Canada’s government-run income pension system, made up of the Canada and Quebec Pension Plans (CPP/QPP), is run on a pay as you go basis. With only minimal prefunding in the CPP account, the CPP is a Ponzi scheme in which the benefits of each cohort of participants are paid from subsequent cohorts’ contributions. Pay-as-you-go plans have serious economic and political flaws. This study makes three recommendations on how policymakers can meet these challenges.

Although dividing Canada's public debt would have economic consequences, it would likely be decided by political bargaining with little weight given to economic criteria. Such political bargaining could easily magnify the costs of debt division through spillovers to other policies. This potential for needless loss exists at all three stages of Quebec separation: posturing, bargaining and enforcement. This study makes recommendations on how the costs of dividing Canada's debt could be minimized.