The federal government has been floating one-sentence options for cutting the Old Age Security (OAS) program — causing a media flurry, and heated public debate. The only details provided to date indicate that changes would focus on those aged 65 and 66, and that it would not be implemented until sometime after 2020.

But what would have happened if the proposed government changes to OAS had been fully implemented in 2011? That is, what if OAS would not have been paid at all to 65 and 66 year olds last year, assuming the Guaranteed Income Supplement (GIS — the income tested benefit that is part of OAS legislation) remained unchanged?

This is an important question to ask, since the primary reason provided by the government for cuts to OAS is to make the program more fiscally sustainable — to save money, in other words.

But OAS is only a part of Canada’s retirement income system that includes other major programs and tax provisions, so cutting OAS would cause ripples throughout the system. Creating a hypothetical scenario helps to see how far the ripples from the cuts might reach.

Since the federal government is short on details, I have used Statistics Canada’s Social Policy Simulation Database and Model, and my own assumptions to create the calculations and interpretation of the results. If OAS had been denied to all 65 and 66 year olds in 2011, the overall costs of OAS would have dropped by about $4 billion. But because OAS is included in taxable income, there would also have been a drop of roughly $500 million in federal income taxes and a $300 million decline in provincial income taxes.

Further, because these seniors (the 65 and 66 year olds) would have lower disposable incomes and hence less money to spend, there would be over a $100 million drop in federal GST and almost a $200 million drop in provincial sales and other commodity taxes and health premiums.

The bottom line: the net fiscal impact of such a cut to OAS, in 2011 terms, would be a fiscal savings for the federal government of about $3.5 billion, but combined with a $500 million loss in tax revenue for the provinces.

Further, the almost 700,000 seniors age 65 and 66 would also have had reduced incomes unless they compensated — for example, by working more, or drawing down more of their savings, or moving in with relatives. If they didn’t, the number of 65- and 66-year-old Canadians falling below Statistics Canada’s after-tax Low Income Measure (LIM) would have more than doubled from about 50,000 to almost 120,000 (with a further 15,000 in their 60s but not exactly age 65 or 66).

Such an increase in low-income rates — most analysts refer to them as “poverty” rates — would likely be offset, at least in part, as many of these seniors would go onto provincial social assistance programs. Federal cuts in OAS would be shifting costs to the provinces, in other words.

To avoid hurting the poor, the government could offset the cut in OAS for those with lower incomes by increasing GIS benefits by a corresponding amount.

But this change would dramatically reduce the fiscal savings for the federal government to about $500 million, taking into account changes in lost federal income tax and GST revenues. The provinces would still lose about $350 million because non-taxable GIS benefits would be substituted for taxable OAS benefits.

So what is the federal government going to do?

Will the cut in OAS save billions in federal spending, while shifting hundreds of millions in revenue losses to the provinces, and more than doubling the poverty rate among affected seniors? That’s what the 2011 hypothetical scenario indicates would happen.

Or will the cut — with a possible modified GIS — protect the most vulnerable seniors, but save far less for the federal government, and still hit the provinces with large revenue losses?

This would mean that the net effect on the fiscal balances of both levels of government combined — what ultimately matters to taxpayers and the economy — would be essentially nil.

On Thursday, the federal government will table the budget and we will see if and how crucial details of the OAS cuts will be addressed. Let’s hope the government does not chose to reverse one of Canada’s greatest social policy successes of the last half century and increase poverty rates among Canada’s seniors.

Let’s also hope it doesn’t choose to shift hundreds of millions of fiscal burdens to the provinces in the name of improving its own fiscal situation. And let’s hope it will not approach public policy with a narrow focus that pays no attention to the realities of a shared jurisdiction and the complexity of programs forming Canada’s retirement income system.

Michael Wolfson is an expert adviser with EvidenceNetwork.ca, and Canada Research Chair in Population Health Modeling/Populomics at the University of Ottawa. He is a former assistant chief statistician at Statistics Canada, and spent several periods during his career in the federal public service developing and advising on pension policy.

< http://www.thestar.com/opinion/editorialopinion/article/1152793–oas-savings-could-turn-out-to-be-costly >

The numbers are far from reassuring. In 2001, one Canadian in eight was over age 65. By 2026, one in five will have entered their golden years. Yet in spite of the aging Canadian population, more than 60 per cent of working Canadians currently don’t have a workplace pension. And even those who do are not guaranteed retirement security.

Further, as employers increasingly opt for defined-contribution rather than defined-benefit pension plans, the burden of managing the risks associated with a pension — such as longevity and the market performance of assets — has shifted to the worker. Access to a stable, secure and adequate standard of living after retirement is becoming increasingly rare for middle-income Canadians.

While the traditional defined-benefit pension plan remains the primary model for occupational pensions — where they exist — defined-benefit plans have been in a slow and persistent decline for more than two decades. And while this shift may have curtailed pension costs for businesses, it has also left workers more vulnerable financially, since many are not equipped with the resources to plan effectively for retirement.

