An Old Excuse
Ottawa is using the retirement of aging baby boomers to justify its decision to slash social programs. But we’ve heard that one before
BY Ellen Russell
Illustration by Raymond Biesinger
Politicians love to claim the moral high ground. They’ll often use an emotional issue to justify their least palatable actions. In other words, they find a scapegoat.
When governments took money from social programs in the 1990s and put it toward the federal deficit instead, Canadians were squeamish about enhancing public coffers at the expense of the poor, the unemployed and other vulnerable groups.
To overcome this obstacle, users of social programs were made out to be lazy welfare bums. While cutting programs for the poor looks bad, disciplining welfare bums can be celebrated as a moral imperative!
Now, with large federal budget surpluses anticipated for the foreseeable future, pressure is building to use these resources to reinvest in social programs. To resist this pressure, the government needs a new scapegoat.
Enter aging Canadians. The government is trying to persuade us that federal surpluses should be used to prepare for the budgetary pressures associated with Canada’s aging population. What a perfect excuse! Who could possibly demand spending on social programs if that money is needed for our elders?
While welfare bums were vilified, this next scapegoat is ostensibly venerated. But the political purpose is the same: it is a red herring designed to persuade Canadians to scale back their expectations for government programs.
The federal government began giving prominence to its “aging Canadians” story in the 2004 federal budget. As baby boomers start retiring in 2010, the government says, there will be more retirees relative to people in the workforce. This means a smaller share of the population will pay taxes on their paycheques. At the same time, older Canadians will be putting more demands on health care and government pension programs.
The government would like you to believe that the budgetary squeeze implied by our aging population is so onerous that we can’t afford to use upcoming budget surpluses to rebuild social programs. But don’t push the panic button quite yet.
There are a few salient points missing from the government’s argument. For example, Canadians have been socking away a lot of money in tax-sheltered retirement plans—about $1.159 trillion as of 2000. As they draw on this money during retirement, they will pay taxes on it. So while more money will be needed for seniors, more tax revenue will be coming from seniors.
And you don’t have to worry about the solvency of the Canada Pension Plan (not that CPP is financed from tax revenues—but scaremongers often ignore such details). Even Finance Minister Ralph Goodale said, as recently as December, that the CPP is on “rock solid” footing.
The government is promoting public anxiety about aging Canadians to justify using the federal budget surplus to repay the public debt. But if the government were seriously expecting significant future budget-pressure related to our aging population, repaying debt would not be a sensible response. Let’s say the government uses $3 billion a year in forthcoming surpluses for debt repayment (a scenario presented in the last Economic and Fiscal Update) until baby boomers start retiring. This will save about $1 billion a year in interest costs by 2010. On projected budget expenses of $187 billion, annual savings of $1 billion won’t make a meaningful difference. The annual contingency reserve alone is three times as much.
And what will Canadians forgo if the government spends $18 billion in debt repayment over the next six years? That $18 billion won’t be spent building hospitals, affordable housing and other infrastructure that seniors need, nor will it go to training the health-care personnel required to provide services to older Canadians. Once the demographic wave hits, it will be too late to make these investments.
While aging Canadians do not represent a credible excuse to avoid spending forthcoming budget surpluses on the government initiatives Canadians need, I don’t want to leave you with the impression that seniors face no problems. Lots of retirement-aged Canadians are in fine shape, thanks in part to years of tax-sheltered savings. But many others who suffered as social programs were cut have long since used up any savings they had.
If the government really cared about aging Canadians, it would provide more support for poor older Canadians. Or better yet, why wait until someone reaches retirement age to address their poverty? Why not just rebuild social programs for all Canadians?
