By Jake Fuss and Grady Munro

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Opinion: Canadians should understand the costs of expanding Old Age Security Back to video

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In yet another high-stakes maneuver in the current session of Parliament, the Bloc Québécois recently tabled a motion urging the Trudeau government to support Bill C-319, which would increase Old Age Security (OAS) payments for seniors aged 65 to 74 by 10 per cent. The bill, which passed the House of Commons (though with only five Liberal votes in favour), proposes to spend money so it still requires a “royal recommendation” from the government. And the Bloc is threatening to trigger an election if the government doesn’t sign on by Oct. 29.

According to a new poll, 79 per cent of Canadians “support or somewhat support” the OAS increase. But the poll provided no information to respondents about the costs of expanding OAS, even though Canadians should understand the costs before they pledge support for any government program.

Benefits without costs are often popular. According to past polling, more than two-thirds of Canadians expressed support for the Trudeau government’s three new social programs: national dental care, $10-a-day daycare and pharmacare. Yet once respondents were made aware of potential tax increases (specifically, increases to the GST) to finance these programs, support plummeted to less than 50 per cent for all three.

Clearly, support for government programs can change dramatically once Canadians understand how much they’re going to have to pay for them. So, that being said, what are the costs of a 10 per cent increase in OAS payments for seniors aged 65 to 74? According to Parliamentary Budget Officer Yves Giroux, more than $3 billion a year, with a five-year price tag of $16.1 billion, which is in his words a “significant chunk of change.”

Based on its latest budget, the Trudeau government expects to run deficits of at least $20 billion for the next five years and rack up more than $400 billion in new debt by fiscal year 2028-29. If it borrows more money to pay for increased OAS benefits, those deficit and debt numbers will grow even larger.

And again: Canadians will ultimately bear the costs of an expanded OAS through higher future taxes because of increased interest on the government’s debt. This fiscal year (2024-25) federal interest costs are expected to reach $54.1 billion — which is equal to all the money the GST raises. These are taxpayer dollars that won’t go towards any services or programs for Canadians. And interest costs will continue to grow as the government adds more and more debt.

In addition to being costly, the Bloc plan is poorly targeted. While some programs — most notably, the Guaranteed Income Supplement (GIS) — provide additional income support to low-income seniors, OAS also goes to many upper middle-income seniors. Based on current thresholds, individual seniors earning up to $148,451 per year are eligible to receive it (though seniors earning more than $90,997 of income don’t receive the full amount). If Bill C-319 becomes law, a senior couple with a combined household income of nearly $300,000 will receive an increase in OAS payments.

Increasing OAS payments will cost billions of dollars each and every year and supplement the income of many seniors who aren’t in need. Canadians will foot that bill.

Jake Fuss and Grady Munro are economists at the Fraser Institute.

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