With respect to the policy reform proposals currently on the table, there are ways to improve pension coverage and better manage risk for pension members, while also providing cost predictability for employers. Expanding the CPP/QPP would indeed be worthwhile but, it appears unlikely to be undertaken in the current economic and political environment. Meanwhile, the recently proposed pooled registered pension plan (PRPP), lacks mandatory employer contributions and will do little to reduce risks for individuals.

However, in a recently published study by the Institute for Research on Public Policy, we propose a voluntary pooled target-benefit pension plan (PTBPP). It involves commingling assets across all participating workplaces to maximize scale efficiencies in investment and to manage actuarial risk. Employers’ matching contributions would be mandatory but fixed, as in a defined-contribution plan. As with the PRPP, it would be available to individuals and the self-employed.

Most importantly, upon retirement, members could expect a benefit within a target range, depending on market performance. We propose a benchmark of 50 per cent income replacement, requiring a slightly higher contribution rate than in many defined-contribution plans today.

While the target-benefit design would not eliminate the risk that benefits could decrease due to market underperformance, the model proposed includes mechanisms to mitigate this risk. The plan would be managed by actuaries and investment managers, instead of by workers. To curtail administrative costs, the PTBPPs would be required to maintain a minimum pool of $10 billion, and management fees would be capped at 40 basis points, considerably more cost-efficient than most defined-contribution plans and RRSPs today, which typically pay 250 to 300 basis points.

The extent to which higher management expense ratios can severely limit capital accumulation over an individual’s working life and, thus, pension outcomes is dramatic. Consider two middle-class workers who work 40 years, have the same earnings history and contribute regularly to their pensions. One has a pension fund which pays management fees of 40 basis points, while the other pays fees of 150 basis points. The worker in the more efficient fund will receive a benefit upon retirement 18 percentage points higher relative to annual salary than his/her peer.

The PTBPP could be implemented within the legislative framework recently created for PRPPs, but this would require concerted action by the provinces.

On balance, the proposed PTBPP would provide better pension coverage, cost efficiency and retirement income security for plan members than would PRPPs or most current private group or individual plans. While the PTBPP would not solve all the challenges facing Canadians in securing their retirement incomes, it should yield less volatile costs than traditional defined-benefit plans and be more cost efficient than defined-contribution plans.

For employers, the advantages are undeniable. The PTBPP model is more sustainable than a defined-benefit plan, and it limits risk much like a defined-contribution plan. For a typical defined-contribution or group RRSP plan, total contributions may be slightly higher under this model, but employers would gain immensely improved benefits for their employees. Employees would still face some pension risks under this plan although, with the impact of pooling, the risks would be minimized in a more efficient and effective way than in a defined-contribution plan. For members of a defined-benefit plan facing the prospect of conversion to defined-contribution, the PTBPP would provide a better alternative to preserve future benefits.

Perhaps most important for policy-makers, the PTBPP is a timely proposal with the potential to address many of the limitations of the PRPP within the framework of Bill C-25.

Given the uncertainty surrounding the future of pension reform in Canada, it should be viewed as a key step forward.

Robert L. Brown and Tyler Meredith are the authors of “Pooled Target-Benefit Pension Plans: Building on PRPPs,” published by the Institute for Research on Public Policy ( www.irpp.org). Brown is a member of the executive committee of the International Actuarial Association. He was research chair for the Ontario Expert Commission on Pensions in 2007-08. Meredith is a research director at the IRPP.

< http://www.thestar.com/opinion/editorialopinion/article/1147889–fending-off-canada-s-pension-crisis >

If a sense of sour irony could be bottled and sold, Premier Dalton McGuinty would be well on his way to erasing Ontario’s deficit. Instead he’s trying to do it, in part, by hurting this province’s most vulnerable residents while claiming to protect them.

That’s a sorry signal to send in the run-up to Tuesday’s provincial budget. Given Ontario’s $16-billion deficit, McGuinty said this was the “toughest budget by far” since his Liberals were elected in 2003. But, as hard as it was on him, it will be even more difficult to bear by the poor on the receiving end of McGuinty’s changes. And that’s despite reassuring words uttered by the premier on Sunday.

“We are not prepared to balance this budget on the backs of families who may find themselves in difficult circumstances . . . or on the backs of our children,” McGuinty said. He then proceeded to do exactly what he’d said he wouldn’t by announcing that Ontario’s welfare rates will be frozen at their already lamentable level. Even worse, poor children will be denied a $100 payment they were to receive next year.

The location chosen to serve as a backdrop for McGuinty’s bad news announcement was the Cabbagetown Youth Centre, dedicated to helping kids in underserviced neighbourhoods. Call it a mixed blessing for local residents. Yes, McGuinty is shortchanging many of the children who come here. But, on the bright side, they were granted the privilege of sharing in his weekend photo op.

When times are hard, and governments must impose pain on the public, people who are already in dire circumstances need to be shielded, not targeted for additional sacrifice. That’s why McGuinty is wrong to freeze welfare rates, including for the disabled, as the cost of necessities jumps.

According to the latest Statistics Canada release, food prices rose 4.1 per cent, on a year-over-year basis, last month. Energy costs leapt 7.2 per cent in the 12 months to February. Nice time to put the freeze on folks who depend on welfare.

