Saturday, February 18, 2012

Elections, Deficits, and Debts - Addendum

It appears that the Drummond Report has confirmed my observations on the precarious state of Ontario's finances.  Drummond manages to give a rather sanitary glimpse into McGuinty's debt saturation policies of the his previous two terms.  However, Drummond does not fully delve into the long term implications of how this unsustainable debt will cripple Ontario for generations.

Demographics are against Ontario.  New immigrants are choosing the West over Toronto.  The population is aging, putting additional strains on the delivery of health care services.  Fewer children mean larger legacy education costs per child.   As I have posted before - Ontario is using the Greek strategy of using short term debt at record low rates to finance this.  

Tax increases and strategic cuts - as outlined by Drummond, will not solve the problem.  The entire model of how government services and benefits are financed and provided will need to be addressed from first principles.  Long term - defined benefit pensions need to be phased out.  Retirement ages and  employee contributions will need to be increased while benefits will need to be decreased.  Even though the Ontario Teacher's Pension Plan (OTPP) is one of the best run plans in the world - they even admitted that they will have problems paying out benefits.  The plan inadvertently outlined the issues with defined benefits when it reported that they had over 40 pensioner over the age of 100 receiving benefits - people who have received a pension longer than they have worked.  

Politicians here are willfully negligent of what is happening with the PIIGs, thinking that it won't happen here.  Sorry, it is right around the corner.