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Stealing From the Future: The High Cost of Senior Benefits · The Missing Middle Podcast

• 0:00
  SPEAKER_02: 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.
• 0:08
  SPEAKER_02: More money for our seniors.
• 0:10
  SPEAKER_02: And I think whoever printed it assumed English-speaking Canada would never bother to translate it.
• 0:15
  SPEAKER_02: So today we're talking about that sign and the two policies sitting behind it.
• 0:19
  SPEAKER_01: Classonomics, hosted by Sabrina Maddow and Mike Moffat.
• 0:24
  SPEAKER_00: Yeah, and you wrote a National Post column about this.
• 0:27
  SPEAKER_00: And there's a line in that column that I keep coming back to.
• 0:30
  SPEAKER_00: You said that once you know who these seniors actually are, that sign may as well read, more money for the rich.
• 0:37
  SPEAKER_00: So what did you mean by that?
• 0:38
  SPEAKER_02: Yeah, it might as well.
• 0:40
  SPEAKER_02: And that's because seniors are in Canada by a vast margin, the wealthiest demographic in the entire country.
• 0:46
  SPEAKER_02: 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.
• 0:55
  SPEAKER_02: 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.
• 1:05
  SPEAKER_02: So that picture in people's heads is decades out of date.
• 1:08
  SPEAKER_02: Seniors are, again, now the wealthiest age group in Canada, and senior poverty is really low and declining.
• 1:14
  SPEAKER_02: And we did a great job of fixing that over the last few decades.
• 1:17
  SPEAKER_02: So the thing is what this proposal of theirs actually targets.
• 1:20
  SPEAKER_02: It's not those low-income seniors who do need more help.
• 1:24
  SPEAKER_02: And I think we should help them more, but it's giving money to all seniors, no matter what their wealth or their income.
• 1:30
  SPEAKER_02: 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.
• 1:40
  SPEAKER_02: 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.
• 1:48
  SPEAKER_00: Yeah, absolutely.
• 1:49
  SPEAKER_00: And the data backs that up.
• 1:50
  SPEAKER_00: 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.
• 2:01
  SPEAKER_00: Couples that aren't seniors, it's half of that.
• 2:04
  SPEAKER_00: Or we could look at the poverty data.
• 2:06
  SPEAKER_00: You know, children are twice as likely to live in poverty as seniors, and so too are persons with disability.
• 2:12
  SPEAKER_00: 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.
• 2:21
  SPEAKER_00: Uh, Generation Squeeze has done some terrific work on this.
• 2:25
  SPEAKER_00: And they show how benefits to seniors is the biggest single expense the federal government has and it's growing quite quickly.
• 2:32
  SPEAKER_00: Old age security by itself is about one in six uh federal dollars.
• 2:36
  SPEAKER_00: 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.
• 2:45
  SPEAKER_00: 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.
• 2:53
  SPEAKER_02: Right.
• 2:53
  SPEAKER_02: 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.
• 3:00
  SPEAKER_02: But that's not actually how OAS works at all, right?
• 3:03
  SPEAKER_02: I'm wondering if you can walk us through the mechanics.
• 3:07
  SPEAKER_00: Yeah, it's so many people don't seem to understand this.
• 3:09
  SPEAKER_00: And whenever I talk about OAS, I get these kind of comments from people saying, oh, well, I paid into it for years.
• 3:15
  SPEAKER_00: No, you didn't.
• 3:16
  SPEAKER_00: Nobody pays into OAS.
• 3:18
  SPEAKER_00: It's funded by current taxpayers.
• 3:21
  SPEAKER_00: There's no pool of OAS savings that the government draws from.
• 3:25
  SPEAKER_00: Nobody paid into it over their lifetime.
• 3:28
  SPEAKER_00: It's nothing like a pension.
• 3:29
  SPEAKER_00: Instead, it's today's workers and today's taxpayers funding today's seniors.
• 3:34
  SPEAKER_00: 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.