After all, they just got a raise. On Dec. 1 last year Ontario’s 475,000 neediest people were granted a one per cent increase — or $7 a month for an individual receiving help. It means a single mother raising two preschool kids remains 56 per cent below the poverty line.

According to McGuinty, there’s good news coming. Poor families eligible for the Ontario Child Benefit will get an additional $100 next year. He’s holding back only the second $100 that kids were supposed to receive. They’ll wait an extra year for it. Meanwhile, the change saves the government $90 million. A “tough” budget choice, indeed.

In fact, it’s easy for cash-strapped governments to target the disadvantaged; the poor don’t make big political donations and they’re too busy surviving to do much lobbying. What remains to be seen Tuesday is just how bold McGuinty will be in challenging Ontario’s real vested interests. That will show the toughness of this budget, and this premier.

< http://www.thestar.com/opinion/editorials/article/1152203–ontario-targets-the-poor-by-freezing-welfare-and-delaying-child-benefit-increase >

The controversy over raising the age of entitlement for Old Age Security from 65 to 67 is taking attention away from alternative possible reforms of that vital program, and of Canada’s pension system generally.  The allegation that Old Age Security will be unsustainable in future is more a political than a policy judgement, and the substantive evidence does not support it.

Low-income seniors will be hardest hit by increasing the age of entitlement for Old Age Security, since they rely on that program for most of their income and they have a lower lifespan than middle-  and upper-income Canadians.  If the federal government goes ahead with that ill-considered change, then at least it should provide an income benefit to poor seniors aged 65 and 66 so that they do not have to keep working or remain on welfare for two more years.  The mechanism for this already exists, in the form of an extension of the Allowance (which is part of the Old Age Security program).  The federal government could pay for this enhancement out of the billions it will save by raising the age of entitlement to 67.

The Caledon report puts forward other possible changes for public debate, including:

• An ‘actuarially adjusted’ Old Age Security, where the amount of benefit would vary with the age that beneficiaries choose to begin receiving their payments; the Canada and Quebec Pension Plans have that feature.

• Lowering the clawback on the basic Old Age Security pension – either by reducing the income threshold or raising the reduction rate or both – would bring more seniors into the income test and reap more savings for the federal government – part of which could go to paying for increases to benefits we have proposed for the elderly poor.  But at least this would be a progressive measure, affecting better-off seniors and not touching the majority of seniors who have low or average incomes.  However, care must be taken not to lower the clawback so far that it digs into the large group of middle-income seniors for whom Old Age Security is a significant source of income.  The income test for couples should be based on their combined income, not their individual income as at present. One thing that should not be changed is indexation of the income test to the full cost of living.

• Combining Old Age Security, the Guaranteed Income Supplement, the age credit and the pension income credit into a single income-tested program with a progressive design.

• Scrapping the costly and regressive pension income splitting tax expenditure and using the savings to bolster the Guaranteed Income Supplement.

The focus on Old Age Security is important, but it threatens to deflect attention from the key to pension reform – boosting the Canada and Quebec Pension Plans.

< http://www.caledoninst.org/Publications/Detail/?ID=983 >

The federal government is stepping up its rhetoric to justify plans to cut public pension benefits, but remains silent on how it will address seniors’ poverty.

In a speech in Toronto on Tuesday, Human Resources Minister Diane Finley delivered the government’s most nuanced discussion to date of its plans to reform old age security or OAS.

She confirmed that a detailed plan would be presented in the budget, expected next month.

And she targeted her pitch at younger Canadians, saying they will face higher taxes, fewer social programs or larger deficits unless major reforms are started right now.

“We cannot allow ourselves to be pegged into a situation where we are faced with a choice between the country’s financial security, and our commitment to aging Canadians who have worked long and hard to build this great nation,” she told a Canadian Club luncheon.

But Finley did not say anything about how the changes would affect low-income seniors who depend heavily on federal pension benefits to stay above water.

“A lot of Canadian seniors rely on this money,” said Susan Eng, director of advocacy for CARP, an advocacy group for people over age 50.

She attended the speech in the hope of learning more about the government’s plans, but said she left annoyed and concerned about the future for impoverished seniors.

OAS is tightly entwined with the guaranteed income supplement or GIS, a top-up for low-income seniors. The two-part system is widely credited for dramatically reducing poverty among seniors over the last 30 years.

Now that Ottawa is poised to lay out a plan in the next budget that could raise the age of eligibility to 67 from today’s 65, opposition members and a wide spectrum of experts have pointed to the need to consider vulnerable people over 60.

Government officials have made it clear that when cabinet ministers talk about reforming old age security, they are lumping in the guaranteed income supplement with the basic benefit that delivers about $500 a month to 98 per cent of Canadians over 65.

Unless Ottawa takes steps to separate the top-up from the basic old age security benefit, poor seniors would stay on provincial welfare rolls for an extra two years.

Government sources say Ottawa is currently in discussions with provincial governments on this topic.

And since low-income seniors die earlier than high-income seniors, the federal government would be cutting disproportionately into their lifelong retirement benefits, analysts note.

In 2006, the government’s chief actuary found that the average life expectancy at age 65 of people receiving the guaranteed income supplement was much shorter than the life expectancy of those too rich to receive OAS.

