Justin Trudeau’s destructive promise to lower the retirement age back to 65

One of the reasons I consider Stephen Harper to be best Canadian Prime Minister in my lifetime was his willingness to go out on a limb for politically problematic but beneficial reforms. One such policy was gradually raising the retirement age in the Canada Pension Plan (CPP) from 65 to 67.

Because this was to be phased in gradually over time, it didn’t have an immediate impact on the bottom line of the federal government. As a result, it didn’t seem like a big deal, but it is. It has a huge effect on something even larger, Canada’s unfunded liability burden. While Canada’s federal debt is $616 billion as I write this, Canada’s unfunded liabilities are measured in the trillions of dollars. One reason this amount is less talked about is that it is not money that has already been borrowed. It is the tally for promises made, but not yet paid. A big part of this total comes from promises made to future retirees by the CPP.

The good news is that a relatively small modification to government promises can have an outsize effect on how much the government owes in the future. Think of this as a pivot point or a fulcrum that you can use to move a large boulder with a lever. One such pivot point is the retirement age. Raising it by a couple of years can have a big effect in the unfunded liability column. While such a change doesn’t make the CPP solvent for all time (only raising Canada’s birth rate can do that), it is an important step in the right direction. By raising the retirement age by two years, Harper saved Canada untold billions of dollars and pushed the insolvency date for the CPP much further into the future.

And because it was to be phased in gradually over time, Stephen Harper was able to implement it relatively easily. Perhaps this is why conservatives did not hail it as a great reform like we should have. We shrugged, taking Harper’s leadership for granted. As a result, we made it easy for Justin Trudeau to backtrack on it.

That Justin Trudeau is reversing this beneficial change to Canada’s entitlement system shows how shallow he really is. Say what you will about Jean Chrétien (and there is a great deal negative that can be said about him), Chrétien was wily enough to know a good policy when he saw one. While he may have promised to repeal the GST and renegotiate NAFTA when he campaigned against Mulroney and Campbell, he never really meant it. His method was to get all the political benefit by publicly opposing these measures while owning all the benefit from these wise policies when he broke his promises.

In the real world, a Machiavellian schemer is usually better for a country than a glib underwear model. Of course, an uncharismatic but steadfast reformer is better still.

Comments

[Martin]

This continues the trend to overturn every law or policy implemented by the CPC government, good or bad. A childish obsession with Stephen Harper is all that passes for policy analysis by Justin Trudeau and his acolytes. Trudeau has not the slightest concept of economic or fiscal matters, and remains uninterested in them. This announcement appeals to likewise uninformed people who
think Trudeau is giving back something Harper took away from them. That it puts Canada out of step with most democratic partners is a given, but most of these have elected serious leaders.

[monkey]

Absolutely a dumb decision. We have an aging population and like most other OECD Countries raising the retirement age makes sense. I would have raised it to 70, but at least the changes were in the right direction. In most European countries, this is a non-partisan issue that parties on both sides of the spectrum support. The problem with Trudeau, not just here, but elsewhere is he is great at making promises but has no idea of how to pay for them. Unfortunately I also blame us as Canadians to as far too many people in the public expect more from the government than what is realistic, thus why fiscally irresponsible ones are winning and responsible ones not. If we had more realistic expectations and started asking what we could do for our country, not what our country can do for us, maybe politicians wouldn't be doing this, but unfortunately promising the moon wins elections, realistic ones do not. I truly fear for our future.

[Boorshnik Greesh]

Once again you've nailed it. Le Dauphin has his blinkers on, and is forging ahead with his scheme of erasing every common sense move made by PM Harper, returning the country to "the way Daddy left it".

[WiseGuy]

More proof that Trudeau is a blundering fool who should never have been elected. But look how much Obama and the Hollywood media loves him.

[joeFrmEdm]

It was only OAS not CPP...

[Cincinnatus]

Hi Joe From Edmonton:

Thanks for the correction.

[monkey]

"This continues the trend to overturn every law or policy implemented by the CPC government, good or bad. A childish obsession with Stephen Harper is all that passes for policy analysis by Justin Trudeau and his acolytes. Trudeau has not the slightest concept of economic or fiscal matters, and remains uninterested in them"

Exactly, just because we voted for change doesn't mean you undo everything the previous leader brought in good or bad. Chretien unlike Trudeau at least left in place many of Mulroney's good policies like NAFTA and the GST. I am fine if Trudeau wants to fine tune this, but reversing it is just silly. If they wanted to replace with a sliding scale whereby it would be 65 for manual labour jobs while 70 for office jobs that is one option.

I've noticed a lot on the left in the US and Europe are thinking he will be the beginning of a progressive movement sweeping across the developed world, but I am quite skeptical. While things go in their ebbs and flows, I suspect any right or left wing swing will have little to do with Trudeau. Besides in Europe all signs are they are moving rightward not leftward while in the US it's only moving leftward in the sense the GOP hasn't managed to find a way to do better amongst non-whites, but if they can find a way to do so, that will end that trend too.

[JohnT]

The only thing I would add or correct is that there really is no such thing as retirement age anymore. The courts have ruled a mandatory retirement age unconstitutional except for a very few select occupations (firefighting, for example). There's no real retirement age anymore, just an age at which you choose to stop working and begin drawing your pensions (including drawing from your RRSP's). Given the demographics of the nation, extended life expectancy and the fact that people don't automatically "retire" at 65 anymore, it makes a whole lot of sense to raise the OAS eligibility to 67. Harper's plan gave people lots of lead time. They simply need to plan ahead and save enough to fill in that 2 year gap (or whatever) between the time they actually "retire" from the work force and the time they begin drawing OAS (which given the claw back is less important for many people now.)