Millenials will be stuck with debt bill, watchdog says

TORONTO — Millennials will have to foot the bill for Ontario’s rising debt over the next three decades if the government doesn’t hike taxes or cut spending by $6.5 billion annually to address major demographic changes, the province’s fiscal watchdog warned Thursday.

As the baby boom generation ages, the province’s economy will change, experiencing slow revenue growth and requiring increased spending on social programs like health care, Ontario’s Financial Accountability Office explained.

Consequently, government debt — which currently sits at $312 billion — will be driven up unless taxes are increased or spending is cut beginning next year, the office warned in its long-term budget outlook.

“If these difficult fiscal changes are postponed the burden of stabilizing Ontario’s public finances would be increasingly, and arguably unfairly, shifted from the baby boom generation to younger Ontarians,” said David West, the FAO’s chief economist.

The FAO report, which took a year to research, said balancing the province’s budget annually won’t be enough to offset the financial impacts of the aging demographic. The government must generate surpluses and use that cash to pay down debt, it said.

West acknowledged, however, that a $6.5-billion tax increase or spending cut would have large budget implications. “(It’s) roughly equivalent to eliminating funding for 40 per cent of the province’s hospitals, raising the HST rate by two percentage points, or a 25 per cent increase in federal transfers,” he said.