KOPYA NG SALIN 🔗
WEBVTT
00:00:00.160 --> 00:00:08.640
There was a federal conservative campaign sign at an event in Quebec recently ahead of a federal by-election, and it read Plus d'argent pour no année.
00:00:08.960 --> 00:00:10.320
More money for our seniors.
00:00:10.480 --> 00:00:14.960
And I think whoever printed it assumed English-speaking Canada would never bother to translate it.
00:00:15.119 --> 00:00:19.519
So today we're talking about that sign and the two policies sitting behind it.
00:00:19.839 --> 00:00:24.320
Classonomics, hosted by Sabrina Maddow and Mike Moffat.
00:00:24.879 --> 00:00:27.440
Yeah, and you wrote a National Post column about this.
00:00:27.519 --> 00:00:30.640
And there's a line in that column that I keep coming back to.
00:00:30.800 --> 00:00:37.119
You said that once you know who these seniors actually are, that sign may as well read, more money for the rich.
00:00:37.359 --> 00:00:38.640
So what did you mean by that?
00:00:38.960 --> 00:00:40.000
Yeah, it might as well.
00:00:40.079 --> 00:00:46.240
And that's because seniors are in Canada by a vast margin, the wealthiest demographic in the entire country.
00:00:46.479 --> 00:00:55.600
So a lot of people still picture the struggling pensioner who's maybe low income when they hear more money for our seniors, but that's not who this is aimed at.
00:00:55.759 --> 00:01:05.519
They're wanting to send money to all seniors, including the vast majority that actually are doing quite well and sitting on a lot of wealth, in particular asset wealth.
00:01:05.680 --> 00:01:08.480
So that picture in people's heads is decades out of date.
00:01:08.640 --> 00:01:14.319
Seniors are, again, now the wealthiest age group in Canada, and senior poverty is really low and declining.
00:01:14.480 --> 00:01:17.599
And we did a great job of fixing that over the last few decades.
00:01:17.840 --> 00:01:20.879
So the thing is what this proposal of theirs actually targets.
00:01:20.959 --> 00:01:24.319
It's not those low-income seniors who do need more help.
00:01:24.400 --> 00:01:30.719
And I think we should help them more, but it's giving money to all seniors, no matter what their wealth or their income.
00:01:30.959 --> 00:01:40.239
So more money for our seniors really means more money for a group that on average is doing better than the younger workers whose taxes would actually be paying for this extra help.
00:01:40.560 --> 00:01:48.079
So the honest version of the sign might as well read, like you said, more money for the rich, paid for by people with a lot less.
00:01:48.640 --> 00:01:49.359
Yeah, absolutely.
00:01:49.439 --> 00:01:50.799
And the data backs that up.
00:01:50.959 --> 00:02:00.480
So if we look at 2023, which is the latest data or year we have data for, the median net worth of senior couples is around$1.1 million.
00:02:01.200 --> 00:02:03.840
Couples that aren't seniors, it's half of that.
00:02:04.079 --> 00:02:05.920
Or we could look at the poverty data.
00:02:06.000 --> 00:02:12.159
You know, children are twice as likely to live in poverty as seniors, and so too are persons with disability.
00:02:12.400 --> 00:02:21.520
But despite all of that, the vast majority of financial transfers from the federal government that go to persons, they go to seniors and not other groups.
00:02:21.759 --> 00:02:25.039
Uh, Generation Squeeze has done some terrific work on this.
00:02:25.199 --> 00:02:31.680
And they show how benefits to seniors is the biggest single expense the federal government has and it's growing quite quickly.
00:02:32.000 --> 00:02:36.719
Old age security by itself is about one in six uh federal dollars.
00:02:36.879 --> 00:02:45.039
And by the end of the decade, it's set to grow, or the seniors' benefits are set to grow to over a hundred billion dollars in annual spending.
00:02:45.199 --> 00:02:53.199
So when a party says, let's add more, they're proposing to grow what is already the single largest thing that the federal government does.
00:02:53.520 --> 00:02:53.759
Right.
00:02:53.840 --> 00:03:00.800
And a lot of people hear old age security and assume it works like a pension, like something you paid into over your career and then it grows.
00:03:00.960 --> 00:03:03.759
But that's not actually how OAS works at all, right?
00:03:03.919 --> 00:03:06.639
I'm wondering if you can walk us through the mechanics.
00:03:07.120 --> 00:03:09.680
Yeah, it's so many people don't seem to understand this.
