I referred to a column by Paul Kershaw a while back. His subject was the financial burden we baby boomers are leaving on the young. He returns to that topic in today's Globe and Mail:
Boomers came of age as adults around 1976, when total government debt was approximately $39-billion. When this debt is divided by the 17 million residents under the age of 45 in that year, and adjusted for inflation, the data show that the debt per younger person in that era was equal to $10,500 today.
Compare that with 2021, the most recent year for which there are complete data. Total government debt is $1.1-trillion. When you divide this figure by the 21 million residents under 45, debt per younger person is now $53,000. That’s a fivefold increase over the past 45 years.
Just as the debt inherited by boomers was shaped by multiple generations alive at the time, so the debt inherited by younger people today reflects the influences of multiple generations. Still, for much of the past 45 years, boomers were the largest generation driving economic and political trends. As a result, much (but not all) of the responsibility for today’s larger debt rests with them.
There are a lot of sweeping generalizations made about the boomers. And, as is the case with all sweeping generalizations, they're simply not true. For instance, we ran up a lot of debt recently dealing with COVID -- which did not choose between generations:
The pandemic years weren’t business as usual for government spending. Emergency response measures added an outsized amount to our debt. Fair enough, so let’s exclude the pandemic years. In 2019, debt per person under 45 was $43,000 – four times higher than in 1976.
Another potential caveat is that the figures I report above don’t account for our economy being more affluent today than in 1976. Back then, gross domestic product per capita was approximately $40,000 when adjusted for inflation. Now it is 65-per-cent higher, at $66,000.
If we adjusted debt levels in 1976 for the economic growth that Canada has enjoyed since then, the debt per young boomer would be $17,395 (not $10,500). Even by this charitable approach, there’s no getting around that boomers were involved in racking up government debts on their watch that are around three times larger than what they inherited. That doesn’t sound like “living within our means” to me.
Debt per se isn't the problem. It all depends on how that debt is invested:
Had debt tripled because governments made historic investments to fix housing unaffordability, or decarbonize the economy to reduce climate risks, young Canadians might cheer. But those aren’t the primary reasons that debt has grown. The last decade may be especially concerning, because – as I’ve written before – the largest increases to government spending have been on income support and medical care for retirees.
The cost of servicing the debt on boomers’ unpaid government bills has real implications for younger people today. For example, the British Columbia government just tabled its 2023 budget. Interest payments on provincial debt will be $1.4-billion higher as of 2025-26. That’s 23 per cent more than B.C. will add to spending on kindergarten-to-Grade 12 education over the same period.
Just imagine how much more quickly governments could scale up $10-a- day child care, improve parental leave benefits, reduce university tuition, or invest in climate adaptation if they were only paying interest on the amount of debt boomers inherited – not the much larger debt they now leave behind.
Something to think about.
Image: Bradford Today