He found that for men, poorer seniors were dying 4.5 years earlier than the rich. For women, the difference was 3.4 years.

So chopping two years off their benefits would be far more punishing for the poor than the rich, says Michael Wolfson, a former senior official at Statistics Canada now at the University of Ottawa.

“Cutting back on OAS, and more so GIS, hits those who not only are poorer, but also live fewer years to collect these benefits,” he said in a note.

“This would really hit those with low incomes, and (like the crime bills) could shift hundreds of millions in costs to provincial governments, since many in this age bracket might have to go on social assistance.”

There are ways the government could raise the age of entitlement for old age security but still deliver an income supplement to low-income people under 67, experts say.

But so far, the government has focused the discussion on the need for the government to save money over the long run.

“We will need to ensure that our government has the fiscal room to meet the various needs of an aging population … without putting an undue tax burden on younger generations,” Finley said Tuesday.

While other countries have acted to increase the age of eligibility to keep in line with aging populations, Canada has stood still, she said.

“It’s ticking along as if things haven’t changed demographically in 50 years.

Prime Minister Stephen Harper announced in Davos, Switzerland, last month that he would soon undertake major reforms to Canada’s retirement system. Current arrangements are “unsustainable,” he said, as more and more people retire and fewer and fewer people pay income tax.

The leading option is to gradually raise the age of eligibility to 67 from today’s 65, beginning in a few years’ time.

Other options could include changes to the clawback rules, which require individuals earning more than $69,000 a year to start paying back their OAS benefits.

The reform plan has been met with much skepticism, however, and is still in flux.

Opposition parties have pounded the government for backtracking on promises not to touch transfers to individuals in order to eliminate the deficit.

“Pushing seniors into poverty is not leadership,” New Democrat MP Matthew Kellway said after Finley’s speech. “Providing jobs for Canadians, providing jobs for Canadian youths — that would be leadership.”

Many experts say a discussion about the age of pension-benefit entitlement is worth having, given changing demographics. But they want a broader discussion on how changes would affect the retirement system as a whole.

“The one area that the minister didn’t mention, but I think is really important, is that there also is the guaranteed income supplement,” said Toronto-Dominion Bank’s chief economist, Craig Alexander, after the speech.

But he said that for most people, raising the age of eligibility would only mean marginal changes in the long run — working an extra year or two than originally planned.

“I don’t think that’s a negative because one of the biggest changes of an aging population is skill shortages,” he said.

Still, parliamentary budget officer Kevin Page has questioned the government’s claim that today’s system is unsustainable. He says that with recent changes to the rate of escalation in health transfers to the provinces, the federal government now has fiscal room to continue with old age security as it is now if they choose.

And, more significantly for Harper, Tory caucus members are worried about a backlash from their constituents and are pressing him to be cautious.

— With files from Romina Maurino in Toronto

< http://www.winnipegfreepress.com/business/finley-targets-younger-canadians-with-pitch-to-cut-public-pension-benefits-139850483.html >

The proposal by the federal government to increase the age of eligibility for Old Age Security from age 65 fails to address the problem facing Canadians.

The trouble is not that increases in expenditures for OAS are unsustainable as the baby boomers begin to reach retirement age. Rather it is that Canadians are starting their working lives later than ever, living longer than ever and wish to retire — with lots of money — while in their late 50s or early 60s.

Making clear that this is the predicament shifts the debate from the OAS to the Canada Pension Plan. After all, it is the CPP that provides workers with a significant amount of retirement income.

Making sure that Canadian workers can retire in comfort is possible in only two ways: Require workers to contribute more of their employment income to pension plans, or require workers to stay employed longer. Neither will be popular, but there is no magic bullet.

However, increasing the age of eligibility for OAS from the current 65 will not accomplish either. Workers do not contribute to the OAS, and it is paid to all, not only workers. So increasing its age of eligibility will not increase the retirement security of older Canadians, but rather make it more precarious.

Many countries, including the U.S., Britain and Germany, recently increased the eligibility age for work-related pensions. In contrast, in Canada, early retirement is still encouraged, with CPP benefits available at age 60, and many employer plans, especially those in the public sector, enticing workers into retirement while in their 50s. Canada’s incentive structure encourages people to retire early — exactly the opposite of what is needed today.

Not too surprisingly, when pension plans are structured to permit early retirement, pension payments to retirees are small. Over the past decades, governments, like individuals, have become enthralled with “Freedom 55.” This was great marketing, but lousy public policy.

International experience shows that retirement age reform is more likely to succeed when initiated well before longevity increases or funding problems occur. The U.S. made the decision to move the normal retirement age from 65 to 67 years in the early 1980s, with the eligibility age for early payments rising from age 60 to 62, but the implementation began only in 2000 and will end in 2024. Many other countries have followed the U.S. lead, gradually increasing the age at which early pensions are paid to 62 and full payments to 67.

Canada’s CPP early retirement age at 60 is increasingly an exception when placed in an international perspective. However, increasing OAS to 67 would also be an exception as no country makes people without any work-related pension wait to age 67 for income assistance from the state.