00:03:09.759 --> 00:03:15.360
And whenever I talk about OAS, I get these kind of comments from people saying, oh, well, I paid into it for years.
00:03:15.599 --> 00:03:16.479
No, you didn't.
00:03:16.639 --> 00:03:18.639
Nobody pays into OAS.
00:03:18.800 --> 00:03:21.280
It's funded by current taxpayers.
00:03:21.439 --> 00:03:25.439
There's no pool of OAS savings that the government draws from.
00:03:25.759 --> 00:03:27.759
Nobody paid into it over their lifetime.
00:03:28.080 --> 00:03:29.520
It's nothing like a pension.
00:03:29.680 --> 00:03:34.479
Instead, it's today's workers and today's taxpayers funding today's seniors.
00:03:34.800 --> 00:03:44.560
Now, the money that seniors get from OAS, it is taxed as income, and there is some means testing, but that means testing is incredibly generous.
00:03:44.800 --> 00:03:50.879
A seniors couple can have a combined income of nearly$200,000 and collect the full amount.
00:03:50.960 --> 00:03:55.439
And even at$300,000, they can still collect some OAS.
00:03:55.599 --> 00:03:58.000
There's no uh complete clawback.
00:03:58.159 --> 00:04:04.400
And keep in mind when we talk about this income of$200,000 or$300,000, almost all of that's passive income.
00:04:04.479 --> 00:04:06.319
You know, it's it's not from working.
00:04:06.560 --> 00:04:17.439
So you can have a senior couple, neither of them work, they own a$5 million home, they own a$2 million cottage, they own both of them outright, no mortgage.
00:04:17.519 --> 00:04:24.000
They have an RRSP worth, say$4
Load full transcript
million that they're pulling$200,000 from every year.
00:04:24.240 --> 00:04:34.240
And despite that, you know, despite that net worth of over$10 million, they're still collecting OAS and in some cases collecting near the full amount of OAS.
00:04:34.399 --> 00:04:36.079
It's absolutely maddening.
00:04:36.319 --> 00:04:37.680
Yeah, that's wild.
00:04:37.839 --> 00:04:44.800
And the thing though, that really got me when I dug into what the conservatives were proposing, it's not just one giveaway, it's two.
00:04:44.959 --> 00:04:51.759
They resurfaced a 2025 election promise to make the first$34,000 of a senior's income tax-free.
00:04:51.839 --> 00:04:57.839
And then on top of that, they're pledging to raise OAS for the 65 to 74 age group.
00:04:58.000 --> 00:05:00.959
So two separate transfers stacked on top of each other.
00:05:01.199 --> 00:05:04.720
Mike, when you put both of those together, what are we really looking at?
00:05:05.439 --> 00:05:15.279
Yeah, it's and it really does compound or or stack together that you have this uh OAS piece that's worth billions, but you also have this other piece that kind of interacts with it.
00:05:15.439 --> 00:05:20.079
And that tax-free uh threshold is money that the government simply never collects.
00:05:20.160 --> 00:05:24.240
So it doesn't show up as spending uh on the government books.
00:05:24.399 --> 00:05:26.480
It shows up as a whole in revenue.
00:05:26.639 --> 00:05:38.399
Uh, the parliamentary budget office estimated that just the uh increase in that uh tax threshold would cost the government roughly$2 billion a year with those costs going up over time.
00:05:38.560 --> 00:05:41.120
So we're we're talking about some serious money here.
00:05:41.600 --> 00:05:48.240
Yeah, and what also gets me is how that compares to benefits aimed at younger families who we know are in desperate need.
00:05:48.399 --> 00:05:51.519
A lot of people aren't even having families as they feel they can't afford them.
00:05:51.680 --> 00:05:58.560
Um, because we know how to means test apparently for young parents and young people, but not seniors.
00:05:58.800 --> 00:05:59.600
Yeah, absolutely.
00:05:59.759 --> 00:06:05.759
So when you look at something like Canada Child Benefits, you know, those start to get phased out at under$40,000.
00:06:06.079 --> 00:06:19.600
And that's one of the reasons why poverty rates for children are so much higher than they are uh for seniors, is because those phase-outs are clawed back at much lower rates of income.
00:06:19.920 --> 00:06:20.160
Right.
00:06:20.240 --> 00:06:20.399
Yeah.
00:06:20.480 --> 00:06:24.000
The Canada Child Benefit uses family income, not individual income.
