Is old age security really broken?

Peter Jackson
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Fixing what’s not broken seems to be a guiding principle behind much of what Stephen Harper says and does these days.

In everything from corporate tax rates to unions, the prime minister has said, or at least implied, that deep reforms are needed. Corporations must pay less taxes. Unions must have less leverage.

The old age security (OAS) debate is perhaps most illustrative of Harper’s ability to make a mountain where only a molehill existed before.

In Switzerland last month, Harper raised the spectre of increasing the eligibility age for OAS from 65 to 67. More broadly, he warned that Canada’s social programs will be “unsustainable” without such reforms.

On cue, The Globe and Mail’s Margaret Wente waded into the invented crisis. She talks about the “histrionics” of those alarmed by possible OAS reforms. Yet, Wente goes on to say the real issue is “how to protect everyone else from the tsunami of geezers that’s about to crash on our shores and suck the wealth of future generations out to sea.”

Whose histrionics should we believe?

There can be little doubt that many pension plans have not kept up with the times. That is changing swiftly.

Private employers are switching to defined contribution plans in droves, where employees’ benefits are left entirely at the mercy of the markets. The government has mirrored this trend with proposed legislation on private group pension plans.

But OAS is a different matter. It’s true that actuarial predictions point to a three-fold increase in OAS and Guaranteed Income Supplement (GIS) payouts by 2030, but that figure doesn’t account for economic growth or inflation.

In a paper published Friday, two former high-ranking finance officials questioned the prime minister on his claims that current social programming is unsustainable.

The article, written by Scott Clark and Peter DeVries, is worth taking a look at. It can be found online at

In it, the authors focus on the most obvious indicator of sustainability: the country’s debt-to-GDP (gross domestic product) ratio. Essentially, they examine which programs threaten to raise that ratio to unsustainable levels.

Their findings?

Starting with the March 2010 budget, Harper has managed to push most government expenditures into line for the foreseeable future. He did so through such measures as trimming the defence budget, downloading health-care costs onto provinces and cutting foreign aid.

The cost of OAS, admit Clark and DeVries, is still expected to rise dramatically.

But the predicted ratio of OAS to GDP will only increase by less than one per cent from 2012 to 2030 — and will actually fall back again thereafter. The actual ratio ranges from about 2.25 per cent to 3.14 per cent. That’s hardly an earth-shattering amount when the overall debt-to-GDP ratio in 2008-09 was 28.9 per cent, down from a high of 68.4 per cent in 1995-96.

“Based on these projections,” the authors wrote, “the (status quo) is still sustainable. In fact, the prime minister and his minister of Finance take great pleasure in announcing to the world that Canada’s debt-to-GDP ratio is the lowest among the G7.”

The OAS is a relative pittance. It amounts to $517 or less a month, and only those who make less than $108,000 a year can receive all or part of it. (Clawbacks start at $66,000.)

Besides. there are other ways of tinkering with it.

Harper could eliminate the ability of married couples to split the higher income in order for one or both spouses to qualify. Such a move would still shelter the lower-income ranks.

We can’t be sure why Harper ran the OAS question up the flagpole. But one thing is sure: the motivation seems more idealogical than rational.

Peter Jackson is The Telegram’s commentary editor.


Twitter: pjackson_NL

Organizations: OAS, Globe and Mail, G7

Geographic location: Canada, Switzerland

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Recent comments

  • GO....I am not going anywhere
    February 08, 2012 - 19:41

    I am not sure where you think I am going, but I am not going anywhere. I love Canada, and will continue to stay here an collect cheques from my US offices. I declare my income, pay taxes and enjoy my home. Civilization will definately continue without me, but until I am gone, I will continue to operate my businesses as I see fit while charging businesses hundreds of dollars per hour to advise them how to outsource work, offshore jobs and untimately do more work by paying less wages.

  • Lane
    February 08, 2012 - 17:51

    I say scrap the OAS and enhance the GIS. OAS is redundant, costly and ineffective. It is not targeted to poor seniors - Seniors with up to $67,000 annual net income receive the full amount of OAS, and those with up to $112,000 receive a reduced amount. Why should taxpayers be forced to give money to these relatively wealthy seniors? Save money by scrapping the OAS and increasing the GIS, which is truly targeted toward lower-income seniors.

