Stephen Harper’s old-age pension cuts unnecessary
TheStar.com – news/canada/politics
Published On Fri Jan 27 2012. By Thomas Walkom, National Affairs Columnist
Typically, Prime Minister Stephen Harper chose somewhere far away to reveal the next stage of his not-exactly-hidden agenda.
Four years ago, he used an international summit in Peru to signal his brief flirtation with Keynesian economic stimulus. This week, a puzzled audience of tycoons meeting in Davos, Switzerland, found themselves privy to Harper’s gratuitous plan to lop chunks from Canada’s Old Age Security system.
Along with the Canada Pension Plan (which Harper says he will not cut), Old Age Security is the major source of income for most Canadians 65 and over. These days, the average OAS pension payout is a little over $500 a month.
Along with a sister program for the ultra-poor, it is credited with lifting thousands of seniors from lives of execrable poverty.
Old-age pensions have always presented a conundrum to rock-ribbed right-wingers. Like many who grew up in the era when Britain’s cost-cutting Prime Minister Margaret Thatcher served as a conservative icon, Harper has little patience for social programs.
His view, expressed over the years in various writings, is that Ottawa should focus on crime and defence (“prisons and armed men” as Friedrich Engels once put it), leaving charity, family, the free market and perhaps the provinces to take care of all else.
However, old-age pensions are popular among older people, many of whom vote Conservative. Former prime minister Brian Mulroney found that out when he tried to gut Old Age Security in the 1980s. In the end, he was forced to compromise.
Tellingly, Harper didn’t mention old-age pension cuts at all during last year’s election campaign.
In Davos, the Prime Minister said his cuts won’t affect current pensioners. Exactly what else he has in mind is unclear.
There is some suggestion he will raise the minimum age, now 65, at which people become eligible for full Old Age Security payments. But he also could de-link these payments from inflation, or lower the family income threshold (now about $69,000) at which they begin to be clawed back.
What is clear from his speech in Davos is that he doesn’t need to do anything.
As the Prime Minister correctly pointed out, Canada is no Greece. Government debt levels, as a percentage of gross domestic product, are low; the federal deficit is being whittled back.
There is no fiscal crisis in this country.
True, the government predicts that the cost of pensions for the elderly, now about $35.6 billion, will triple by 2030. That sounds dire. In fact it means that the pension bill will grow by about 5.6 per cent a year during the period
And when baby boomers start to die off, as they will from about 2020, spending on the elderly will start to decelerate on its own.
What the times do present, however, is political opportunity. The standard conservative critique of Europe, which Harper echoed in Davos, is that social programs have bankrupted the continent. The case of the apocryphal Greek hairdresser able to retire on state pension at 53 is invariably raised.
In fact, the European debt crisis is far more complex. Spain and Ireland, which do not offer generous social programs, are in trouble. Germany, which does, is not.
Arguably, the real root cause of the crisis was the decision by countries with vastly different economies to use a common currency, the euro — a decision that encouraged too much public and private borrowing during the good times and makes repayment now near impossible.
Nonetheless, the myth of pensioner excess provides an easy talking point for those anxious to cut social spending in Canada. The euro may be the true villain of the piece. But the story of the slothful Greek hairdresser is easier to understand.
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