CPP is Completely Sustainable Too

While the cuts to OAS and GIS are my biggest objection to the budget, I want to take a moment to rebut the common belief among Canadians of my age group and younger that CPP "won't be there" for them when they retire.  That belief is a self-fullfilling prophecy because disingenuous neoliberal (try here for a half decent description if you're not sure about the term) politicians, mainly in the Conservative party (though lamentably some Liberals too) will use that to cut, privatize or otherwise end the program.  After all, their ideology doesn't like the idea of the government ensuring a basic floor for citizens anyway, and if we all believe the program is unsustainable, we won't raise a fuss for ending it.  Hell, if the belief really gets lodged deeply enough, we may thank them for "acting responsibly" by taking away our retirement security before it causing the impending doom we baselessly believe it will cause.

Here's what you need to know:  Every 3 years, the Chief Actuary of Canada publishes an Actuarial Report on the financial health of the CPP fund.  These reports follow the same sorts of actuarial methodologies that for-profit life insurance companies employ to confirm that they are charging appropriate rates for their life insurance customers.  Of course such reports require dealing with many unknowns about the future, but short of inventing a flux capacitor and pumping 1.21 gigawatts through it, this is the best anyone can do.

What The Report Says:

The latest report (the 25th) is from December 31, 2009, (well into the Great Recession/New Depression) and can be found here (sorry, PDF).  You're encouraged to read it, but let me jump to the conclusion, from page 12:

Thus, despite the projected substantial increase in benefits paid as a result of an aging population, the Plan is expected to be able to meet its obligations throughout the projection period and to remain financially sustainable over the long term.

(Emphasis added because this statement needs to be said over and over until people get it).   The "projection period" by the way is 75 years (p10), which means that by the best professional projection techniques available, CPP is believed to be healthy until 2084.  I'm 36, and I fully expect CPP to be there for me when I retire sometime between maybe 2036 and 2046.  Babies born today can rely on CPP being there.

Note as well the line about the increase in benefits paid due to the aging population.  I included that because things like the aging boomers, the rise in retirees to workers expected, or smaller family sizes are frequently cited by ordinary people in explaining why they "know" CPP won't survive.  The people running CPP know about these things too, and adjustments have been made over the years to guarantee the health of the program in the face of changing demographics.  Note above this is the 25th actuarial report, CPP's non-partisan officials have been checking into this for quite some time. 

How Credible is the Report?

I'm not an actuary so of course I won't offer a personal opinion on the techniques employed in writing these things.  Luckily, the authors take steps to get second opinions.  Here's what they did to assess the competency of the 25th report:

A panel of three independent Canadian actuaries, selected by the United Kingdom Government Actuary’s Department (GAD) through an arm’s length process, reviewed the Twenty-fifth Actuarial Report on the Canada Pension Plan. The external panel’s findings confirm that the work performed by the Office of the Chief Actuary (OCA) on the Report meets all professional standards of practice and statutory requirements, and states that the assumptions and methods used are appropriate and reasonable. 

I suppose if you're the kind of person who believes that 97%+ of the world's Climate Scientists are arrayed in a massive conspiracy to rig the science to keep their government research grant gravy river flowing, you might believe that Canada's actuaries are conspiring to hide evidence of CPP's imminent downfall from us, but really aside from rampant reality rejection, I don't see how you can do much better than this.

CPP is healthy.  Don't let anyone tell you differently, and if that person is a supposed expert (like some think tank analyst or a politician involved in the pension file) and they don't deal with the Actuarial Reports, you should recognize they are liars trying to con you out of your retirement safety.  By all means, save for retirement if you have the luxury of an income that supports doing so (yes, a "luxury":  half of Canadians live on less than $29,000 a year, which doesn't usually leave much room for RRSPs and TFSAs) but remember CPP is vital to providing a dignified to many Canadians and there's no sound economic reason to take that away from them.

OAS and GIS Cuts Are a Travesty

The Harper's government's first majority budget is being portrayed as some kind of "moderate" or "compromise" budget because it doesn't gut as deeply as the wingnuts in Harper's caucus and Canadian wingnut welfare think tanks like C.D. Howe, Fraser and the Candian Taxpayers Federation have been calling for.   Good job moving the 50 yard line of moderate centrism, wingnuts.  The US political playbook continues to work here.  Canada's "paper of record" the Globe and Mail, calls the budget "prudent."   It's not.  It's a travesty that seeks to reduce the deficit on the backs of poor (future) seniors by delaying eligibility for Old Age Security (OAS) and the Guaranteed Income Suppliment (GIS) retirement income programs (and very little attention is being paid to the GIS cuts, even though they're actually more disturbing). 