    • IF you want to exclude wealthy seniors
      February 09, 2012 - 07:26

      If you want to cut wealth seniors out, then be sure to NOT take their money. Social services are great when the benefit, but a system where one pays for a service that they cannot use is unjust and essentially theft. I would rather see the whole system abolished rather than pay into a system I cannot use. Taxpayers should be forced to give payments to everyone who pays into the system...Arguable, the low income seniors have paid LESS into the system, yet you think they should get the most. I have a big problem with this position.

    • Mexican Rose
      February 18, 2012 - 13:46

      While LANE is quite within his right to voice his opinion, for him to suggest scrapping the OAS altogether is ridiculous. Seniors with up to $67,000 net income, or those with income up to $112,000 suffer clawbacks..which in reality, I can see that, BUT if a Senior is earning $112,000. they truly don't need the OAS, yet on the other hand, very likely they were smart by contributing to RRSP's, investments, etc rather than spending their money needlessly. Should be punished for this??. NO WAY!!! There are thousands upon thousands of people who were not earning enough money to be able to contribute to RRSP's, investments, etc. They needed every dollar to support themselves & their families. There are other ways to alleviate the pressure on the OAS, but penalizing innocent people is not the way to go. There are reports after reports than quote facts & figures, stating that the OAS IS sustainable. People are starting to panic...and rightly so.

  • Preventive Maintenance
    February 08, 2012 - 14:07

    The OAS is universal, the GIS is based on income NOT assets. A wealthy retiree with a clever tax shelter might get both. However seniors on subsistance incomes in their own house with or without a mortgage pay no tax to the Fed/Prov govs - nice, fair - but are nailed on Municipal Property tax even though they use minimal town services. Well maybe they could sell their home -but real estate is the same as the stock market - valuation is not cash, if everybody sells the value crashes and they may not pay any capital gains tax anyway. It is not a matter whether the system is broken or not - it is vulnerable and it is plan "B" if public pension funds, (R)RSP's tied to the stock market fail. Harper know this. Change HAS to come. Make his day.

  • Anon
    February 08, 2012 - 12:51

    Again, the point is missed all around. Until you change how money works, you can change nothing. FIAT currency, Fractional Reserve Banking and Compound interest need to end. The banking elite need to lose their monopoly on the worlds monetary systems and people need to take a stand and back their currencies with tangible things like Gold or Oil. You can't create more money than there is energy to service that debt. Money is Debt. Plain and simple. If you don't know what money is than how can you debate whether we should pay more or less taxes. We wouldn't have taxes at all only for the fact that the sum of every canadian dollar is less than amount owed to the central banks who loaned us that money at interest. This is slavery without chains and Harper is a massa, so is bernanke, so is Obama etc. etc.

  • Townie
    February 08, 2012 - 08:36

    All we need to do is double the taxation on corporations.

    • Carl
      February 08, 2012 - 17:54

      Great idea. Then corporations will flee Canada, pay their taxes in other countries, and also lay off hundreds of thousands of taxpaying workers, leaving Canada broke. It's horrifying that some people think raising tax rates through the roof always results in more revenues. So often the opposite is the case.

  • State funded retirement is broken, so I keep my money out of the pool
    February 08, 2012 - 07:53

    From the artice: "Corporations must pay less taxes. Unions must have less leverage..... “how to protect everyone else from the tsunami of geezers that’s about to crash on our shores and suck the wealth of future generations out to sea.”............................................................The two above points raise serious concerns. First, corporations must pay less taxes. I move jobs out of Canada becuase I pay less takes in the US. WHy would I pay more whenI could pay less? I wont. Second, unions must have less leverage. Right again. Not only do I not want to negotiate with unions, I don't want to spend time negotiating, and don't want to pay negotiatiors. I just want to list the wage as a take-it or leave it, and those who take it will work, and those who don't will not work. Canada give unions legal right to force me to spend MY money of negotiating and negotiators, so I choose not to operate in Canada. Lastly, the pension system is broken....the will be more people collecting than paying. SO what I have done is set my self as a contractor and set up an EPSP instead of putting my money in a pool that is shared among Canadians, MY money goes into a pool that is just for me. That way, I control the investments, and rather than contributing to a pool for everyone, I am in a pool just for me. That means that when the boomers break the pension system, I will be unaffected.

    • Chantal
      February 08, 2012 - 12:47

      Then quit whining and go. Civilisation will continue without you.

    • baieboy
      February 09, 2012 - 22:31

      Makes sense to me.