The wrong path

Should the wrinklies get more dough?

A new front opened in the generational war some days ago when the House of Commons voted in favour of a motion to hike OAS. Give everyone between 65 and 75 a 10% raise, the MPs said. (The over -75 set already saw a similar increase from the Libs.)

The Mills, Zs and Alphas feel like they’re getting it in the ear again. Already pogey for old people is the greatest expenditure Ottawa makes. Four years ago OAS cost $46 billion. This year the tab is $68 billion. In ten years it will rise to $94 billion and by 2060 – when the Millennials will collect – the cost will be $195 billion. Every year.

But wait. MPs want to spend more. The Bloc-sponsored bill would add another $16 billion over the next five years – and forever thereafter. Unless it becomes law, the oppo guys (including the Cons) threaten to defeat the government.

Now, let’s stop and consider a couple of things before we debate whether people should get public money for just becoming old or having a baby.

Canada is a great place, but we’re building up one helluva mortgage. Currently it costs all of us $54 billion a year – more than one thousand million dollars per week – to pay the interest on the money borrowed. And we keep borrowing. The deficit this year (spending less revenues) will be $39.8 billion, which is added to the debt. It’s currently $1.2 trillion.

(Remember, a million seconds is a vacation. A billion seconds is a career. A trillion seconds is 31,688 years.)

Let’s now time-travel back to 1993, when a charismatic and dashing MP with great abs and a blog ran quixotically to be leader of the Progressive Conservative Party, and the next PM. I had two goals: (a) raise awareness of our miserable debt and the folly of government overspending and (b) not come last. (I didn’t.)

To accomplish that I convinced the guys at the Vancouver Board of Trade to ship their debt clock to Ottawa where the leadership convention was being held, then dragged it into the hall. Mark Baker was there. This week he sent me a note, and a picture. “Here’s a photo from the PC convention back in the day… I thought these numbers were extreme at the time,” he writes. “I guess it’s been powered off and stored in a garage somewhere… All the best & thanks for the blog.”

In 1993 we owed $460 billion. The dodgy-looking hairy dude, by the way, was one of my young supporters. Normal people shunned me.

When this photo was snapped it had taken Canada 126 years to amass that mortgage. These days we add the same amount every ten or twelve years. Since the current government took office – and we went through the pandemic – the debt doubled. From $616 billion to $1.2 trillion. There is no plan to balance the budget (so spending is covered by taxes) for at least another decade, when we’ll owe about $300 billion more.

This is why we spend $54 billion on interest, or more than the feds dump into health care. It’s why the government doesn’t and can’t build affordable social housing, and our military has three days’ worth of ammo. The Canada Child Benefit, pharmacare, $10 dollar day care, dental care and wrinkly care are popular and expensive. Add in the public debt interest and the idea of spending $16 billion more on old people – money we don’t have – is worthy of debate.

By the way, here’s the debt clock now (it’s virtual – like everything else).

How do responsible politicians justify this?

They can’t. They don’t and won’t. And they lie. When Chrystia Freeland upped the capital gains tax recently she said, “Canada could finance critical investments by taking on more debt, but that would place an unfair burden on younger generations.” In fact the government is spending so much that the extra tax raised every year will last just five days.

As for the Conservatives, Poilievre told his caucus to vote for the OAS increase proposed by the Quebec MPs. So they did. Even though this will exacerbate spending, augment the debt and pose an extra burden and cost on the young.

“We’re of the view that seniors need more purchasing power and that’s what we signalled with that vote,” he said. “As we develop our platform, we will bring forward a low tax plan that allows seniors to have more powerful pensions and to bring home affordable prices that will allow them to have a dignified retirement.”

As you know, however, the main party plank is to ‘axe the tax’. Maybe it’s spending we should axe first.

But, in contrast, that takes guts.

About the picture: “Long time reader, first time emailer,” writes Philip. “I’ve been following your advice for years (much to the dismay of the nice lady at the bank of Mom, aka Mom). After many years of saving and investing we bought a modest townhouse in the beaches close to work and play that was well within our budget (and following the rule of 90 and not borrowing nearly as much as the bank approved us for). Being debt averse we managed to pay that off with accelerated mortgage payments while still topping up RRSPs and TFSAs. Thanks to the equity we had built up it allowed us to sell and move into a newer, larger detached house outside the city (while slightly bending the rule of 90…) as we recently welcomed twin baby girls! Thanks to a healthy portfolio it has given us the most important thing, the financial flexibility to both take extended maternity and paternity leaves and spend time with our new little ones. Thankfully our first fur son Kobi has adjusted well to the additions to the family (it probably doesn’t hurt that he’s almost 15 years old and his hearing is starting to go, sparing him from listening to the noisy new roommates). Feel free to use his picture if means less felines or worse…a certain non-financial finance minister. Thanks for the blog, look forward to reading it every afternoon.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2024/10/16/the-wrong-path/