OAS not in crisis, no need to soak the seniors plan

Posted on February 12, 2012 in Social Security Debates

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TheStar.com – business
Published On Fri Feb 10 2012.    By David Olive, Business Columnist

Say what you will of Stephen Harper’s success in scaring Canadian seniors with his recent musings about cutting seniors’ benefits. It does not warrant the public debate that the most charitable of the PM’s critics on this issue have tepidly welcomed.

The affordability of a higher-quality health care system does merit debate. Also affordable housing, the cornerstone of poverty reduction. Also education reform that better matches students with a workplace that, as a business think tank complained last week, is suffering a “desperate shortage” of skilled workers despite 1.42 million Canadians out of work.

The PM is wrong about the sustainability of Old Age Security and the Guaranteed Income Supplement, paid to the poorest Canadians. And Canadians have let him know it.

In the short space of a week, an overtly partisan actor – a Liberal Party distracted by a leadership campaign – was able to collect 12,000 signatures in an online petition opposing cuts to seniors’ benefits.

On his return from swanning with the swells in Davos, the improbable venue where Harper first floated his soak-the-seniors idea, the PM was given an earful from his own caucus. They have been inundated with complaints from constituents fearful and angry about the prospect of either themselves or someone they love being deprived of some portion of their average modest $500 a month in OAS payments. (That’s $6,000 a year, considerably below the poverty line. Hence the Guaranteed Income Supplement paid to the poorest seniors.)

Neither Harper or his more excitable ministers have explained why OAS and GIS suddenly are a “crisis.”

Nor have they offered a scintilla of convincing evidence for their case. Which is not surprising, perhaps, given the weight of contrary evidence in the many reports on this topic. But you’d think the PM would at least have read those reports before needlessly frightening a large part of the population.

Nor have the Tories advanced any solutions to their “crisis.” Indeed, the PM and Finance Minister Jim Flaherty have wilted under public pressure and back-pedaled on the issue.

Here are some relevant facts.

• Diane Finley, the federal human resources minister, is correct in noting that, due largely to a baby boom entering retirement years, the number of Canadians 65 and over will roughly double by 2030 to 9.3 million people. And in tandem, OAS and GIS spending by government will triple by that time, to $108 billion.

Experts agree on those figures but dispute their impact. While the OAS and GIS expenditures are growing, so too will the economy and government revenues, to say nothing of inflation.

That prompts Kevin Page, the independent Parliamentary Budget Officer, to make the common-sense observation that “By 2030, the size of the economy is going to be more than double, and budgetary revenues will double. You cannot argue the government has a fiscal sustainability problem.”

The cost of elderly benefits is forecast to rise to almost 21 per cent of government spending by 2030. But thereafter that burden is expected to decline back to current levels, due to economic growth and demographics. The burden “is going to go up, and then it’s going to go down, so where’s the crisis?” Page asks.

• Finley’s “scarems” include the fiscal crisis in Europe, whose more generous public pensions could migrate to Canada, she says.

Fat chance of that. In Canada, seniors’ benefits account for nearly 15 per cent of government program spending. (“Program spending” excludes huge costs like servicing the national debt, which means the actual percentage is even smaller.)

For the average of rich-nation members of the Organization for Economic Cooperation and Development (OECD), that figure is 17 per cent. For Italy, the figure is 30 per cent.

Yes, that comparative generosity does contribute to Europe’s current debt crisis. But what European actually suffers is aftershocks from the collapse of the U.S. housing bubble, in the form of stagnating growth that has made debt payments suddenly onerous. Besides, Italy has just raised its age eligibility from age 60 to 67, matching similar efforts elsewhere in Europe.

• Yet another, perhaps defining, difference between Canada and other countries besides the U.S. is immigration. The population of the Japanese monoculture, which like much of Europe is hostile to newcomers, already is in decline. So is Russia’s. Continental Europe will soon follow. That does put a big burden on a dwindling number of people still in the workforce.

By contrast, Canada will continue its open-door immigration policy, with all the entrepreneurial and technological wealth that comes with it. And the U.S. population is forecast to increase about 40 per cent by mid-century, an incredible feat for a “mature” economy. So yes, we North Americans are aging. But the ranks of our young will soon be growing at a rapid pace.

• There are about half a dozen recent reports on our seniors’ benefits. They all find that OAS and GIS “burdens” are affordable basically forever.

Kevin Page made a big splash Feb. 8 exposing the nonsense of Harper’s crisis-mongering. But Page was only echoing a 2007 report commissioned by Ottawa as part of a larger study overseen by Jack Mintz, a fiscal hardliner.

A 2010 Parliamentary committee recommended no change in OAS and GIS eligibility years. Same with a 2010 report by York University political science professor Thomas Klassen. A 2009 paper by Richard Shillington also commissioned by Ottawa agreed and reminded us that women are especially reliant on seniors’ benefits given their greater longevity.

In 2010 Parliamentary testimony, OECD demographics expert Edward Whitehouse highlighted a fundamental difference between Canada and “Europe and among the East Asian countries, Japan and Korea, whose populations are aging most rapidly.”

Kevin Page is among those experts and media commentators who’ve said a debate on elderly benefits might be useful. Page, like Mintz a fiscal hardliner, would like Ottawa to have more cash for other priorities.

Debates we need, as noted above. But not about seniors benefits, which Page, for one, believes Ottawa can easily afford to increase.

One thing we have long known is that getting and holding a job becomes more difficult with age. Which should give anyone pause about raising eligibility ages for seniors’ benefits.

Wal-Mart Stores Inc. last month did away with its “greeters,” a hallmark of the firm for decades. It was also one of the rare bastions for North American seniors for whom government assistance programs are comparatively skinflint.

Bottom line: We can’t consider ourselves a caring society if we consign those who built the country to anything remotely approaching penury

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