00:06:24.079 --> 00:06:34.319
And it starts getting clawed back once family income passes about$37,000, which is just above the amount that uh conservatives would like to tax exempt for seniors, ironically.
00:06:34.480 --> 00:06:43.519
But so a young family starts losing support at$37,000, while a senior couple can earn$182,000 and keep every single dollar of OAS.
00:06:43.680 --> 00:06:46.000
And there's something almost darkly funny about that.
00:06:46.079 --> 00:06:52.079
And that$37,000 threshold sits just above the same income conservatives now want to make tax-free for seniors.
00:06:52.240 --> 00:06:58.879
So I think at bare minimum, you'd think eligibility for these programs should be built on the same logic and be standardized.
00:06:59.040 --> 00:07:02.160
But right now, they're almost opposite of one another.
00:07:02.720 --> 00:07:03.759
Yeah, absolutely.
00:07:03.920 --> 00:07:18.959
Because again, you see, you know, you've got these seniors who can have five,$10 million of wealth and they're able to collect, where you've got uh a child who's raised by a low to mid uh income family, and you know, some of that money is getting clawed back.
00:07:19.120 --> 00:07:23.279
And you wrote a column arguing that this whole thing has kind of lost the plot.
00:07:23.439 --> 00:07:33.199
And the part that struck me is that you didn't just object to the OAS increase, though you certainly did, but you said that one of the two conservative proposals could actually be a good idea.
00:07:33.360 --> 00:07:34.879
So could you walk me through that?
00:07:35.199 --> 00:07:35.839
Yep, for sure.
00:07:35.920 --> 00:07:41.759
So again, just to recap for anyone who missed the top, two proposals, the tax-free threshold and the OAS boost.
00:07:41.920 --> 00:07:50.399
And I said that that tax-free threshold could actually be a good policy idea, like letting people keep more of their paycheck is something that we should want.
00:07:50.480 --> 00:07:53.680
And I do think we're grossly overtaxed in Canada.
00:07:53.839 --> 00:07:57.199
But the problem is that they're gatekeeping this to seniors.
00:07:57.439 --> 00:08:10.959
So instead of everyone keeping more of what they earn, younger workers' tax dollars would be used to subsidize a tax cut just for seniors, regardless of how wealthy those seniors are, when in fact it's probably the young workers that could use this help more.
00:08:11.279 --> 00:08:14.959
So if they wanted to make that change for everyone, I'm on board.
00:08:15.120 --> 00:08:23.759
But if they're gonna carve it out for the wealthiest demographic in the country and fund it off the backs of struggling young workers, then that's going in the wrong direction here.
00:08:24.000 --> 00:08:28.319
But the OAS booth is the one that really sets me off from an economist chair.
00:08:28.399 --> 00:08:32.080
Is it as bad as I think it is, or am I being a little bit unfair here?
00:08:32.480 --> 00:08:37.600
Yeah, I don't think you're being unfair at all because there's a generational fairness issue at play here.
00:08:37.759 --> 00:08:47.679
So when you talk about increasing OAS, or when governments talk about increasing OAS, they're talking about taking money from young workers who are struggling to buy a home.
00:08:47.919 --> 00:08:52.240
You
know, they're struggling with uh a labor market that's really not hiring that many people.
00:08:52.399 --> 00:09:00.960
They're struggling with tax brackets that treat somebody who earns, you know,$90,000 and trying to live in Toronto as being wealthy.
00:09:01.200 --> 00:09:16.960
And taking that money from them, this group that's already struggling, and giving it to the wealthiest cohort of the country, who most of them, you know, let's be clear, they got a lot of that wealth by buying a house 40 years ago and sitting on it and doing nothing.
00:09:17.120 --> 00:09:24.159
And, you know, for young workers to be compensating seniors for that seems to be a compensation in the wrong direction.
00:09:24.399 --> 00:09:26.639
And there's also a fiscal side to all this.
00:09:26.720 --> 00:09:34.240
That OAS, as I pointed out, is already the single biggest source of new spending growth that's driving federal deficits.
00:09:34.480 --> 00:09:39.360
And these debts and deficits are, you know, not what you can call an investment.
00:09:39.440 --> 00:09:45.039
You know, it's not infrastructure, it's not building future capacity, it's discretionary spending.
00:09:45.120 --> 00:09:54.960
And again, it's discretionary spending in kind of a regressive way from taking from groups that are struggling to giving it to groups who really don't need the money.
00:09:55.120 --> 00:10:03.360
So I can't think of a single economist or policy person who wouldn't advocate for making OAS payments to be reduced for high-income seniors.
