The Canadian Minister of Finance has stubbornly flown in the face of expert advice from the Parliamentary Budget officer and unnecessarily raised the age of eligibility for Canadian old age pensions from 65 to 67. The change will be phased in over six years beginning in 2023 and be fully operational by 2029. This is about the only good thing about the proposed changes because it gives a new alternative government elected in a future election the opportunity to reverse this bad policy before it is fully implemented. The report of the Parliamentary budget officer who is a non partisan servant of Parliament and therefore the Canadian people has a full report available on the internet which clearly refutes the government’s argument and claim that the OAS is unsustainable in its current form.
In fact, the as the report’s author states ” Seniors’ benefits do not threaten Canada’s fiscal sustainability.” Even if we assume full indexation to inflation and take into account the changing demography of the country, the OAS system in no way undermines fiscal sustainability. With full indexation the system which currently costs 2.2 % of the GDP would cost 3.0 % of the GDP in 2031/32 and then decline to 1.8 % of the GDP in later years.
Even if government revenues are restricted to the historically low level of 15 % of the GDP, 2 percentage points below the average over the past fifty years the system is totally sustainable and no threat to Canadian fiscal sustainability. It is worthwhile to read the short paper in full. Its available from the Parliamentary budget office here. at (/www.carp.ca/wp-content/uploads/2012/02/Federal-Fiscal-Sustainability-Benefits.pdf). The budget also eliminates some 19,000 plus civil service jobs which is ill advised at a time when unemployment is still elevated and the recovery not fully developed. I will deal with this aspect of the budget and its employment, growth and debt projections in a post later today.