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 iPolitics.ca.
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.
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.