• 3:44
  SPEAKER_00: A seniors couple can have a combined income of nearly$200,000 and collect the full amount.
• 3:50
  SPEAKER_00: And even at$300,000, they can still collect some OAS.
• 3:55
  SPEAKER_00: There's no uh complete clawback.
• 3:58
  SPEAKER_00: And keep in mind when we talk about this income of$200,000 or$300,000, almost all of that's passive income.
• 4:04
  SPEAKER_00: You know, it's it's not from working.
• 4:06
  SPEAKER_00: 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.
• 4:17
  SPEAKER_00: They have an RRSP worth, say$4 million that they're pulling$200,000 from every year.
• 4:24
  SPEAKER_00: 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.
• 4:34
  SPEAKER_00: It's absolutely maddening.
• 4:36
  SPEAKER_02: Yeah, that's wild.
• 4:37
  SPEAKER_02: 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.
• 4:44
  SPEAKER_02: They resurfaced a 2025 election promise to make the first$34,000 of a senior's income tax-free.
• 4:51
  SPEAKER_02: And then on top of that, they're pledging to raise OAS for the 65 to 74 age group.
• 4:58
  SPEAKER_02: So two separate transfers stacked on top of each other.
• 5:01
  SPEAKER_02: Mike, when you put both of those together, what are we really looking at?
• 5:05
  SPEAKER_00: 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.
• 5:15
  SPEAKER_00: And that tax-free uh threshold is money that the government simply never collects.
• 5:20
  SPEAKER_00: So it doesn't show up as spending uh on the government books.
• 5:24
  SPEAKER_00: It shows up as a whole in revenue.
• 5:26
  SPEAKER_00: 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.
• 5:38
  SPEAKER_00: So we're we're talking about some serious money here.
• 5:41
  SPEAKER_02: Yeah, and what also gets me is how that compares to benefits aimed at younger families who we know are in desperate need.
• 5:48
  SPEAKER_02: A lot of people aren't even having families as they feel they can't afford them.
• 5:51
  SPEAKER_02: Um, because we know how to means test apparently for young parents and young people, but not seniors.
• 5:58
  SPEAKER_00: Yeah, absolutely.
• 5:59
  SPEAKER_00: So when you look at something like Canada Child Benefits, you know, those start to get phased out at under$40,000.
• 6:06
  SPEAKER_00: 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.
• 6:19
  SPEAKER_02: Right.
• 6:20
  SPEAKER_02: Yeah.
• 6:20
  SPEAKER_02: The Canada Child Benefit uses family income, not individual income.
• 6:24
  SPEAKER_02: 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.
• 6:34
  SPEAKER_02: 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.
• 6:43
  SPEAKER_02: And there's something almost darkly funny about that.
• 6:46
  SPEAKER_02: And that$37,000 threshold sits just above the same income conservatives now want to make tax-free for seniors.
• 6:52
  SPEAKER_02: So I think at bare minimum, you'd think eligibility for these programs should be built on the same logic and be standardized.
• 6:59
  SPEAKER_02: But right now, they're almost opposite of one another.
• 7:02
  SPEAKER_00: Yeah, absolutely.
• 7:03
  SPEAKER_00: 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.
• 7:19
  SPEAKER_00: And you wrote a column arguing that this whole thing has kind of lost the plot.
• 7:23
  SPEAKER_00: 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.
• 7:33
  SPEAKER_00: So could you walk me through that?
• 7:35
  SPEAKER_02: Yep, for sure.
• 7:35
  SPEAKER_02: So again, just to recap for anyone who missed the top, two proposals, the tax-free threshold and the OAS boost.
• 7:41
  SPEAKER_02: 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.
• 7:50
  SPEAKER_02: And I do think we're grossly overtaxed in Canada.
• 7:53
  SPEAKER_02: But the problem is that they're gatekeeping this to seniors.
• 7:57
  SPEAKER_02: 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.
• 8:11
  SPEAKER_02: So if they wanted to make that change for everyone, I'm on board.