Everyone younger than 54 has just had approximately $12,000 in OAS ($6,000/yr) and potentially another $12,000 in GIS taken away from their retirements.  That's $24,000 in 2012 dollars, of course by the time people aged 53 hit 65, assuming 2% inflation, that figure is over $30,000.  The people who qualify for GIS are of course those least able to sustain the loss of this income, and particularly so at age 65, where the potent mix of health issues and workplace age discrimination mean it will be particularly hard for these seniors to find paying work.  There are just only so many Walmart greeter jobs, and for even those you have to be in reasonable health to work them.

Let's be clear that people receiving GIS are poor pushing on destitute.  The income cutoff to receive GIS in 2012 is just over $16,000.  That figure doesn't include OAS benefits, but CPP payments (which max out at about $12,000 a year anyway) would count.  However not everyone qualfies for CPP and you don't necessarily get the maximum depending on your work history contributions to the program.  Also, the numbers aren't trivial, in 2011, over 1.6 million Canadians received GIS. 

The arguments for the OAS changes are the usual stew of mistruths and tendenicious rationalizations:  People live longer ("People" here meaning: "middle to upper class" people; working age poverty has a dramatic effect on life expectancy), there's more retirees per worker than when these programs were created, the boomer bulge (you can safely ignore anyone citing this since boomers are cynically exempted from this cut) and so on.  For GIS, there are no good arguments for cutting it, as this progressive economist notes.  In general, I don't buy any of these arguments, for this basic reason:  Canada today is a much wealthier country than the Canada that created OAS in 1951 under Liberal PM Louis St. Laurent. 

OAS is Completely Affordable if We Want To Afford It

A little math here:  Canada's GDP per-capita in 1970 was $4047 (using 1970 dollars).  I couldn't find a figure for 1951, but 1970 is far enough back and yet modern enough that we had most of the same modern safety net programs in place, and found them evidently affordable at the time.  Using the bank of Canada's inflation calculator that leads to a figure of $24,282 in 2012 dollars.  Canada's actual 2010 GDP per capita?  $46,236.  That's 1.9 times higher even after the biggest recession since the Great Depression.  We're almost twice as wealthy as a society than our 1970 cousins.  According to this, we may actually be more than twice as wealthy (not sure how the difference emerges).  Why could those 1970 Canucks afford OAS but not us?   
This is the Big Picture 

All the sophist minutia about the number of seniors per working age Canadian, the deficit, the percentage of the federal budget this stuff eats and stats on how long people live after 65 cannot withstand this basic fact.  Yes, you can persuade me that OAS will become modestly more expensive as a percentage of our GDP in the coming years, but not that it isn't, at a very fundamental level, affordable.  We're simply allowing this government to make the choice not to afford a decent and humane retirement for all Canadian seniors.  We decided more than a generation ago that leaving seniors in poverty was unacceptable (in fact income programs for seniors pre-date the Great Depression in Canada).  How can we afford this?  Clearly there are people who can pay more taxes.  The answer really is that simple.  Raise the taxes of those who are doing best, who are far wealthier than their 1970 peers were and maintain this basic social intergenerational compact.  We don't need another complicated neoliberal four letter (RRSP, TFSA etc) Rube-Goldberg scheme.  Tax the people with the most money and ensure the poorest seniors aren't left relying on foodbanks and soup kitchens. 

I'm also not moved by arguments around what our OECD/First World peers are doing with pensions.  Neoliberal dogma has infected the whole rich world, and a bunch of other neoliberal government unwilling to tax the rich appropriately to maintain the social contract are just proof the problem is very big, not that reducing retirement guarantees is some kind of hard economic necessity. 

I am looking for the two main opposition leaders to promise to overturn this decision.  Ian Welsh likes what he is seeing from Mulcair on this, so I'm optimistic.  Rae perhaps cannot make promises given that he is supposedly only the interim leader, but NDP supporters should pressure Mulcair and when it comes time to pick a Liberal leader, voters in that process should ask the candidates to commit to reversing this.  It doesn't have to be this way.