Fixing pensions and providing a comfortable retirement for Canadians cannot be accomplished painlessly. But eligibility ages have been changed before. For example, until the 1960s, age 70 was the point at which the government provided support. It then changed to 65 and in the 1980s — at a time of increasing life expectancy — the CPP lowered it again to 60.

The federal government, by wishing to reform OAS but leave CPP untouched, is failing to engage in strategic pension reform. Rather than rushing to address the wrong problem for the wrong reason, the federal Conservatives should learn from other nations.

Nearly all countries that have reformed income security for older people used independent expert commissions to examine the challenges of rising life expectancy, develop recommendations and build consensus. The work of those commissions ensured that all political parties ultimately supported the policy reforms.

Raising the eligibility ages for workplace pensions will be more acceptable to workers if they understand the trade-offs: maintaining the current retirement age leads to less secure pensions, higher contributions, and lower benefits; raising the retirement age leads to more secure pensions, stable contributions, and higher benefits.

Understandably, politicians are loath to propose that people work longer. However, as with any medicine, the earlier you start, the more effective the results. The creation of an independent expert commission on pension reform, followed by extensive consultations with citizens, is a vital step to protect, and strengthen, Canada’s income security programs.

Thomas Klassen is an associate professor in the Department of Political Science at York University

< http://www.thestar.com/opinion/editorialopinion/article/1133567–fix-cpp-not-oas-to-head-off-a-pension-crisis >

More than a decade ago, the federal and provincial governments started work on a new poverty line, the Market Basket Measure (MBM). After decades of distracting and divisive debates about poverty lines, Human Resources and Skills Development Canada crafted a methodology for the MBM that passed the test of common sense.

These days, the federal government appears more intent on throwing all that work into the garbage heap.

Two years ago, the bean-counters in Ottawa changed the methodology. In particular, they started calculating housing costs in a way that produced figures that were patently absurd. Suddenly, the much-lauded MBM no longer passed the test of common sense.

In Vancouver, for example, the shelter portion of the MBM for a family of four dropped from $12,329 a year for two-bedroom or three-bedroom apartments to $7,455 a year, a drop of almost 40 per cent. The new measure works out to $621 a month, including utilities, in one of the most expensive housing markets in Canada.

Anyone know of a nice two-bed-room or three-bedroom apartment in Metro Vancouver that rents for $621 a month?

While the biggest cuts in the shelter portion of the basket for a family of four occurred in B.C., there were also major cuts elsewhere when the revisions went into effect:

. Toronto dropped 31 per cent, from $13,477 to $9,346 ($779/month).

. Winnipeg dropped 29 per cent, from $8,961 to $6,325 ($527/ month).

. Fredericton dropped 28 per cent, from $9,729 to $7,034 ($586/ month).

. Calgary dropped 27 per cent, from $12,002 to $8,758 ($730/month).

. Ottawa dropped 26 per cent, from $12,373 to $9,134 ($761/month).

. Halifax dropped almost 26 per cent, from $10,034 to $7,476 ($623/ month). The MBM is worth getting right. Unlike other poverty measures, it is intuitive and easily understood because it is based on the actual cost of basic goods and ser-vices. The MBM is also grounded in real local expenses in cities and towns across Canada rather than using a single figure for all major cities regardless of variations in local costs. And it was designed to be reasonable. People could look at the list of local costs and agree that the line made sense; that it reasonably came to a figure that most would agree was an appropriate poverty line. In short, the MBMs were a simple and uncomplicated way to describe poverty, and they were so much simpler to understand than the Statistics Canada low-income cut-offs (or LICOs) traditionally used by most poverty analysts.

The three of us (all longtime researchers of social policy and poverty issues) were early supporters of the MBM. While recent revisions to the costs for food, clothing, transportation and other items in urban and rural regions of each province met the test of common sense, the same could not be said for the revisions to the shelter costs.

We raised our concerns with colleagues in the federal government in September 2010, shortly after the changes were made public.

We saw no corrections when the most recent poverty data were published in June 2011. Human Resources and Skills Development Canada and Statistics Canada ignored our suggestions either to suspend the MBMs last year or include a warning about the housing changes.

< http://www.vancouversun.com/business/destroy+good+poverty+line/6149044/story.html >

In the first few minutes of the first day of February, in the darkened parking lot of a 24-hour Wal-Mart, Tamara, a Syracuse mother of two, is packing a trunk load of milk, eggs and other essentials into a friend’s car.

She’s pleased. She was running out of supplies and carefully timed this visit to buy more food minutes after midnight — the moment her automated “food stamp” card would be topped up for a new month.

“I’ve got two children,” she says. “I’ve got to have food.”

So do 46 million other Americans.

In what is clearly the country’s most troubled period in modern times, a Food Stamp Nation-within-a-nation is swelling to proportions that seemed unthinkable five years ago.

In 2006, there were 26.7 million people on food stamps in America. By September 2011, that number had grown to a record 46.3 million, bigger by far than Canada’s population of 33 million, and equal to that of Spain.

In fact, if the Americans using food stamps constituted a country, they would be the 27th largest nation in the world.

Nowhere is their urgent need more obvious than in the aisles of America’s best-known retailer.

In the first minutes of each month, food stamp purchases at 24-hour Wal-Marts across the country surge as Food Stamp Nation drives through the dark to purchase sorely needed food.

