Wednesday, February 01, 2012

On nothing burgers

Kevin Milligan, associate economics professor out at UBC is quoted again today on Old Age Security in another report on what experts are saying about the question of raising the age of eligibility. He reiterates the point that our spending on OAS as a percent of GDP is much lower than many countries. But today's CBC item has a little bit more commentary from him:
As a percentage of GDP, Milligan said the cost will grow from the current 2.41 per cent of GDP to 3.14 per cent by 2031. That increase would be equivalent to about $12 billion.

"There's a question about characterizing whether that's big or small," Milligan said. "That's not nothing. That's why it's reasonable to have a look at it."

A recent OECD study found that Canada has a "more favourable demographic outlook than many European countries. The analysis suggests that Canada does not face major challenges of financial sustainability with its public pension schemes."

Milligan pointed to Italy, which spends 14 per cent of its economy on public pensions.

"We're going from 2.4 to 3.1 per cent. Italy has that for breakfast," he said.

Milligan said he is more concerned about health-care costs, as they grow at rate of about six per cent of GDP over the next 20 years, and the stress they will impose on the system.

He said the OAS program could be on the list of some of the more pressing issues the government must deal with, but questioned some of the claims being made.

"I heard Mr. Van Loan comparing us to Greece, if we don't fix this problem. That's just an exaggeration. At the same time I'd ask some of the opposition leaders how you fund a $12-billion program. I haven't heard what taxes they will raise or what programs they will cut."
After his blog item in the Globe that raised doubts about the need to hike age eligibility to 67 and after having been quoted again, yesterday, in a Globe report as an expert saying there is no crisis in OAS, he seems to be ever so slightly changing his tune to position his view a little more evenly. Whatever, he's an academic not a partisan. The numbers he cites have not changed, however, and are left for observers to decide for themselves. Re-read his other two items as well.

As for what the opposition would do to fund the OAS program, that's not really a mystery if you have been following Canadian politics for the past few years. What's more important is that the government is still sowing doubt about senior's pensions and what they plan to do by being evasive in the House of Commons, as Harper continued to be yesterday. On a matter of trust, like pensions are, it's hard to explain such an approach.

More reading on OAS today:

Where’s the evidence for OAS overhaul?
Why raising OAS to 67 doesn't make sense

P.S. Blog post title is taken from the earlier edit of the CBC report. I swear Milligan said "nothing burger" instead of "That's not nothing." It was eye catching and drew attention to his commentary above. Google CBC.ca, nothing burger, over the past 24 hours. Should come up.