Madam Speaker, it is a pleasure to speak on this bill. One of the greatest policy challenges for the 21st century will be the impact of our aging population on our social programs, be they health, pharmacare, housing or seniors' housing. All of these programs will be torn asunder by a massive population bubble that will move into that retired age group and put an unsustainable demand upon the social programs. We will simply not have the people working and the tax base to pay for all that we ask.
Indeed not only is it the biggest challenge in the 21st century in terms of domestic policy, but it also is perhaps the most neglected issue because in the House the intergenerational transfer of wealth and the impact of our aging population on our social programs is virtually neglected. That is what I will talk about today specifically with reference to our pension plans, and the CPP in particular.
If one looks at our aging population, the population over the age of 65 will double over the next 20 years. That is combined with a reproduction rate that is below replacement levels. The replacement level is 2.1 children per woman and now we are down to 1.4. We can see that not only is our population declining in the workforce, but we also have a massive increase in population over the age of 65.
This will put that unsustainable demand on our pension system. What choices do we have? Option one is to increase the amount of payments people make through their payroll taxes into a fund to pay for retirees, but there is a finite limit to that. Right now workers pay 10% of their income into that fund. The estimation is that we must pay about 20% into that fund to sustain our retirees in the future. Whereas today we have one person out of every four over the age of 65, in the year 2030 one out of every two will be over the age of 65. That is a massive number of people.
That is combined with the fact that we are living longer. What is interesting is that the age of retirement was actually put together in the 1880s by Otto von Bismarck in Germany. At that time he deemed that 65 would be the age of retirement. Yet at that time the age of a person's life expectancy was 55. Therefore, he did not expect many people to retire to be able to access the German pension fund. In 1966 we blindly took it upon ourselves to determine that age 65 would be the age of retirement when people could receive their CPP pension plans.
The other fact is that we are living longer. In the year 2030 it is estimated that our longevity will be expected to be 90. One can imagine that not only will there be a larger pool of people in their retirement years extracting money from our pension plan, but we will also be extracting money for a longer period of time, on average at least 25 years after the age of 65. That is truly a massive and unsustainable amount of impact upon these pension plans.
The Association of Canadian Pension Management said in January 2000:
The combined forces of the retirement of the Boomer Generation, rising life expectancies, and falling birth rates will seriously strain, and could possibly rupture our retirement and healthcare systems in the next 30 years.
It also said in January 2000, and this is prophetic:
If we do not change the rules of the game, the OECD estimates Canada’s public spending on pensions and healthcare would rise from 13% of GDP in 1995 to 23% in 2030.
How will we pay for education, highways, welfare, this House and the myriad of other social programs and issues that government is asked to pay for? We tend to forget that there is only one payer in the system, and that is the beleaguered taxpayer out there who is already overtaxed. For those who would say that we must raise taxes to meet these increased social demands, I would suggest this is what happens.
It has been proven in Canada that when we raise taxes, it puts a constricting effect upon our economy, the very economy that we rely upon for jobs and to produce the tax base to pay for health care, pensions and other programs. Raising taxes will put a damper on our economy and have the deleterious effect of a negative impact to our tax base by shrinking it. Therefore this is not an option.
What can we do? First, the government needs to do is rationalize our CPP. It should lower the rates right now so we can get our economy moving. Payroll taxes right now are running a significant surplus, which is a removal of wealth from the existing workers of today. Let them have that money, let the private sector have the money and let the companies have the money so they can reinvest in our economy which will make our economy competitive with other around the world.
Second, the government needs to rationalize our pension system. The OAS, which is the old age security, and the guaranteed income supplement are two other issues that need to be rationalized.
We pay a very large sum of money, or roughly $18.7 billion a year, the for old age security. I would submit to the House that we need to do the following. People who are making over $60,000 should not receive OAS. The OAS needs to be targeted toward those who are making less than $60,000 a year. The savings from that can be plowed into the guaranteed income supplement so that those seniors who are significantly impoverished, and there are a lot of them, will have more money on which to live.
I draw the attention of the House to this. What does an impoverished, poverty line senior make today under the GIS? A senior living below the poverty will receive the monthly maximum of $436.65 for old age security. That combined with the GIS, the guaranteed income supplement, brings that to a maximum of $774 a month. How can somebody who has aged, who is retired, who has put their back into this country, some of whom have fought in wars, survive on $774 a month?
We need to do is this. Somebody who is making a rather large sum of money, over $100,000 a year, should not receive OAS. Why not use the OAS savings then to supplement the guaranteed income supplement for those seniors living below the poverty line? That way those seniors will have the money on which to survive. In effect, what we are doing is targeting our pension programs, our social programs, to those who need them, which then make them truly a safety net for those who cannot make it.
If we do not do that, we will have a legion of seniors in the future who live below the poverty line and who cannot afford the medications they require because medications are being delisted and not covered by pharmacare due to the cash crunch in which the governments find themselves. They will not have the money to pay for adequate housing. As a result, they will fall through the cracks and they will suffer. That is not the objective of a reasonable, rational social program.
The government needs to rationalize the OAS and GIS. It should take the OAS away from those who are making more than $100,000 a year although some of it is indeed clawed back today. There should be a graded scale for individuals making between $60,000 and $100,000 a year. If we claw that back a little more aggressively that money can go to those seniors who live below the poverty line so they will have enough money to put food on their tables, a roof over their heads, clothes on their backs and can afford the basics of life, including medications that they will need to use in their senior years.