“Our sales for those first few hours on the first day of the month are substantially and significantly higher,” Wal-Mart CEO William S. Simon told a Goldman Sachs conference 18 months ago. “If you really think about it, the only reason somebody goes out in the middle of the night and buys baby formula is that they need it — and they’ve been waiting for it.”

Months later they’re still doing it, in staggering numbers.

“Every time I know that my food stamps are coming in, I (check) the card non-stop waiting for them to land,” says Tamara, a part-time cashier with two daughters, ages six and two.

This month she was lucky to get to Wal-Mart at midnight. She and her unemployed husband do not own a car. “But a friend from out-of-state is visiting, so she drove us.”

Without food stamps, she says, “I’d be struggling to put food on the table.”

Anyone in America can apply for food stamps, technically known as the federal Supplemental Nutrition Assistance Program (SNAP), and millions do.

At the beginning of last year Texas had the most citizens enrolled in the program with more than 3.5 million people; California was number two at 3.3 million and New York state ranked third with 2.8 million.

To be eligible, an individual must not make more than $14,088 per year.

A person with a family of four can’t have a household income exceeding $28,668.

The average payout isn’t handsome: individuals get $133 per month while families average $290.

But overall, the federal program currently costs taxpayers about $75 billion annually — a point of mounting criticism among conservatives who contend that their tax dollars are being parceled out to people who, they believe, are not contributing to America.

Leading that public charge are Republican presidential contender Newt Gingrich and New York City Mayor Michael Bloomberg.

New York City is the only place in America, aside from the state of Arizona, where the local government continues to insist on finger-imaging technology, the digital equivalent to fingerprinting, to verify food recipients.

Some recipients feel that process treats them like criminals.

Bloomberg contends that for “people who are receiving things, rather than dedicating their lives to make it better, (this) is hardly something that’s a great imposition or that anyone should feel stigmatized about.”

That wasn’t exactly the spirit in which the program began.

Launched under John F. Kennedy, first as a pilot project and later permanently by Lyndon Baines Johnson as part of his “War on Poverty,” the program was supported by the American agricultural sector keen to have more markets for its produce, as well as liberals and conservatives in an era when bipartisan agreements on key issues were still possible in America.

Those days, of course, are long gone and the program is now under attack.

“If you ask a liberal, all of these people (on food stamps) are oppressed — people who got screwed by the elite,” says Syracuse University political scientist Jeffrey Stonecash. “If you ask a conservative, these are simply people who made choices, like deciding not to continue their education.”

How Americans view food stamps now, “is entirely a function of one’s ideology,” he says.

Seeking political advantage, Gingrich is making a direct appeal to that part of American society that is now angry, explains Stonecash, people who have lost their homes, their retirement accounts, who have worked hard and now think, “there’s this vast welfare state out there that is consuming huge amounts of money.”

And it’s not just Gingrich.

“There are an awful lot of Republicans who think ‘the welfare state’ has become too big,” Prof. Stonecash observes.

But Gingrich went further last month, treading into still-sensitive territory on America’s racial divide, insisting on calling President Barack Obama “the best food stamp president” ever, and saying African-Americans want “jobs, not food stamps.”

That went too far, says Syracuse University’s Prof. Eric Kingson, calling Gingrich’s attacks “coded racism.”

“The notion that is being put forward is, ‘he’s put all that money into welfare programs for African-Americans.’ That’s the imagery,” says Kingson, “and it’s just plain wrong.”

Kingson is concerned Gingrich’s message is no off-the-cuff remark.

“These kinds of messages are carefully developed and generally tested with polling (to determine) what works among different constituencies,” he says, “. . . like the kind of support he got in South Carolina.”

Gingrich won big in the South Carolina primary.

Democrats in Washington, however, got a huge boost with the announcement that some 243,000 new jobs were created in January and the unemployment rate dipped to 8.3 per cent, its lowest in three years.

Still, those figures don’t mean much on the streets of Syracuse.

Every weekday morning on the second floor of the John H. Mulroy Civic Center on Montgomery St., the “intake” room for Onondaga County, of which Syracuse is the county seat, overflows with people seeking social assistance.

They are of all ages, all races and some have children in tow.

Helpful signs guide the uninitiated: “Applying for Food Stamps: Complete blue & white application — drop in tray in booth 9 — have a seat until your name is called,” instructs one.

Names are called out over a loudspeaker every couple of minutes.

On one window a flyer titled “Food Stamp Rights” informs visitors that anyone can get an application on request, turn it in the same day and receive food stamps — or a notice that they are ineligible — within 30 days.

Out on the street, Jessica Hartz, an unemployed mother of four who used to work at a Price Chopper store, explains that she first got on food stamps in 2008 and still relies on them. They amount to “about $200 a month.” .

She has no family support, she explains: she is divorced; her mother recently died; her father disowned her; and today she lives with a friend.

“It’s good that they’re there,” she says of the stamps. “With this economy now, it’s really hard to get a job. I don’t even know how people are doing it.”

Trevor Bridges is another homeless person without family support. He has been living on his own since he was 15.

He has been relying on stamps for three months and says applying was a debilitating experience.

