Opposition screeching over pension reform not helpful
by John Robson
Stephen Harper’s vague musings about modest reforms to Canada’s public pension system, addressing the World Economic Forum in Davos, Switzerland, have the opposition howling about a “war on pensions” and the Conservatives “attacking seniors.” Such rhetoric is as predictable as it is unhelpful.
In fact, true to his generally cautious and incremental nature, the prime minister mentioned Old Age Security because it is a fairly minor problem reasonably easy to fix. He didn’t even say what he might eventually do, but it’s probably gradually to raise the age of eligibility to 67 from 65 with no cuts for current recipients.
There is nothing radical about this suggestion. As Macdonald-Laurier Institute executive director Brian Lee Crowley noted, when OAS eligibility was lowered to 65 from 70 in the late 1960s Canadian men’s life expectancy was just 68. They now live 79 years on average and, crucially, stay healthy longer. The life expectancy for all Canadians was 71 in the late 1960s and is 81 today. So why would a social program assume we are no more capable of providing for ourselves between 65 and 67 today than half a century ago? Indeed, if OAS were revised to cover the same average last 10% of our lives as in the late 1960s we would qualify at 74 not 67.
I also second Crowley’s deeper point that the whole notion of people as better off not working is wrong. We are not farm animals, glad to get away from the plough and out to pasture. We feel better, more alive and more human while doing something useful in the world. Let the truly ill or incapacitated be covered by disability programs and the rest of us remain active even if we are wrinkled. Especially since the alternative insults the laws of mathematics as well as human nature.
Columnist Dan Gardner pretty much dismissed the whole OAS reform business by quoting a UBC professor who, taking inflation and growth into account, said the projected rise in OAS benefits to $108 billion in 2030 from $38 billion today (and 9.3 million recipients compared to 4.7 million) only raises costs to 3.14% of GDP from 2.41%, trivial compared to the projected rise in health spending to 18% of GDP from around 12%. But 0.7% of GDP is not trivial to a federal government now gasping for fiscal air and spending 13% of GDP on programs. And frustrated as I generally am by the prime minister’s incrementalism, there is some logic to picking the low-hanging fruit, especially if it gets people used to admitting our social programs have problems it is neither insane nor brutal to fix.
Certainly needing another $70 billion for OAS won’t help the federal government and the provinces find an extra $600 billion or so for health. Which underlines that our fundamental problem is demographic not actuarial. An aging populace generates problems that cannot be solved by angry rhetoric, condescending prose or clever accounting.
Here I do fault Harper. In his Davos remarks he said while OAS needs tweaking, CPP is fully funded. But it’s not. The people running it have a plan to get the money CPP will need in the future, but they don’t have it yet. And whatever they plan to take in the future for CPP won’t be available for health, OAS or for that matter defence, policing or infrastructure.
I also worry that CPP is counting on 6.3% returns on its investments to remain solvent. But the main problem is far more simple.
Within 20 years the share of Canadians over 65 will roughly double, to around 25%, so by 2031 we could have as few as two people working for every retiree instead of nearly five today. (Roughly another quarter don’t work for various reasons including being children.) It doesn’t matter how you arrange things actuarially or conceptually; each working person cannot carry half a retiree on their shoulders, especially since in 2008 public health care cost $2,097 for the average Canadian under 65 and $10,742 per person over 65.
Given these facts, that Harper’s vague, timid suggestion to take a baby step away from fiscal ruin toward human dignity should prompt opposition screeching fits instead of alternative reform plans is profoundly unhelpful.
I offered a solution to the pension crisis which would preclude the legislative tinkering which almost always degenerates delivery of a poorly funded service.
I say the Harperites have had the solution to two of their greatest problems dropped right in their lap. I speak of the rotting cash sucking albatross the CBC has become and a solution to making CPP sustainable. The answer is so blatant that only an entitlement addicted sinecured bureaucrat could ignore or evade it.
A) Privatise the CBC – put the sale of those assets directly into a CPP core investment fund and put it out to work in the markets.
B) Divert the budget of the now defunct CBC directly into CPP
With a decent core fund out working and gathering interest revenue and the diverted budget of the CBC funding the immediate draw on the CPP, Canadians could have government run pension security that meets their practical needs.
If out as a referendum question out to the general public: “CBC of CPP” I’m sure you would get resounding support for the CPP continuity at the expense of a decrepit money sucking albatross like the CBC.
The only reason our pension fund is in danger is that previous Liberal governments have used it like a “Candy Bowl”, dipping into it every time a perceived need arose, or a pork barrel needed filling.
The EI find is the same. The taxpayer/employer contributions to these programs need to go there, and stay there.
Canadian taxpayers want to know that these social programs, funded by the people, are there when we need them.
Low hanging fruit or no, so long as they are ripe for picking – I am all in favour of it. So far the PM did not dissapoint.
May I second Bill Elder’s idea to give CPP a burst with the money wasted on the brainwashing machine?