00:10:03.600 --> 00:10:13.440
But let's pivot away for the economics a little bit, you know, because my regular column at the globe is on economics and personal finance, and yours at the post is about politics.
00:10:13.600 --> 00:10:16.320
So I'm going to give you the political question here.
00:10:16.559 --> 00:10:22.799
So I think that this promise must pull well, or else you know parties wouldn't keep making it.
00:10:22.879 --> 00:10:30.240
And we've seen liberals, conservatives, whoever, all run on making OAS and programs like it more generous.
00:10:30.480 --> 00:10:35.840
So why is transferring money to already comfortable seniors such a reliable political move?
00:10:36.000 --> 00:10:39.519
And why is nobody willing to touch it from the other direction?
00:10:39.679 --> 00:10:46.080
It doesn't even seem like the NDP or Greens who try to appeal the younger voters.
00:10:46.240 --> 00:10:48.559
It doesn't seem like even they're willing to go there.
00:10:48.879 --> 00:10:54.799
Yeah, I mean, the simple answer is seniors vote in large numbers and baby boomers are a huge demographic.
00:10:54.879 --> 00:10:56.159
Uh, and every party knows that.
00:10:56.320 --> 00:10:59.200
Unfortunately, younger Canadians still vote at lower rates.
00:10:59.360 --> 00:11:02.000
So the political incentive points one way.
00:11:02.320 --> 00:11:08.399
And particularly for this by-election in Quebec, it's a riding that has a large senior demographic.
00:11:08.559 --> 00:11:15.840
So the idea of taking money from the young and moving it to the old should be so far outside of the range of acceptable politics that you can't even see it.
00:11:16.000 --> 00:11:19.200
And instead, it's just sitting there on a campaign sign.
00:11:19.360 --> 00:11:23.919
And like you said, the other parties aren't even critiquing them on how crazy this is.
00:11:24.159 --> 00:11:32.480
The fact they printed it in French at a Quebec event tells you they knew exactly who the message was for and probably assumed the rest of the country wouldn't be paying attention.
00:11:32.639 --> 00:11:34.159
But what makes it worse is the framing.
00:11:34.320 --> 00:11:40.399
More money for our seniors sounds compassionate, but this isn't going to seniors who are living in actual poverty.
00:11:40.559 --> 00:11:47.279
It's not targeting low-income seniors who are dealing with very real inflation and um a soaring cost of living.
00:11:47.440 --> 00:11:53.039
Instead, it's just going to everyone almost as a vote-buying bribe, no matter how much they already have.
00:11:53.279 --> 00:11:56.559
So it's not really just a fairness complaint either.
00:11:56.720 --> 00:12:00.320
There is also a real economic cost to running the system this way.
00:12:00.480 --> 00:12:02.320
And I think that's the part people miss.
00:12:02.480 --> 00:12:10.399
So I've written about how our ultra-low fertility rate is partly a story of young people feeling like they can't afford the kids they'd otherwise want.
00:12:10.559 --> 00:12:14.879
And when you keep pulling money out of that generation, you're not just making them poorer.
00:12:14.960 --> 00:12:17.120
You're making a bunch of decisions for them.
00:12:17.360 --> 00:12:20.320
So, Mike, from the economic side, where does that show up?
00:12:20.559 --> 00:12:23.279
Yeah, it shows up in a lot of uh little places.
00:12:23.360 --> 00:12:31.840
Uh that, you know, every dollar you take from a younger worker and send it to a comfortable senior is a dollar that's not going into starting a business.
00:12:31.919 --> 00:12:37.679
It's a dollar that's not going into uh a first home or making a bigger family feel possible.
00:12:37.919 --> 00:12:50.799
So if you, you know, kind of aggregate that over an entire country, you know, you get a drag on productivity, you get a drag on entrepreneurship, you get a drag on population growth and a drag on long-run uh growth overall.
00:12:50.960 --> 00:12:55.279
And, you know, those are the things that determine whether a country gets richer over time.
00:12:55.360 --> 00:12:57.200
You know, are we being more productive?
00:12:57.440 --> 00:13:01.279
Are we able to do new new things and grow the economy?
00:13:01.519 --> 00:13:03.200
These things compound.
00:13:03.279 --> 00:13:09.600
Uh, and if you slow that growth over time, you're not going to be nearly as well off as you could be.
00:13:09.759 --> 00:13:12.159
So you're not just moving money around here.