“They judge you,” he says. “They can be rude. They’ve never been in other people’s shoes.”

Bridges attributes his fate to “my upbringing, and partly because I made a lot of bad choices.” He left school in Grade 9, a decision he now regrets.

“I never once passed a single grade,” he confides. “The teachers just passed me because they didn’t want to deal with me.”

Today he suffers from a chronic nervous condition, so the stamps are important, especially given Syracuse’s tough economy.

Once a vibrant manufacturing hub, today’s Syracuse is home to the highest rates of poverty in the state, with 32 per cent of residents living below the poverty line. That’s more than twice the national rate of 15.1 per cent.

The U.S. Census Bureau in 2010 put the poverty threshold for a single person at $11,344. For a family of four, including two children, it’s $23,133.

“We have some of the poorest census tracts in the United States,” Mayor Stephanie Miner said, “and our poverty rates are actually higher than Buffalo and Rochester.

“We have a growing level of people who are struggling.”

Miner wants some of what Governor Andrew Cuomo allocated to Buffalo last month because of its acute poverty: $1 billion over the next several years.

Statistics for Syracuse’s Onondaga County show that between 2007 and 2011 the number of people and households relying on food stamps skyrocketed.

In 2007, there were more than 41,000 residents relying on food stamps. Last year that leapt to about 68,800.

In 2007, there were just under 20,000 households relying on food stamps. Last year that surged to more than 34,000.

And the costs of running the program shot up too, by 133 per cent, from $48.5 million in 2007 to more than $111 million last year.

Any talk about cutting the federal program troubles Miner.

“You worry about people being hungry and what people will do if they’re hungry,” she says.

“If you were to cut the food stamp program, or eliminate the food stamp program, it would have a dire impact on the city’s residents.”

But there is other infrastructure in place in Syracuse.

The city, which has a population of just 145,000 people, is home to 59 pantries distributing food to the poor.

Studies show that food stamps typically last only 17.5 days, says Peter Parrillo Jr. He is a retired insurance executive directing Cathedral Emergency Services, the Catholic charity that runs one of the city’s biggest food banks, distributing more than $20,000 of groceries per month to about 600 people.

Many food stamp recipients depend on pantries to get them through the rest of the month, he explains.

The pantries also supply recipients with items they’re not allowed to buy with food stamps under government regulations, such as toilet paper and toothpaste.

But for all his good work and concern for the poor, Parrillo doesn’t think government should really be involved.

“I’m not a big believer that the government should be feeding people,” he says in his broad upstate New York accent. “I believe you and I should though.

“But we’ve now created a situation where people are dependent on food stamps.”

Yet the signs of a worsening economic situation are everywhere: people who used to be donors to the charity are now recipients; a dip in donations has led to a reduction in groceries distributed; and the numbers of people in need continues to grow.

“I just don’t see it improving,” says Parrillo. “I see it getting worse. I see more and more people who are dependent on food pantries to feed their children.”

He calls the situation “devastating.”

And a growing number of young people are utterly ill-equipped to help themselves.

“I have 19-year-olds who come in and can’t fill out a form, who can’t spell, who don’t have basic math skills. Where are they going to work?”

Political scientist Stonecash worries they might not work anywhere. If so, they’re likely to become what sociologists are now calling “the left behinds,” second and even third generations of people whose regions have been subjected to chronic long-term unemployment.

“Forty or 50 years ago you could be relatively poor and uneducated and do okay,” he notes. “But the fundamental fact is that the vast array of unskilled blue collar jobs that were once out there — attached to a union or to a factory — are gone.”

< http://www.thestar.com/news/world/uselection/article/1129304–america-s-food-stamp-nation-continues-to-grow >

Faced with an aging population that the Prime Minister claims poses a threat to our social programs, Stephen Harper says we need to make Canada’s retirement-income system sustainable. He hinted that part of the solution might be to raise the age of entitlement for Old Age Security benefits to 67 from 65.

The government has since softened on this point, and assured Canadians that any reforms put in place will ensure the security of retirement benefits for existing seniors and future generations, but the idea of pension reform still looms.

Certainly, the sustainability of the OAS and CPP/QPP is worth a public discussion. But such a debate should be based on fact, not perception.

We are told, for example, that OAS will cost Canadians $108-billion in 2030, up from $36.5-billion today. While both figures are correct, they’re meaningless on their own. What we need to know is whether such costs are affordable in a growing Canadian economy. Is the system unsustainable?

Thankfully, the answer already exists. The Chief Actuary of the OAS system reports regularly (and publicly) on the system’s financial health. In his last published report (the eighth, in 2008), he confirms that the cost of OAS (including the Guaranteed Income Supplement) would rise to $108-billion in 2030. He also points out that, while there were 4.7 Canadians aged 20 to 64 per individual aged 65+ in 2007, that ratio would fall to 2.4 in 2030, or almost in half.

But there are other attributes that need to be remembered. First, OAS is taxable income, so a lot of the moneys paid out go straight back to Ottawa. Second, the OAS is further clawed back depending on your income. If your income exceeds $67,668, then you lose your OAS at a 15-per-cent clawback rate. If you have income of $110,123 or more, you get no OAS at all.