• 8:15
  SPEAKER_02: 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.
• 8:24
  SPEAKER_02: But the OAS booth is the one that really sets me off from an economist chair.
• 8:28
  SPEAKER_02: Is it as bad as I think it is, or am I being a little bit unfair here?
• 8:32
  SPEAKER_00: Yeah, I don't think you're being unfair at all because there's a generational fairness issue at play here.
• 8:37
  SPEAKER_00: 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.
• 8:47
  SPEAKER_00: You know, they're struggling with uh a labor market that's really not hiring that many people.
• 8:52
  SPEAKER_00: They're struggling with tax brackets that treat somebody who earns, you know,$90,000 and trying to live in Toronto as being wealthy.
• 9:01
  SPEAKER_00: 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.
• 9:17
  SPEAKER_00: And, you know, for young workers to be compensating seniors for that seems to be a compensation in the wrong direction.
• 9:24
  SPEAKER_00: And there's also a fiscal side to all this.
• 9:26
  SPEAKER_00: That OAS, as I pointed out, is already the single biggest source of new spending growth that's driving federal deficits.
• 9:34
  SPEAKER_00: And these debts and deficits are, you know, not what you can call an investment.
• 9:39
  SPEAKER_00: You know, it's not infrastructure, it's not building future capacity, it's discretionary spending.
• 9:45
  SPEAKER_00: 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.
• 9:55
  SPEAKER_00: 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.
• 10:03
  SPEAKER_00: 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.
• 10:13
  SPEAKER_00: So I'm going to give you the political question here.
• 10:16
  SPEAKER_00: So I think that this promise must pull well, or else you know parties wouldn't keep making it.
• 10:22
  SPEAKER_00: And we've seen liberals, conservatives, whoever, all run on making OAS and programs like it more generous.
• 10:30
  SPEAKER_00: So why is transferring money to already comfortable seniors such a reliable political move?
• 10:36
  SPEAKER_00: And why is nobody willing to touch it from the other direction?
• 10:39
  SPEAKER_00: It doesn't even seem like the NDP or Greens who try to appeal the younger voters.
• 10:46
  SPEAKER_00: It doesn't seem like even they're willing to go there.
• 10:48
  SPEAKER_02: Yeah, I mean, the simple answer is seniors vote in large numbers and baby boomers are a huge demographic.
• 10:54
  SPEAKER_02: Uh, and every party knows that.
• 10:56
  SPEAKER_02: Unfortunately, younger Canadians still vote at lower rates.
• 10:59
  SPEAKER_02: So the political incentive points one way.
• 11:02
  SPEAKER_02: And particularly for this by-election in Quebec, it's a riding that has a large senior demographic.
• 11:08
  SPEAKER_02: 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.
• 11:16
  SPEAKER_02: And instead, it's just sitting there on a campaign sign.
• 11:19
  SPEAKER_02: And like you said, the other parties aren't even critiquing them on how crazy this is.
• 11:24
  SPEAKER_02: 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.
• 11:32
  SPEAKER_02: But what makes it worse is the framing.
• 11:34
  SPEAKER_02: More money for our seniors sounds compassionate, but this isn't going to seniors who are living in actual poverty.
• 11:40
  SPEAKER_02: It's not targeting low-income seniors who are dealing with very real inflation and um a soaring cost of living.
• 11:47
  SPEAKER_02: Instead, it's just going to everyone almost as a vote-buying bribe, no matter how much they already have.
• 11:53
  SPEAKER_02: So it's not really just a fairness complaint either.
• 11:56
  SPEAKER_02: There is also a real economic cost to running the system this way.
• 12:00
  SPEAKER_02: And I think that's the part people miss.
• 12:02
  SPEAKER_02: 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.
• 12:10
  SPEAKER_02: And when you keep pulling money out of that generation, you're not just making them poorer.
• 12:14
  SPEAKER_02: You're making a bunch of decisions for them.
