A senior couple taking a closer look at their budget in the comfort of their home.BERNARD BODO/iStockPhoto / Getty Images
The deficits announced in Ottawa’s fall economic statement remind us that previous governments never worked out how to pay for the healthy retirement of baby boomers.
Now the Trudeau government is left holding the bag, which is very heavy. The economic update reports $150-billion in new spending on retirees between now and 2028, with many billions more to follow.
The Liberals seem content to pass these costs on to the children and grandkids of boomers: both as deficits and as limited spending on the challenges facing younger Canadians, such as housing. The personal finances of younger Canadians are collateral damage.
Grandparents can help fix this by telling politicians, “I don’t want my legacy to be one that damages my kids’ and grandchildren’s generations.”
Here’s the challenge. The “Outlook for Expenses” in the update shows that spending on Old Age Security (OAS) will increase by $115-billion between now and 2028.
The economic statement also adds $70-billion in new spending on medical care – half of which will be used by Canadians who are 65 or older, according to data from the Canadian Institute for Health Information.
Together, these two budget lines add $150-billion in new spending for retirees. They drive up tax payments from younger people for today’s retirees well beyond what those retirees paid toward seniors when they were young.
Even though spending on retirees represents the biggest new investment in the economic statement, it received little attention in the government’s talking points. This prompted Bloc Québécois Leader Yves-François Blanchet to claim mistakenly that the statement included “nothing” for seniors.
Instead, the government’s talking points focused more on housing: $1-billion in grants for new non-profit housing, along with $15-billion more in loans to build apartments. While these figures are important, they are much smaller than the new money for retirees – which does not include loans.
Even if we add all of the Trudeau government’s previously announced loans and grants for housing, the cumulative value would still not rival new spending on retirees.
Nor does adding the new money for $10-a-day child care. Ottawa will invest $16-billion to ensure that child care no longer costs another mortgage-sized payment. This investment is critical, but still small potatoes by comparison with the OAS increases.
Indeed, new spending on OAS is larger than all new spending on child care, the Canada Child Benefit, and Employment Insurance combined.
How to get better at managing your money
This matters when interpreting what is driving the $186-billion in federal deficits between now and 2028 – which accelerate federal debt charges that will be paid disproportionately by younger taxpayers.
Mr. Poilievre describes the deficit as “inflationary spending,” and lays the blame on the Prime Minister.
But that’s a misdiagnosis. The Prime Minister is not responsible for the inadequate retirement income and medical care plans made by governments decades ago.
When boomers came of age as young adults, there were seven working-age residents for every retiree. Now in retirement, boomers want the same or better supports when there are just three workers to pay for every person over age 65.
This means past governments needed to collect enough taxes from boomers during their working years to create a large surplus so there would be a pool of unspent government money on which to draw for their retirement supports.
Unfortunately, past governments found it politically inconvenient to ask boomers to build this surplus. So current governments, federally and provincially, now inherit the problem. Deficits are the outcome.
By not drawing attention to past governments’ poor revenue decisions, Mr. Trudeau makes himself culpable.
I had thought that polls showing younger voters shifting allegiance to the Conservatives may motivate his government to engage more deeply with intergenerational tensions in federal finances to win back their support.
Not so far.
This must signal that Liberals are very nervous about the power of the older voter, because they choose instead to leave themselves politically vulnerable to being bashed by the opposition for alleged inflationary spending or underinvestment in seniors.
If fear of older voters is so politically influential, then grandparents have the power to fix problems in public finances that are squeezing the wallets of their offspring.
Please use your voices and your votes to invite politicians to expose the failures of past governments to work out how to pay for your healthy retirements, and let’s together search for solutions that work for young and old alike.
Dr. Paul Kershaw is a policy professor at UBC and founder of Generation Squeeze, Canada’s leading voice for generational fairness. You can follow Gen Squeeze on Twitter, Facebook, Instagram, and subscribe to Paul’s Hard Truths podcast.
