Are we entitled to our entitlements?

I use that phrase almost as much as the NYT columnist Gail Collins talks about Mitt and his trip to Canada with the dog strapped to the roof of his car.

I think it is fair for Harper to be raising this issue.  We need to talk about this.  All of these entitlements – from health care to public pensions – are taking up an increasing share of national income and will only accelerate in the coming years.

In New Brunswick, health care is something like 40 percent of the budget (less debt servicing) and there is about 19 cents in government transfer income to persons per every dollar of employment income.

I think it is fair to ask if there is an upper boundary on that and what it might look like.

I raised the idea of tying health care spending growth to GDP growth a few years ago – as a hard cap – allowing that individuals would likely go out and spend as much as their own private income on health care as they would like.  This doesn’t go over well, of course, but at least it is an idea.

I have talked about raising the age people can access public pensions – remember any all protection should be put in place for those in real need – poverty reduction should not be tied to age – but I am talking about people collecting pensions and other benefits who could/should work longer in life or who have enough private income to sustain themselves.

There is normally a lot of backlash to this kind of talk because people read into it what they will.  It’s like a Rorschach test – if you don’t like Harper – you will see this as part of his evil plan – if you like him – you will say it is a sensible time to have this dialogue.

In the end, people need to realize that all of the entitlement spending crowds out spending on other important things such as education, research, infrastructure – and even other important social programs.

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13 Responses to Are we entitled to our entitlements?

  1. The equation is not “If we dislike Harper, then we dislike this dialogue (as you euphemistically put it).”

    It is, “If we dislike this dialogue, then we dislike dislike Harper.”

    People dislike Harper *because* he wants to cut health care and pensions, among other thing; people don’t support pensions and health care beecause they dislike Harper.

    p.s. these programs are not ‘entitlements’, they are services. They are what were created and invested in by generations of programs because we *want* them.

    Yes, we would all like to reduce costs, but not by cutting loose the poor by privatizing significant chunks of these programs.

    We should also examine again raising income. Corporate taxes and taxes for the wealthy have dropped in relative terms over the years, while all the while they have earned increasingly large incomes.

    *These* are the groups who are ‘entitled’ in this country, not the poor. We should be raising questions about the amount of tax they pay, and about the grants and other supports they receive from the government.

  2. Oliver D says:

    @Stephen Downes To always equate cutting services to hurting the poor is problematic, as is demonizing the rich. The majority of Canadians are neither poor nor rich. David made it quite clear that the potential cuts he’s referring to should not impact the poor. In dire fiscal times, we need to take a good look at the services being provided to those in the middle class and evaluate whether they are truly necessary.

    For example, you have to make over $67,000 in retirement before the government begins clawing back Old Age Security. You have to make $110,000 before you get no OAS at all. It seems ridiculous to me that people making even $50k in retirement are given this handout. This isn’t a program like CPP in which you pay into it while you are employed; to qualify for OAS, you simply have had to live in Canada for at least 10 years after you turned 18. If people really need this money, fine, but it’s a waste to give it to people who have good income from other sources in retirement. You could easily cut OAS payments without hurting the poor.

  3. Mark says:

    But they have not been “invested in by generations”. They were arguably created by one generation, and are about to be enjoyed overwhelmingly by a second generation. The lion’s share of the “investing” will be done by a generation that faces an ever-diminishing likelihood of being able to benefit from them.

  4. We have to find a way to have the conversation without framing it as another rich vs. poor argument. Let’s agree that poor Canadians need to be protected. In Canada, millionaires get free health care, public pensions, etc. and as was pointed out even OAS extends well above those earning median incomes. People are free to argue those programs should be maintained as is and new tax revenue must be found to fund them on a go forward basis. I argue they will eventually eat up so much of public spending that everything else will suffer.

  5. Further, the programs were designed at set up when people were living on average no more than 5-10 years after starting to access them. Now people are living – on average closer to 20 years after accessing the public pension schemes. And in some public sector cases, take a teacher or someone working in the military – they could end up spending more years on a pension income than they did in the workforce (i.e. those retiring in their mid 50s). That is totally fine if the pension was self-sustaining but increasingly they are not.

  6. Paul says:

    From a political standpoint, because part of this thread appears to have started from either liking or disliking Harper, I am curious how this will play out in the next election. Mulroney, 25 years ago or so, had a political comeuppance when he encountered a senior.

    I suspect with the political power of the seniors is gaining significant strength, and their higher likelihood of being politically engaged and voting, that changes to pensions will be less dramatic than people seem to be fearful of.

    Public Service pensions on the other hand…..

