When Stephen Harper returns to Canada, he’ll have to keep an eye out for the next Solange Denis.
The Prime Minister signalled in Davos, Switzerland this week that he’s prepared to use the front end of his majority government to tackle long-standing fiscal problems that have left previous governments running in fear.
The most politically challenging will be his effort to put Canada’s “retirement income system” on a sustainable footing. Given that he made clear he was not talking about the Canada Pension Plan, that leaves Old Age Security – an income stream for Canadians 65 and over.
The cost of the program is poised to soar as the baby boom generation retires, which is starting now. Previous governments saw this coming, but ultimately backed down from plans to tackle the problem.
When Tory Prime Minister Brian Mulroney partially de-indexed the program from inflation in his 1985 budget, he was famously accosted by then-63-year-old protestor Solange Denis, who fumed “You lied to us.” She then summed up Mr. Mulroney’s political future as “goodbye Charlie Brown.” A week later, Mr. Mulroney reversed the decision, which he called “a mistake.”
Twelve years later, then-Liberal Finance Minister Paul Martin won over Ms. Denis – even to the point of dancing together for the cameras – for his proposed revamp of the OAS in 1996. Mr. Martin planned to replace the OAS and the Guaranteed Income Supplement for low-income seniors with a Seniors Benefit based on family, rather than individual, income. The fury came from others however, and Mr. Martin also backtracked.
In his memoirs, Mr. Martin described how he originally pushed to have OAS reform included in the cost-cutting 1995 budget.
“We had an aging population, and the baby boomers would start to retire in 2011, imposing huge new burdens on a potentially debt-ridden federal government,” wrote Mr. Martin, in 2008’s Hell or High Water: My Life in and Out of Politics.
He even risked budget secrecy by visiting Ms. Denis at her Ottawa home.
“I explained my plan in detail to Madame Denis and once she understood it, she endorsed it,” he wrote. “As it turned out, though, our problem was not Solange Denis.”
The resistance came from Prime Minister Jean Chretien.
“Although the prime minister understood all these issues and shared my concerns, he was extremely reluctant to take on the seniors, especially with a Quebec referendum in the offing. In fairness to him it must be said that his worries were especially intense because historically, these cheques from Ottawa had been an important part of securing federalist support in the province,” wrote Mr. Martin.
Two draft budgets were crafted. One with the change. One without. Mr. Chretien won the argument then and Mr. Martin said he said he and his advisers debated whether he should resign.
Mr. Martin’s 1996 proposal was ultimately abandoned in July, 1998.
Then-Reform MP Diane Ablonczy, now a minister of state in the Harper cabinet, offered a prescient reaction.
“The answer wasn’t the Seniors Benefit; that was not the way to address the problem of the coming seniors bulge... but for sure the answer isn’t to run away from the problem,” she said. “These issues aren’t going to get addressed and that is going to cause problems for Canadians when the boomers retire.”
Jim Stanford, chief economist for the Canadian Auto Workers, said touching OAS opens up battle lines on many fronts. Raising the eligibility age will lead older workers to work longer at a time when a main problem in the economy is youth unemployment.
Mr. Stanford said he disputes the premise that the program is unsustainable in its current form.
“If I was a senior citizen today, I’d be gearing up my old Charlie Brown lines,” he said.