Personally, the other thing we need to do is change the retirement age. We should abolish the mandatory retirement age of 65. If we do this, it will serve two functions. If someone wants to retire at 65 and take their CPP, they can. However why not provide a situation where between the ages of 65 and 70 individuals can accept 50% of their CPP and earn an income up to $30,000 a year without any negative effect on their CPP?
This would save and reduce the demand on our CPP, keep youthful, vigorous seniors in the workforce, if they choose to, given them an incentive to stay there and they will still be paying taxes. This would have several benefits. Not only would it benefit our economy by allowing these people to stay in the workforce and use their expertise to support our economy, but there also would be less demand on our CPP. In my view this would be innovative. In fact, in a court case, the Supreme Court said that abolishing the mandatory retirement age of 65 would not be a transgression of our Constitution. I think section 1 actually allows us to do that.
If I can quote again the Canadian Pension Management Group, it said:
We need to move from a system which currently provides incentives for people to retire early, to one which provides incentives for people to stay in the work force as long as they are willing and able to do productive work.
That is something at which the government should look. It should abolish the mandatory age of retirement of 65. If people want to retire at 65 and accept their full CPP, they can. However give people the option of having a partial CPP payment between 65 and 70, while allowing them to work and earn an income. That would go a long way in taking the pressure off our pension plan.
The third issue is the RRSPs. We need to increase the foreign content amount from 30% to 50% and allow people to invest 25% of their gross income up to $20,000. This would go a long way in helping people provide for themselves. If we do that, we can lessen the demands on our pension system. At the same we should allow people over the age of 65 to redeem their RRSPs tax free up to $20,000 a year.
I say that because people making less than $20,000 a year should not be taxed. It is impossible to live on less than $20,000. Why should anybody be taxed for making less than $20,000 a year? That is theft from the poor as far as I am concerned.
If the government truly wants to give people a chance to provide for themselves, if it wants the poor to have more money in their pocket, then do not tax them if they are making less than $20,000 a year. What the government could do, which would be innovative, is increase the basic individual allowance from what I think it is about $12,500 to $20,000. That would remove the poor off the tax rolls, which indeed would be very innovative.
To quote the Canadian Pension Management Group again concerning RRSPs, it said:
Because these global markets offer the best opportunities to diversify longer term risks, the globalization of Canadian retirement savings should be seen as a positive, not a negative, development for the ‘financial wellness’ of Canadians.
In essence, give people the tools and the ability to provide for themselves.
In summary, whether we talk about pensions, health care or any of the social programs that we have and enjoy, the government is simply not dealing with the impact of a massive baby boomer bubble that will put unsustainable demands on our social programs.
Our social programs will rupture in the next 10 to 15 years unless we plan now. This is cannot be dealt with in the year 2015. It is something that has to be dealt with now, so we can institute the plans and measures that will allow us to have a graded series of responses to prepare for this cataclysmic event on our social programs.
Speaking from the point of view of being in the health care system, we see this in the emergency department in hospitals and in offices. Our aging population will have massive demands upon our health care system. Some would suggest that because we are living longer and are healthier that this will have no appreciable effect on our health care system. They are absolutely dead wrong and here is why. Yes, we are living longer and we are healthier, but we also will need more joint replacements, angiograms, angioplasties and a whole host of treatments and medicines.
We are also not taking into consideration the impact of the dementias on our health care system. Dementias, whether Alzheimer's or multi-infarct dementia, and other neurological disorders will have a massive effect on our health care system in terms of housing and medical care, and we are utterly ill-prepared to deal with this situation.
I would only impress upon the health care minister for her to work with her provincial counterparts to plan a national strategy to deal with the neurological disorders of the aged, including the dementias and depression which the World Health Organization said would be the second leading cause of morbidity in the next 10 to 15 years. We again are completely and utterly ill-prepared to deal with the impact of this on our health care system.
This includes our pharmacare system. Because of the impact of increasing demand and a lack of resources, governments are forced to ration. That is a polite way of saying that they are withholding essential treatment from sick individuals in an effort to meet their budgets. Who actually is deprived of health care? It is the poor and the middle class, not the rich because they will either pay for it or go south of the border to buy the care they require.
Our health care system in its current form is depriving the poor and middle class of health care, not the rich. I say this right now in view of the fact that the Kirby commission report is coming out this week and the Romanow commission report will be coming out next month.
Ex-premier Romanow has said very clearly that the issue of private services will not be on the board with respect to his final report. I can only impress upon Mr. Romanow that this is short-sighted and highly destructive to the longevity and sustainability of our public system. Private services performed properly in a parallel fashion will save our public system by removing demand without removing resources. I say that personally, not as a party issue.
I say to Mr. Romanow that we should keep all our options open, remove the dogma from the issue and deal with the facts and solutions that work to save our public health care system so that all Canadians, particularly the poor and middle class, who are having their health care withheld, rationed or deprived today will not have to endure that in the future.
I just hope the government will work with members from all political parties and with its provincial counterparts. It should bring its provincial counterparts to the table and tell them to throw their dogmas out the window, that the challenge is here from the people of our country to have sustainable social programs and that there is a duty and a moral obligation to fix these problems in a sustainable fashion. I hope the Prime Minister takes his leadership role in the few months he has left, makes that final gesture and builds the legacy that he is seeking.