Government By Gaffe

"A gaffe," Michael Kingsley wrote, "is when a politician tells the truth." Americans have been treated to several examples of this phenomenon as Mitt Romney seeks the presidency. Last week, Vic Toews treated Canadians to a homegrown version of the same. "I don't know if statistics demonstrate if crime is down," he told a Senate committee. "I'm focused on danger."

Stephen Harper used the same argument in Davos when he implied that the Old Age Security system is unsustainable. The truth is, writes Robert Brown in today's Globe and Mail, that  the system is quite sustainable:

The Chief Actuary of the OAS system reports regularly (and publicly) on the system’s financial health. In his last published report (the eighth, in 2008), he confirms that the cost of OAS (including the Guaranteed Income Supplement) would rise to $108-billion in 2030. He also points out that, while there were 4.7 Canadians aged 20 to 64 per individual aged 65+ in 2007, that ratio would fall to 2.4 in 2030, or almost in half.

But there are other attributes that need to be remembered. First, OAS is taxable income, so a lot of the moneys paid out go straight back to Ottawa. Second, the OAS is further clawed back depending on your income. If your income exceeds $67,668, then you lose your OAS at a 15-per-cent clawback rate. If you have income of $110,123 or more, you get no OAS at all.

For the GIS, the clawback rate is 50 per cent starting at $3,500, so if you have income in your own right of $16,230 (other than the OAS), you get no GIS. Finally, OAS/GIS costs rise with the consumer price index, whereas tax revenue rises with the growth in GDP. The latter usually rises faster than the former.

So do we need to worry about the sustainability of OAS? Not according to the Chief Actuary.

We don't need new prisons. But we will get them. A significant portion of the costs will be downloaded to the provinces. And, because those costs will not be on Ottawa's books, the Harperites will claim that they are prudent managers.

It's when they make statements like Toews made last week that the truth comes out.

Seizing Expediency

The cuts Stephen Harper wants to make to Old Age Security are driven by ideology, not necessity. Consider the Public Appointments Commission and the Employment Insurance Financing Board. Both departments were set up by the Conservatives. And, although both agencies are on record as having nothing to do, the government intends to keep them going.

Neither agency has been part of the government's review of spending. Yet Harper claims that -- while such zombie departments can be tolerated -- the Old Age Security program is "unsustainable." That claim, Tom Walkom writes in the Toronto Star, is pure Harperian balderdash:

True, the government predicts that the cost of pensions for the elderly, now about $35.6 billion, will triple by 2030. That sounds dire. In fact it means that the pension bill will grow by about 5.6 per cent a year during the period.

And when baby boomers start to die off, as they will from about 2020, spending on the elderly will start to decelerate on its own.

Harper claims that he is merely saving Canada from the kinds of problems which Europe is facing. But his diagnosis of the cause of those problems -- an out of control welfare state -- is simply wrong. Walkom writes:

In fact, the European debt crisis is far more complex. Spain and Ireland, which do not offer generous social programs, are in trouble. Germany, which does, is not.

Arguably, the real root cause of the crisis was the decision by countries with vastly different economies to use a common currency, the euro — a decision that encouraged too much public and private borrowing during the good times and makes repayment now near impossible.

The truth is that Stephen Harper will cut what he doesn't like -- not what doesn't work. The man who insists he's the smartest guy in the room is really not a very bright fellow. Still,  he has proved in the past that he has a talent for seizing expediency.