The natural human tendency, when thinking about the future, is to focus on what’s right in front of us. Small things happening now loom large; huge issues evolving steadily in a more distant future are easy to leave to, well, the future.
In Canada, two such very large objects are moving toward us, inch by inch, year by year.
Last week, they moved closer. They are entirely manageable – but not if we ignore them.
The first is elderly benefits paid by Ottawa.
They are rising rapidly and will continue to do so, as outlined in the small print of Finance Minister Chrystia Freeland’s fall economic statement. Media coverage of the budget update was of course focused on things like inflation, booming tax revenues and the shrinking deficit. But as in each budget and update, there are fiscal tables in the back that reveal big trends that aren’t making the news.
Consider the multiyear “outlook for expenses” in Ms. Freeland’s document.
The biggest federal spending item is elderly benefits, mostly comprised of the Guaranteed Income Supplement for low-income seniors, and near-universal Old Age Security. Elderly benefits in 2022-23 are forecast at $69-billion. They’re predicted to hit $96.6-billion in 2027-28.
That’s a jump of 40 per cent in just five years. Ottawa expects elderly benefits to account for half of all new program spending over that time frame, with the share of elderly benefits as a percentage of total program spending rising to 20 per cent from 16 per cent.
Part of this is inevitable: as Baby Boomers age, the number of seniors climbs higher. A second factor is inflation, to which OAS and GIS benefits are indexed – as they should be.
But a third factor in the exploding size of this spending envelope is caused by two political choices. One was a reasonable choice. One was not.
Last year, the Trudeau government permanently increased OAS benefits by 10 per cent, for people 75 and up. Seniors with income as high as $79,000 a year get the full OAS – around $8,200 for those 65 to 74 and about $9,000 for people 75 and older. There’s a clawback on wealthier seniors, but a retired couple earning as much as a quarter-million dollars still get some OAS.
More money for low-income seniors is a good idea, and in 2016, the Liberals bolstered GIS. That was the right move. Poverty among seniors is half that of Canadians in general, thanks to programs like the GIS. But last year’s permanent boost to the OAS is something else. It’s pumping up the deficit, taking money from other worthy causes and effectively raising taxes on the young – all to benefit not just poor seniors, but millions with average and above-average incomes.
It’s the elephant in the budget room. It’s eating more and more tax dollars, but no politician finds it politically expedient to notice. Elderly benefits account for a bigger share of federal spending than the Canada Health Transfer and equalization, combined. Yet while there’s loud debate about health transfers and equalization, there’s zero debate about OAS, the Liberals’ sweetening of the OAS pot – and their earlier move to reverse a Harper government decision to gradually raise the age of eligibility to 67 from 65.
The second looming object is ever-increasing immigration.
On the plus side, immigration is already the reason behind most of the growth in the labour force, and could soon account for the entirety of Canada’s population growth. Ottawa last week said it aims for as many as 550,000 new permanent residents in 2025, up by a third from a record 405,000 last year, and roughly double the level when the Trudeau government was first elected in 2015.
There are good arguments for boosting immigration – but it urgently needs to be accompanied by infrastructure, from more public transit to much more housing. There’s already a widely chronicled housing shortage, from Toronto to Vancouver; Canada is already doing far too little to address it. Ottawa is trumpeting its latest ratcheting up of the population dial, but the steps necessary to fully accommodate millions of newcomers isn’t part of the conversation.
Yes, Canada can properly calibrate seniors benefits to the actual needs of seniors. Yes, Canada can build millions of new homes, to house millions of new Canadians. But not if politicians ignore these issues.