Poilievre’s promise to end deficits sets collision course with boomers

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Government deficits leave unpaid bills for younger generations that are unnecessary when our economy is not in a recession. That makes deficits run by the NDP in B.C., Progressive Conservatives in Ontario and Liberals in Ottawa quintessential examples of intergenerational injustice.

We should either pay for the government we want or reduce government to the level of taxes we are willing to pay – not saddle our children with expenses we wish to avoid.

That’s why I like Conservative Leader Pierre Poilievre’s promise to end deficit spending if elected, which is projected to be around $40-billion this year. I’m keen to hear more about how he plans to achieve this important goal.

There are only three realistic paths to eliminate the federal deficit: gut benefits for boomers’ retirement because governments didn’t design adequate revenue plans decades ago; raise taxes to pay for boomers’ benefits; or ramp up immigration well beyond the levels we’ve witnessed recently.

Travelling down any of these paths will be challenging. Voters deserve to know which challenges Mr. Poilievre plans to accept.

Boomers’ retirement income and medical benefits must be at the centre of deficit-reduction plans, because spending on boomers is growing far faster than any other budget line item – a fact made clear in my analysis of federal budget 2024, and affirmed by The Globe and Mail’s editorial board.

Retirement benefits for boomers drive deficits because they have been funded by a reverse-pyramid scheme. Whereas many hands made light work of the responsibility to pay for seniors when boomers were young, this function must be borne by relatively few workers now that boomers have retired.

Accordingly, the number of working-age taxpayers for every retiree has dropped from seven-to-one decades ago to three-to-one today. The smaller ratio of workers relative to retirees generates insufficient tax revenue, and deficits will persist unless governments either cut retirement spending or raise taxes.

Some may hope immigration will help us reduce the deficit without talking taxes. Indeed, it is a primary reason why the Trudeau government set higher immigration targets to recruit more younger workers and trainees.

But despite adding nearly two million people to our population over the last two years, record immigration levels have done little to change the ratio of retirees-to-workers. Shifting from one retiree for every three working-age residents to one-to-four would require that Canada rapidly add eight million more people aged 18 to 64.

This increase to immigration would dramatically exacerbate the housing supply pressures with which our country is already seized. So Mr. Poilievre has ruled it out.

“The only way to eliminate the housing shortage,” he suggests, “is to add homes faster than we have people.”

If he won’t rely on immigration, then Mr. Poilievre’s deficit-reduction plans must rely on spending cuts or tax increases. This won’t be easy.

His favourite targets for spending cuts are the CBC and shameful contracts with consultants that did not deliver adequate value for money, such as ArriveCan. But I’ve already shown that such expenditures are tiny by comparison with the 129-per-cent surge in Old Age Security spending – from $44-billion to $99-billion – driven by boomers’ retirement between 2014 and 2028.

My budget analysis also showed that spending increases on housing, child care, pharmacare, the Canada Child Benefit, employment insurance and national defence are all small compared with OAS.

So if Mr. Poilievre plans to wrestle down the deficit through spending cuts, his only realistic option is to rein in the budget line item that is most accelerating. This will mean slashing OAS for some boomers, because the $20-billion deficit projected for 2028 equals one-fifth of the allocation to the program in that year.

If he is not ready to talk about reducing benefits for boomers, then Mr. Poilievre’s alternative is to hike taxes far more than the changes to capital-gains taxation included in the 2024 budget. So far he has not spoken out against those changes, which may signal he is more open to taxation than many assume.

Either way, we need answers if Mr. Poilievre is to slay the deficit. If they don’t come soon, he is not serious about eliminating the deficit. That would be a pity, because eliminating it is important for delivering fairness to every generation.

Dr. Paul Kershaw is a policy professor at UBC and founder of Generation Squeeze, Canada’s leading voice for generational fairness. He offers policy advice to governments of all party stripes, including the current federal cabinet. You can follow Gen Squeeze on Twitter, Facebook and subscribe to Paul’s Hard Truths podcast.