CATHERINE SWIFT, SPECIAL TO FINANCIAL POST | July 20, 2016
One of the ongoing policy themes of the Trudeau government is a supposed focus on youth. As well, most analysts attribute in part the majority election of the federal Liberals in 2015 to a higher-than-usual voting participation rate of younger Canadians, most of whom voted Liberal. Yet despite this superficial “youthful” orientation of the government, many of its key policies will in fact have very negative implications for young Canadians.
An early example was the decision to reduce the age of eligibility for the Old Age Supplement (OAS) to 65 from 67. Programs like the OAS were designed when the average life span was about 70. Now that people are regularly living to 90 and beyond, it doesn’t take a math genius to realize that these programs are no longer financially sustainable. From a political standpoint, the Harper government had already taken the political flak for increasing OAS eligibility to 67 years of age, so why not just leave it alone? As OAS is paid from general tax revenues, not a dedicated, separate fund such as the Canada Pension Plan (CPP), the burden for funding OAS falls on younger taxpayers. And quite a burden it will be, as actuarial estimates of moving the age back to 65 come in at about $11 billion annually up to 2030, growing to $16 billion per year by 2050. As the huge baby boomer age group increasingly becomes eligible for OAS, younger Canadians need to realize this will be their cost to bear.
The first Trudeau government budget was also very bad news for young Canadians. Huge deficits in the $30-billion range, at a time when the economy is not in recession, are inexcusable. The cumulative addition to our debt over the next four years – $100 billion-plus if the 2016 budget documents are to be believed – will fall on future taxpayers. The government has justified these massive deficits by claiming they will stimulate the economy, but if big government spending boosted economic growth Greece, Japan, Venezuela and many others should be leading the world now instead of being mired in economic stagnation.
The recently announced CPP hike is the most recent nail in the coffin. Virtually all objective analysts have for years stated that CPP enhancement was not needed and that the current system does a commendable job of providing retirement security for the vast majority of Canadians, especially those at the lower end of the income scale. Prior to entering politics, even the current Finance Minister Bill Morneau stated “Canadians are actually doing better than they think they are in their retirement planning – and are better off than many of the experts are telling us.”
So if it ain’t broke, why fix it? Part of the reason is that many Canadians believe they will be big winners from a larger CPP, despite facts to the contrary. Another compelling reason is that the very underfunded government employee pension plans, which are integrated with the CPP, will benefit greatly from a CPP expansion. Public sector unions spent many millions of their members’ mandatory dues in the 2015 federal election promoting the election of the Trudeau government, and the CPP changes are a very nice payback. Unfortunately, this payoff comes at the expense of the 80 per cent of Canadians who do not work for government, but who spend in the neighbourhood of $40 billion annually to fund rich government employee pensions. And as usual with such pension changes, younger taxpayers will bear the brunt of the CPP hikes, paying higher premiums up front for little gain in benefits down the road.
So beware, young Canadians. All the glitzy White House dinners and Vogue articles in the world won’t help you pay off the future tax obligations being accumulated in your name by this government. You might want to consider that next time you go to the ballot box. Many commentators have noted in recent years that millennials, those born between 1982 and 2004, could be the first generation in many decades to be worse off than their parents. The types of policies being implemented by the Trudeau government will pretty much guarantee that outcome.
Catherine Swift is president and CEO of Working Canadians