Old Age Security sustainable in long term: watchdog

The demographic time bomb that will hit Canada once the baby boomers retire won’t cause a fiscal crisis, the country’s budget watchdog says.

OTTAWA — The demographic time bomb that will hit Canada once the baby boomers retire won’t cause a fiscal crisis, the country’s budget watchdog says.

In fact, Parliamentary Budget Officer Kevin Page says the federal government has enough fiscal room to enrich benefits for seniors and cut taxes, or increase spending elsewhere, without breaking the bank.

The new report from the PBO released Wednesday suggests that the debate over Old Age Security reform should be about priorities, not necessity as the Harper Conservatives have so far framed it.

Prime Minister Stephen Harper set off a political fire storm at a speech in Davos last month when he put pension reform on the table as part of the government’s agenda to transform Canada’s economy.

Since, ministers have used terms like “unsustainable” and a “crisis” to defend the need to tackle pension benefits as the number of seniors collecting OAS doubles over the next 20 years.

One option the government is looking at is to raise the age of eligibility for benefits to 67 from the current 65.

But while the Page report finds that the burden on government will indeed increase as the boomers age — from 14.8 per cent of program spending today to 20.9 per cent in 2030-31 — elderly benefits remain within Ottawa’s ability to pay.

That’s because Ottawa gave itself a fiscal sustainability bonus worth about 0.4 per cent of gross domestic product in December, by fixing future health-care transfers to provinces to the growth of the economy plus inflation.

“PBO’s updated long-term debt-to-GDP (gross domestic product) show that the federal fiscal structure is sustainable even under the baseline assumption that there is some additional enrichment to elderly benefit payments,” the report states.

“This indicates that… the federal government could reduce revenue, increase program spending or some combination of both by 0.4 per cent of GDP annually while maintaining fiscal sustainability.”

The bonus is worth about $7 billion during this fiscal period and will rise over time in line with nominal economic growth, Page said.

The report doesn’t break new ground in that Page’s assumptions mirror closely those of the Office of the Chief Actuary, which put the total cost of OAS and the Guaranteed Income Supplement, at about 3.2 per cent of GDP when the retired baby boomer bulge peaks in 2030. That’s only about 0.8 percentage points more than the current burden.

But the new report will add to the political debate about priorities for spending taxpayer money.

Conservative MPs have stressed that the total cost of OAS benefits, which averages about $500 a month to Canadians over 65, will triple from the current $36 billion to $108 billion in 2030. Page says costs are likely to hit $142 billion in 2036-37, assuming some enrichment of the benefits.

The raw numbers, however, obscure the fact that in the interim, Canada’s working age population will continue to grow, as will the economy, while inflation eats away at the relative value of the costs increase.

Opposition parties have attacked the Harper government for pressing ahead with corporate tax reductions and spending on military jets and prisons, rather than on needy seniors.

Page’s report suggests the government can likely afford to do both.

Just Posted

Case of former MLA facing sex-related charges in court

Former Sylvan Lake-Innisfail MLA Don MacIntyre’s case returns to court on May 3

Central Alberta pharmacists decry fee reductions for services

Government funding cuts to Alberta pharmacies will hurt patient care, said about… Continue reading

Horses left in trailer found in the ditch near Bentley returned to owners, no charges laid

Two horses found in an abandoned trailer near Bentley have been returned… Continue reading

RCMP close intersection where Humboldt Broncos bus, transport truck collided

REGINA — Police have closed the intersection where the team bus for… Continue reading

Supreme Court upholds law in cross-border beer case, averting trade shakeup

OTTAWA — The Supreme Court of Canada has affirmed the constitutionality of… Continue reading

WATCH: Red Deer’s newest public art unveiled

Red Deer’s latest “ghost” sculpture is a love letter to the game… Continue reading

WATCH: This is a story about a stoned raccoon at a fire station

An unusual pair showed up in the pre-dawn hours at Fire Station… Continue reading

Plastic makers’ credit ratings may be hit by pollution rules

Plastic packaging makers may be less credit-worthy in the future as governments… Continue reading

Black Press Media acquires two new Alaska newspapers

New Media Investment Group to acquire the Akron (OH) Beacon Journal while Black Press Media takes on daily newspapers in Juneau and Kenai Alaska

‘Dining of the future’: vegan restaurant boom fuelled by meat eaters

Foodies say Canada is in the midst of a renaissance in plant-based… Continue reading

Northbound QEII traffic to return to northbound lanes as contruction continues south of Red Deer

Though the Hwy 2/Gaetz Avenue interchange still has months until completion, some… Continue reading

Howard commencement to feature “Black Panther” Boseman

WASHINGTON — The “Black Panther” is returning to his alma mater to… Continue reading

Armed police will patrol rail stations at royal wedding

LONDON — British officials say armed and undercover police officers will patrol… Continue reading

Power largely restored across Puerto Rico after blackout

SAN JUAN, Puerto Rico — Puerto Rico’s power company said Thursday that… Continue reading

Most Read

Five-day delivery plus unlimited digital access for $185 for 260 issues (must live in delivery area to qualify) Unlimited Digital Access 99 cents for the first four weeks and then only $15 per month Five-day delivery plus unlimited digital access for $15 a month