Canada's Finance Minister Jim Flaherty delivers his budget in the House of Commons on Parliament Hill in Ottawa March 29, 2012.
Credits: REUTERS/Chris Wattie
OTTAWA -- There are two items in Jim Flaherty's eighth federal budget that make it one for the ages, indeed, one of the most significant federal budgets of all time.
First, there is the announcement that the penny will be withdrawn from circulation. For that item alone, Flaherty will be cheered or jeered into the history books as the man who killed the copper coin.
But the end of the penny, notable as it is, is unlikely to have any great impact on the way Canadians or their governments go about their business.
That can't be said for the second history-making change Flaherty announced -- raising the age of eligibility for Old Age Security benefits from 65 to 67.
This change will fundamentally affect the lives of millions of Canadians and will have far-reaching and possibly still unknown effects on both federal and provincial governments.
The change will not affect anyone who is 54 years old or older as of March 31 this year. Those born in or between 1958 and 1961 are going to be affected by degrees. Those born in 1962 or later will not qualify for benefits until the age of 67.
This is a change that essentially creates two groups of Canadians who will have substantially different entitlements from Ottawa during their lifetime.
I'm born in 1964. I will pay more over my lifetime in taxes and collect less in transfers from the federal government than friends born in 1960. Thanks to Flaherty's change, we have an issue of generational fairness to address.
Flaherty and the government argue that raising the eligibility age is desperately needed, that where once there was seven workers for every person over the age of 65, there will be, in 20 years, just two workers for every senior. The costs of OAS will balloon thanks to a healthier population that is living longer.
But a host of other economists and specialists across the political spectrum have argued that OAS was not in any danger of becoming financially unsustainable. They say the cost of OAS as a percentage of the size of our economy will only rise a small amount by 2030, as the bulk of the boomers age and then the relative cost of OAS will drop as the smaller "echo" generation grows into it. Moreover, the costs of OAS relative to our economy have been just as big in decades past as they will be in 2030 and we somehow muddled through.
But even if we grant the government its case, that OAS costs will be unsustainable in 2030, is raising the eligibility and creating two groups of Canadians with different levels of burdens and entitlements the right answer to that problem?
It may not be. The government could have chosen instead to lower the income threshold at which Ottawa begins to claw back OAS benefits. Right now, a senior's net income can be as much as $69,000 a year and they would still qualify for the maximum OAS payout of $6,481 a year. Could the government have not, instead, lowered that threshold so that fewer well-off seniors would qualify?
Still, if this is the way it's going to be, this is a massive change that will force millions of Canadians to reorganize plans for retirement.