Who’s more vulnerable than our seniors?
‘A ll Canadians deserve to be able to retire with dignity … Seniors can now receive $1,700 more per year.” The tweet went out Tuesday from the prime minister and his social development minister, JeanYves Duclos, to celebrate the package of measures the Liberals have introduced since coming to power that benefit seniors. And who could argue with it?
It would be churlish not to praise the Liberals to the rafters for helping the most vulnerable in our society — and who are more vulnerable than our venerable seniors?
The answer is just about everyone. Poverty for seniors is roughly half what it is for the general population. The genius of this government’s social policy is that it has played on an inherent bias in the media. Not the tired old trope about journalists all being lefties. Some are. Most would boil their grandmothers down for glue for a story. But there is an inherent bias in covering the expenditure of billions of taxpayers’ dollars because, while it’s easy to illustrate the impact of increased spending on seniors or children, it is almost impossible to trace those taxes back to their source and explain alternative uses for that money.
The data from the 2016 Census suggests the “crisis” the Liberals sought to solve in the 2015 election didn’t really exist. Trudeau’s mandate letter to Duclos urged him to “provide more direct help to those who need it,” particularly “the struggling middle class.”
But the data shows this was a political construct designed to siphon votes from people who, while they may have felt themselves under pressure, were better off across the board than a decade prior.
Using the low income cut-off after-tax threshold (below which people would have to devote a larger share of their income than average to necessities like food, shelter and clothing), the census showed the number of poor seniors across Canada had declined from 6.7 per cent in 2005 to 5.1 per cent 10 years later. The proportion of 18-to-64-year-olds beneath the LICO threshold also fell — from 11.7 per cent to 9.9 per cent — but in percentage terms that was still double the number of poor seniors. The share of children in poverty was also declining, even before the extremely generous Canada Child Benefit program was introduced. Income levels were on the rise across the country in the decade prior to 2015. The national median income rose 12.7 per cent, a number that masked huge increases in some provinces like Newfoundland and Labrador (up 37 per cent), Saskatchewan (36.2 per cent) and Manitoba (19.2 per cent). Oneparent families were better off (income up 12.8 per cent); couples with children were better off (a median income increase of 15.7 per cent); even little old ladies were better off.
The promises that are now feeding through into benefits payments saw elderly benefits (the Old Age Security and Guaranteed Income Supplement programs) increase in value by $2.7 billion in 2016/17, according to Canada’s annual financial report, an increase of 5.9 per cent. There are more beneficiaries, but this year’s departmental estimates put that figure at roughly half the percentage spending increase. Children’s benefits have also rocketed, up $4 billion from the $18 billion spent by the Conservatives. Indexation of the CCB started this month and will add an extra $1 billion to the cost every year. Employment insurance payments are up and increases to the Working Income Tax Benefit will feed through into this year’s expenses.
In the last available annual report — 2016/17 — program expenses increased 6 per cent to $287 billion, up $16 billion from the previous year. The projection in the 2018 budget was that the current 2017/18 fiscal year will see spending break the $300-billion mark for the first time.
As a result of the deficit spending, public debt charges rose 5.2 per cent in 2016/17, or $1.3 billion, despite interest rates being at historic lows.
The claim is that the massive upsurge in social spending will give Canadians “the tools, skills and resources they need to be successful.” As an exercise in political marketing, it has been excellent — consistent with the Liberal brand of taking the fear out of everyday life. The plan was conceived ingeniously as a coherent package to provide a guaranteed annual income to seniors and lower-income families. The OAS/GIS increases, the CCB and the new Canada Workers Benefit (formerly the Working Income Tax Benefit) were all designed to mesh together as a social safety net. A single mother with two kids earning $35,000 will get $3,500 a year more under the new system than under the old. Combined with the planned Canada Pension Plan reforms, the elderly benefit enhancement will mean retired seniors will eventually have income in the ballpark of a full-time minimum-wage worker. And they will be able to claim OAS at 65 after the Liberals reversed the Conservative move to increase the eligibility age to 67 (on the basis that the number of retirees will nearly double over the next 20 years).
As Université Laval economics professor Stephen Gordon has pointed out, for people on low income retirement is a salvation and many will see their income rise when they retire.
But that suggests the government is administering aid to the wrong patient. Thomas Sowell, the American economist and social theorist, argued in his 1995 book The Vision of the Anointed that policies favoured by interventionists repeat a “pattern of failure” — “the crisis,” “the solution,” results and the response. In the case of the “war on poverty” in the U.S. in the 1960s, the purpose was to reduce dependency on government. But Sowell claimed dependency on government transfers was declining even before the “war on poverty” began.
He said that number increased after programs like the Economic Opportunity Act of 1964 were introduced. There were more people in poverty in 1992 than in 1964, he said, citing U.S. Census statistics, and the number of people receiving public assistance more than doubled between 1960 and 1977. Federal spending on social welfare programs rose as a percentage of gross national product from 8 per cent in 1960 to 16 per cent in 1974. The Liberals have been adept at creating a political crisis and applying a solution, even if the empirical evidence suggests seniors and median earners were all seeing their incomes rise before any additional intervention.
It is too early to judge the Trudeau government on results, but any day of reckoning must also take into account the alternative uses for those tens of billions of taxpayers' dollars, many of which are being borrowed from future generations.