00:13:12.240 --> 00:13:20.720
Like if this was just uh a regressive redistribution, that would be bad enough, but it's also slowing down economic growth.
00:13:20.879 --> 00:13:22.879
So we're getting hit twice here.
00:13:23.440 --> 00:13:26.559
And all of this is happening while we're already deep in the red.
00:13:26.879 --> 00:13:31.440
So this isn't a government who has the luxury of sitting on a surplus deciding how to spend it.
00:13:31.759 --> 00:13:33.039
Yeah, not even close.
00:13:33.120 --> 00:13:38.960
You know, soon federal and provincial debt combined is going to be around three trillion Canadian dollars.
00:13:39.120 --> 00:13:45.759
Uh, and the most recent federal update we had had a deficit around$67 billion or so.
00:13:45.919 --> 00:13:51.679
So we're already spending in our governments are already spending in well beyond what they can bring in.
00:13:51.840 --> 00:13:55.360
And, you know, we should make a distinction between good debt and bad debt.
00:13:55.440 --> 00:14:07.519
You know, if we were borrowing to build a transit line or a port or something that makes the economy more productive down the road, you know, that can pay for itself and then some, you know, that's the kind of debt you want to take on.
00:14:07.600 --> 00:14:10.879
You know, it's like what households do when they they they build a house.
00:14:11.120 --> 00:14:12.399
But this is the other kind.
00:14:12.480 --> 00:14:15.039
You know, this is purely discretionary spending.
00:14:15.200 --> 00:14:22.799
You know, it's it's you know, like a family doesn't really have the money, but going on an expensive vacation and putting on their credit card.
00:14:23.039 --> 00:14:33.120
And again, this is going to the wealthiest cohort in the country and it's making future generations either have to pay down that debt or be stuck with ever-increasing interest payments.
00:14:33.279 --> 00:14:37.519
So it's it's really not good for the economy and it's not a good form of debt.
00:14:37.759 --> 00:14:38.000
Okay.
00:14:38.080 --> 00:14:46.559
So if the goal was actually to support the seniors who need it without just throwing money at the ones who don't, what does a more sane version of this look like?
00:14:47.360 --> 00:14:52.480
Well, we need to start to be honest about what these programs are meant to accomplish.
00:14:52.559 --> 00:14:56.799
You know, OAS and GIS were built to keep seniors out of poverty.
00:14:56.960 --> 00:14:58.799
That's a really important thing to do.
00:14:58.879 --> 00:15:01.759
And that's something, in fact, we should be doing more of.
00:15:02.000 --> 00:15:06.000
And, you know, at least initially, they were a real success there.
00:15:06.159 --> 00:15:09.519
Uh seniors in poverty, as I pointed out earlier, is low.
00:15:09.600 --> 00:15:12.240
It's about half what it is for other groups.
00:15:12.399 --> 00:15:16.240
So the reforms we need isn't about, you know, abandoning anyone.
00:15:16.399 --> 00:15:20.639
It's rather about aiming the support to those who are most in need.
00:15:20.879 --> 00:15:46.879
I would say, in fact, if we reformed OAS thresholds, so basically, you know, have the claw backs be clawed back sooner and actually make the bottom end a little bit more generous for low-income seniors, we could save money, which we could allocate to other programs, and at the same time, actually reduce seniors' poverty even further because we would be targeting those dollars to seniors, to the seniors who actually need them.
00:15:47.039 --> 00:15:50.559
So this isn't for a moment about abandoning seniors.
00:15:50.720 --> 00:15:54.960
Rather, we should be focused on fixing a badly calibrated program.
00:15:55.759 --> 00:15:56.240
Absolutely.
00:15:56.399 --> 00:16:12.559
And I think that's the headline here that this isn't about abandoning seniors or ignoring the fact that there are some low-income seniors for sure who need more help, but they actually need help targeted at them rather than even their um tax dollars going to wealthy seniors that don't need it.
00:16:12.720 --> 00:16:16.240
So we need to make the system fairer for everyone of every age group.
00:16:16.480 --> 00:16:18.639
Thank you everyone for watching and listening.
00:16:18.720 --> 00:16:22.159
And to our producer, Meredith Martin, and our editor, Sean Foreman.
00:16:22.720 --> 00:16:31.440
And if you have any thoughts or questions about bad discretionary spending to put on your credit card, please send us an email to missingmiddle podcast at gmail.com.
00:16:31.759 --> 00:16:33.440
And we'll see you next time.