For the GIS, the clawback rate is 50 per cent starting at $3,500, so if you have income in your own right of $16,230 (other than the OAS), you get no GIS. Finally, OAS/GIS costs rise with the consumer price index, whereas tax revenue rises with the growth in GDP. The latter usually rises faster than the former.

So do we need to worry about the sustainability of OAS? Not according to the Chief Actuary.

Based on the assumption that the cost of living would rise 2.5 per cent a year and that earnings would rise at 3.8 per cent a year (i.e., real wage growth of 1.3 per cent per annum), the Chief Actuary projected that the cost of OAS as a percentage of GDP would be 2.2 per cent in 2007; it would then peak at 3.1 per cent in 2030, then fall (as baby boomers die off) to 2.7 per cent in 2050. He further points out that, if these assumptions prove to be true, each generation of retirees will receive an OAS benefit that will be a smaller ratio of their final pay (the replacement ratio) than the generations before.

Does this indicate that the OAS system is unsustainable? Are we facing a demographic avalanche or a glacier?

Raising the eligibility age for OAS is regressive legislation. It’s well known that wealthy Canadians live longer than poorer Canadians. Look at a blue-collar worker with less than a high-school education who retires at 65. That person’s life expectancy could easily be around 10 years. If you raise the age of eligibility for OAS to 67 from 65, you remove 20 per cent of that person’s expected benefits. A wealthy Canadian, on the other hand, could just as easily be looking at a life expectancy of 20 years. Thus, moving this person’s age of eligibility up by two years is a 10-per-cent reduction in their benefits.

So two key questions need to be addressed. First, is raising the age of eligibility for OAS really necessary, or is the system sustainable as is? Second, how does one justify a public policy shift that’s so clearly regressive in its impact?

Let the fact-based debate begin.

Robert L. Brown is an expert adviser with EvidenceNetwork.ca and a fellow with the Canadian Institute of Actuaries. He was a professor of actuarial science at the University of Waterloo for 39 years and a past president of the Canadian Institute of Actuaries.

< http://www.theglobeandmail.com/news/opinions/opinion/lets-debate-oas-based-on-fact-not-perception/article2325809/ >

In a province where billiondollar energy deals happen regularly, a Calgary agency has tried to put a price tag on the cost of poverty.

In a report being released today, Vibrant Communities Calgary estimates poverty costs the Alberta government between $2 billion and $2.4 billion and the overall Alberta economy between $5.1 billion and $7.2 billion – for a total of up to $9.5 billion annually.

“This big $9 billion number doesn’t include the cost the government pays in social services or subsidies,” said Dan Meades, director of Vibrant Communities Calgary. “We were kind of surprised this was the number of just the external cost of poverty and it’s that big. We were surprised nobody fixed this yet.”

Specifically, poverty costs the government $1.2 billion in health care, between $636 million and $1 billion in tax revenue, and $96 million in crime. It also costs the overall Alberta economy.

The report, however, suggest it’s difficult to determine the exact cost of poverty, particularly since it doesn’t take into account social services, welfare, tax or fee subsidies, affordable housing and other government costs.

“As with other provincial studies of this kind,” says the report, “our purpose is not to provide a definitive price tag on the cost of poverty, but to prove economic evidence of the scale of the costs associated with poverty in public services like health care, crime, and in lost economic opportunities for children and people living in poverty.”

One of the first challenges in the report, however, is determining the official poverty line.

Because there is no official poverty line in Canada, each report uses different numbers.

For the basis of Vibrant Calgary’s report, they used the Low-Income Cut-Off model, which includes families who would have to spend a greater proportion of their income on the basics than the average family in their community. Using that model, there are approximately 388,145 people living in poverty, which works out to about 10 per cent of Alberta’s population.

However, the Fraser Institute defines poverty as not being able to meet your basic needs in life.

Senior economist Niels Veldhuis says there are approximately 32,000 Albertans living under that burden where they can’t meet those basic needs – less than one per cent of the population.

“We have to be extremely careful on what we are deeming to be poverty,” he said. “Most of the folks who use poverty numbers use them incorrectly.”

Veldhuis said studies show that 45 per cent of people in the low-income cut-off move into a better position within five years.

“If you are in the bottom 20 per cent, more likely than not, you are a young individual,” he said. “You are either uneducated or (don’t have) a lot of experience, and a lot of those folks are getting education and experience.”

Meades, though, stands by the methodology of the report.

“It’s a difficult piece of work, but the methodology is really well proven,” Meades said. “It’s been done in other provinces . . . We didn’t come up with the methodology on our own.

“Doing the work was tough, but we had the methodology that is pretty irrefutable.”

Jacqueline Ismael, a University of Calgary social-work professor, says the report is on the right track, although likely on the conservative side.

Although she agrees the measurement of poverty is difficult, Ismael said it was time for such a study.

“Poverty is increasing, we know it is increasing,” she said. “The poor are getting poorer and the rich are getting richer.

“Whether we measure it widely (like Vibrant Communities Calgary) or narrowly (like the Fraser Institute), their numbers are increasing and conditions are getting worse off.”

< http://www.calgaryherald.com/business/Poverty+costs+Alberta+year+report+suggests/6107166/story.html >