Opinion: Canada needs to rein in spending. How about we stop handing out billions to wealthy seniors?
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The Government of Canada’s public pensions web page in 2018. Ottawa’s OAS system currently rewards couples who earn up to $182,000 with $18,000 annually.The Canadian Press
Forty years ago, Prime Minister Brian Mulroney touched a hot stove. He announced that his government would partially de-index Old Age Security benefits from inflation, and very quickly, the smell of burning flesh began wafting through Ottawa. NDP MP Simon de Jong charged that Mr. Mulroney was breaking a “sacred trust” with Canadian seniors. “Two and a half million elderly Canadians are fed up,” barked Liberal leader John Turner. And outside of Parliament, a Quebec woman named Solange Denis pointed at Mr. Mulroney and said: “You lied to us. You made promises that you wouldn’t touch (OAS). It’s goodbye, Charlie Brown!” The Prime Minister backed down (though he did manage to implement a modest clawback for high-income seniors in 1989).
About 10 years later, prime minister Jean Chrétien saw that same stove and thought it needed some attention. His government proposed replacing the Guaranteed Income Supplement, or GIS, and OAS with a combined Seniors’ Benefit, which would be based on household income, not individual income. But the skin on Mr. Chrétien’s hand began crackling under the heat, too, and when the pain became too much, he jerked his hand back.
The last major attempt was made by prime minister Stephen Harper in 2012, when he announced that the age of eligibility for seniors’ benefits would gradually be lifted from 65 to 67. His government reasoned that Canadians were living longer, working longer, living healthier, and many European countries had already made policy moves in that direction. But when Liberal leader Justin Trudeau came on the political scene and pledged to reverse Mr. Harper’s change, the prime minister was not just burned on the stove, but banished from the kitchen.
Young money: A boost to OAS would help too little where it’s needed, and too much where it’s not
And thus, here we are now, with an $80-billion-and-growing OAS system that currently rewards couples who earn up to $182,000 with the full $18,000 annually. (The clawback for the Canada Child Benefit, by comparison, starts when a family’s net income is roughly $100,000 lower). The combined cost of both OAS and GIS payments is both the largest and the fastest-growing expenditure for the federal government, and it will become even greater if the government adopts the proposal from the Bloc Québécois to hike OAS payments by 10 per cent for seniors aged 65 to 74. Indeed, the Parliamentary Budget Office has projected that the upcoming federal budget will boast a $68.5-billion deficit, and yet this government is contemplating handing out even more money to high-income seniors. (Some of these seniors will insist they are entitled to these funds because they paid into it, but OAS eligibility is based on age and residency, not on employment history.)
When Prime Minister Mark Carney made his political ambitions crystal clear earlier this year, he cast himself as an economic fixer: a guy who had a job to do, and not one who was necessarily in pursuit of a job. “I am going to be completely focused on getting our economy back on track,” he said in January, when he launched his campaign to take over the Liberal leadership. “I have stood up for Canada. I have left my roles in the private sector at a time of crisis for our country,” he said in March, just before an election was called. Mr. Carney’s pitch to voters was that he was not a lifelong politician in pursuit of a legacy, but a guy who would come in, try to fix things, and then, one could reasonably infer, get out. Who better, then, to make the politically tough but economically necessary decision to rein in OAS benefits?
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Generation Squeeze, an advocacy group for young adults, has proposed lowering the threshold for OAS clawbacks to couples earning $100,000, which it estimates will save Canada’s coffers $7-billion per year. It suggests that those funds can be redirected to low-income seniors (those eligible for GIS payments, for example), or else, low-income workers, families with children, or Canada’s swollen federal deficit. If Mr. Carney’s budget implemented that suggestion, and perhaps went even further by reviving Mr. Harper’s plan to gradually raise the age of eligibility for retirement benefits from 65 to 67 (which the auditor-general estimated in 2012 would unlock over $10-billion in savings annually), it would go a long way in delivering the economic fix his campaign promised.
Tightening OAS eligibility is of course a terrible political move for a Prime Minister who owes his win to Boomers who trusted him to preserve their status quo, but it is a necessary move for a Prime Minister – or anyone, frankly – who can recognize that it is patently insane to keep handing out billions of dollars to wealthy seniors in this economic environment. If Mr. Carney is indeed “completely focused on getting our economy back on track,” he will ignore the political noise, and do it.