• 12:17
  SPEAKER_02: So, Mike, from the economic side, where does that show up?
• 12:20
  SPEAKER_00: Yeah, it shows up in a lot of uh little places.
• 12:23
  SPEAKER_00: 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.
• 12:31
  SPEAKER_00: It's a dollar that's not going into uh a first home or making a bigger family feel possible.
• 12:37
  SPEAKER_00: 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.
• 12:50
  SPEAKER_00: And, you know, those are the things that determine whether a country gets richer over time.
• 12:55
  SPEAKER_00: You know, are we being more productive?
• 12:57
  SPEAKER_00: Are we able to do new new things and grow the economy?
• 13:01
  SPEAKER_00: These things compound.
• 13:03
  SPEAKER_00: Uh, and if you slow that growth over time, you're not going to be nearly as well off as you could be.
• 13:09
  SPEAKER_00: So you're not just moving money around here.
• 13:12
  SPEAKER_00: Like if this was just uh a regressive redistribution, that would be bad enough, but it's also slowing down economic growth.
• 13:20
  SPEAKER_00: So we're getting hit twice here.
• 13:23
  SPEAKER_02: And all of this is happening while we're already deep in the red.
• 13:26
  SPEAKER_02: So this isn't a government who has the luxury of sitting on a surplus deciding how to spend it.
• 13:31
  SPEAKER_00: Yeah, not even close.
• 13:33
  SPEAKER_00: You know, soon federal and provincial debt combined is going to be around three trillion Canadian dollars.
• 13:39
  SPEAKER_00: Uh, and the most recent federal update we had had a deficit around$67 billion or so.
• 13:45
  SPEAKER_00: So we're already spending in our governments are already spending in well beyond what they can bring in.
• 13:51
  SPEAKER_00: And, you know, we should make a distinction between good debt and bad debt.
• 13:55
  SPEAKER_00: 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.
• 14:07
  SPEAKER_00: You know, it's like what households do when they they they build a house.
• 14:11
  SPEAKER_00: But this is the other kind.
• 14:12
  SPEAKER_00: You know, this is purely discretionary spending.
• 14:15
  SPEAKER_00: 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.
• 14:23
  SPEAKER_00: 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.
• 14:33
  SPEAKER_00: So it's it's really not good for the economy and it's not a good form of debt.
• 14:37
  SPEAKER_02: Okay.
• 14:38
  SPEAKER_02: 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?
• 14:47
  SPEAKER_00: Well, we need to start to be honest about what these programs are meant to accomplish.
• 14:52
  SPEAKER_00: You know, OAS and GIS were built to keep seniors out of poverty.
• 14:56
  SPEAKER_00: That's a really important thing to do.
• 14:58
  SPEAKER_00: And that's something, in fact, we should be doing more of.
• 15:02
  SPEAKER_00: And, you know, at least initially, they were a real success there.
• 15:06
  SPEAKER_00: Uh seniors in poverty, as I pointed out earlier, is low.
• 15:09
  SPEAKER_00: It's about half what it is for other groups.
• 15:12
  SPEAKER_00: So the reforms we need isn't about, you know, abandoning anyone.
• 15:16
  SPEAKER_00: It's rather about aiming the support to those who are most in need.
• 15:20
  SPEAKER_00: 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.
• 15:47
  SPEAKER_00: So this isn't for a moment about abandoning seniors.
• 15:50
  SPEAKER_00: Rather, we should be focused on fixing a badly calibrated program.
• 15:55
  SPEAKER_02: Absolutely.
• 15:56
  SPEAKER_02: 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.
• 16:12
  SPEAKER_02: So we need to make the system fairer for everyone of every age group.
• 16:16
  SPEAKER_02: Thank you everyone for watching and listening.
• 16:18
  SPEAKER_02: And to our producer, Meredith Martin, and our editor, Sean Foreman.
• 16:22
  SPEAKER_00: 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.
• 16:31
  SPEAKER_02: And we'll see you next time.