As our parliamentarians returned this week to the House of Commons following the winter recess, the tempestuous tone of the fall session was on full display yet again. When the word surfaced that the Conservative government was considering raising the age of eligibility for Old Age Security (OAS) from 65 to 67, all pundits knew with certainty that the opposition would pounce, as they sure did. Given that OAS most directly impacts Canadians, particularly seniors that are vulnerable, it is the opposition’s duty to hold the government to account when changes to this program are being contemplated.
Governments at times have to make difficult choices, and the Tories should be lauded in their efforts to come to grips with an inescapable problem; a rapidly aging demographic and smaller workforce that will have greater difficulty supporting this greying population. Harper is right to point out that in order to insure the sustainability of social programs, difficult austerity measures might be needed well in advance of a potential tipping point down the road to insure their long-term practicality.
The challenges to the ongoing sustenance of the OAS cannot be understated. John Ivison shows that in actual dollar terms, the cost to Canadians will balloon from $36 billion in 2010 to $108 billion in 20 years. This “increase represents a rise in share of the GDP from 2.3% to 3.1%. Even economist Kevin Milligan of the University of British Columbia who has often suggested the “government’s actions are unnecessary” has said, “that’s not nothing. That’s why it’s reasonable to have a look at it.” (“Note to Rae: Yes, we have a problem”, National Post, February 2, 2012, A6)
The confluences of socio-economic challenges demand that entitlement programs such as OAS be reviewed. Social programs do not exist in isolation, and with finite resources, and an economic growth rate over the next decade projected to be less than previous one means that there will be finite resources to meet burgeoning social demands. Andrew Coyne points out that “if you double the share of the population over 65, you will see a substantial increase in the share of spending going to the elderly.” It follows, then, that “either there will be less to spend on other things, or taxes must be increased-unless you make the difference up by borrowing.” (Andrew Coyne, “We’re getting older, like it or not”, National Post, February 2, 2012, A6)
The unsustainable increase in healthcare spending is intricately linked to the amount of financial resources available for OAS. Coyne notes too that “spending on healthcare has increased from 7% of GDP in 1975 to 12% in 2009”, and is expected to balloon another seven percentage points by 2031, half of which “is due to population aging.” So while a rise in OAS as a percentage of GDP from 2.3% today to 3.1% in 2031 might not seem like much, it does work out to “$12 billion in today’s dollars” and when pitted against skyrocketing health expenditures, the long term viability of the social safety net is not possible without structural reform.
Although there are very compelling policy considerations justifying this discussion and reform, the optics chosen by this government were terrible. Usually the scrupulous tactician, Harper dropped the ball on this file. It was an error in political judgment for him to casually announce potentially significant reform the OAS and the social safety net in Davos, Switzerland. By doing it in a remote location where he was addressing the heads of state of other countries, and not here in Canada, it was as if Harper was hesitant to look Canadians in the eye on a matter of utmost importance to them.
Many Canadians, even those that are working at well paying jobs now, realize that careers are not always secure and that any of us can be vulnerable down the road. Saving comfortably for retirement is a concern that often triggers anxiety, and for Mr. Harper to make this announcement without much empathy played to his weakness that he is at times cold and out of touch with what people are feeling.
Tim Harper also mentions that the Prime Minister was very vague on the specifics of how cumbersome OAS would become in 20 years, and as such, made himself vulnerable to political attacks by a more focused opposition. Although the numeric data does show a significant increase in the dollar figure, and a modest increase as a percentage of GDP, the precise impact of OAS on the treasury in twenty years time is vague. For instance, “by not filling in the blanks, he lets the opposition frame its side of the debate, whether it be the NDP argument that jets and prisons take precedence over poor seniors or the Liberal argument that this was a broken campaign promise by Harper.” (Tim Harper, “Stephen Harper bold but vague on reforming retirement benefits”, Toronto Star, February 1, 2012)
Notwithstanding Harper’s aloof sloppiness, the Liberals and NDP, are either extremely naïve or in denial if they truly believe that our social safety net is impervious to financial solvency down the road. It was surprising to hear Mr. Rae, an extremely articulate, feisty, yet measured leader quip “there is no problem” and that “there is absolutely no justification for doing what he’s doing.” (“John Ivison, Note to Rae: Yes, we have a problem,” National Post, February 2, 2012)
It is politically expedient for the opposition to frame this as a Harper government desire to steal the retirement benefits of Canadians, especially in an adversarial political environment. The opposition should absolutely hold Harper’s feet to the fire, but in a manner that facilitates spirited, rational debate and probes the issues with precision. A vigorous debate can be contentious and adversarial without being amateurish, which has been on full display this week.
It is refreshing see the Conservatives return to an agenda that will be dominated by long-term social and economic matters. This stands in contrast to the controversial, boorish autumn session that delivered controversial items to the most conservative within the Tory base that never withstood minority government scrutiny, such as the scrapping of the gun registry, the contentious crime bill, and dismantling of the Canadian Wheat Board. As they turn the page on this saga, I salute the government for demonstrating a willingness to tackle politically unpopular matters, such as the long-term feasibility of our social safety net and OAS in particular.
What behooves me is that a usually precise, calculating government could have misfired so poorly on the strategic and political front. To be a gutsy, transformational politician is to make potentially unpopular decisions, but to at the very least include the population in the discussion. Mr. Harper’s remote, aloof communications approach on such a salient issue will unlikely incur long-term significant political damage, but my concern is that he might bow to political pressure and recoil from undertaking OAS reform. In the end, the culprit would not be the opposition or the Canadian people, but sound policy falling prey to the machinations of sloppy politics.
