sporer said...

Won't the religous devotion to socialist egalitarianism ultimately bankrupt the entire Canadian health system? Is this not a paradigmatic example of the poverty of the welfare state?

mvanlamz said...

Maybe instead of going broke, Ontario is actually following the "Logan's Run" plan you mentioned in another post.

To see how it works, imagine you are a hospital administrator. Your hospital has income, in the form of payments from OHIP. Your hospital also has expenses, in the form of wages, utility bills, etc.

You can't control expenses, because the biggest expense is wages, and all your workers have powerful unions. You can't increase revenue, because OHIP only gives you so much money, and you are severely limited in what user fees you can charge.

So what do you do? You cut back services, effectively creating waiting lists. But how will that help anything? How does postponing services help your bottom line? Easy -- at least some of the people on waiting lists will die before their turn comes up. You just balanced your budget!