  7. Something like this:

    “I raised the idea of tying health care spending growth to GDP growth a few years ago – as a hard cap – allowing that individuals would likely go out and spend as much as their own private income on health care as they would like.”

    allows the rich to pay extra for services, and leaves the poor without them. That’s why I raised the question of the poor.

  8. With respect to health care, emerging advanced technologies including molecular cardiology solutions using genetic modifiers, drug eluting stents, protein deliverers and genetic engineering advancements will soon be available for those who can afford them. Expensive new pharmaceuticals (some will cost thousands of dollars per treatment) already have created a two-tiered health care model in which wealthy users increasingly have access to a much more sophisticated treatment model than those without those financial means. The challenge will be determining what should be considered baseline treatment that is under a conventional coverage umbrella. The definition of “entitlement” in that respect is not fixed.

    There is additionally the question of how entitlement expenditures might be reduced in the face of what some perceive to be tax windfalls for the more wealthy. This certainly is an issue in the U.S. with respect to how capital gains taxes have distorted contributions at precisely the time when reductions in services are being made. To many this makes the question of entitlements is an entirely different proposition.

  9. Richard Reeleder says:

    “To many this makes the question of entitlements is an entirely different proposition”

    There are entitlements, then there are entitlements. Are the wealthy entitled to lower taxes on income-generating investments, are they entitled to have the same effective income tax rate as those earning much less? Currently we have a federal government that has 1) stripped itself of billions in tax revenue over the past few years (to no good effect that I can see – the argument was that the cuts would pay for themselves), 2) committed the country to some dubious defence purchases, and 3) changed crime laws to an extent that will significantly raise costs. Then, that same govt cries poor re pensions, health care and public good research. There is a ‘framing’ issue and an agenda there that we should not buy into without some hard thought.

    I’d be more impressed about the need to radically restructure health care and other services if there was some good evidence that those costs were, nationally, rapidly outstripping gains in GDP. Is that the case? Or is it more a case of govt revenue shortfalls (for which there is a remedy)?

    One of the major costs driving health care upwards is the cost of new drugs, as mentioned above. A major contributor to these higher costs was the extension of patent protection that Canada adopted a few years ago. It was predicted that this cost increase would follow the patent changes, and that prediction has been borne out. Canada should be working with other nations to reverse that change.

  10. Kate says:

    Rich v.s. poor is the common dialogue of late. I’m not rich but am comfortably retired at 60 in a small village in NB with CPP and a company pension both of which took over 40 years of steady hard work to accumulate. I live here (from my home province of Ont) for a number of reasons, one being the inexpensive real estate. It has been commented by locals that “it must be nice to have a pot of money to retire with” and now given Harper’s new possible policy on reducing pensions and retirement age…there will be further outrage and voter reaction, but wasn’t the writing on the wall long before now? We have advised OUR children since they turned 18 to start investing in their retirement funds. I accept the fact that there are those in need of social programs – However…when my neighbours, self employed artists and trades, who have been happy to live a life of “come-what-may” and enjoy their substantial free time over the last 40 years, many who have paid little or no attention to their eating/drinking/drug habits in past are now crying foul and pointing to the “rich” as the root of all their evils, then, I take exception and can get behind the reduction of a number of entitlements for those not entitled.
    Sorry…bottom line..the rich don’t necessarily get richer, they usually just work real hard and real smart at getting to where they are.

  11. Will says:

    Many of you don’t understand that dividends are taxed lower because the income’s already been taxed in the corporation. It’s not an entitlement. And lower capital gains and corporate taxes attract investment and businesses who hire workers. When the poor start hiring then maybe we can change the way things work.

    Also what about personal responsibility towards health care and saving? People like to whine about services but I don’t see many people staying in shape around here, exercising and eating right. And many don’t want shale gas but yet don’t mind taking transfer payments from other provinces to pay for health care. Nobody saves anymore and people have huge consumer debt but they can’t wait to get CPP and OAS. Then they will blame business for their stagnant wages when they didn’t retrain and take risks to better their lives.

    Wow I sound like a conservative but I generally dislike that group.

  12. > Many of you don’t understand that dividends are taxed lower because the income’s already been taxed in the corporation.

    So if I use my own income, which has already been taxed, to pay a contractor to fix my porch, there should be no tax?

    No, the “it has already been taxed” argument applies only if we don’t consider how most other commerce is taxed.

  13. Richard Reeleder says:

    “And lower capital gains and corporate taxes attract investment and businesses who hire workers.”

    Is that akin to a religious belief, or is it something that can be backed up with data?

    I’d note that a number of nations have lower corporate tax rates than we do, but many (most of the prosperous nations anyway) have raised personal and value-added taxes to compensate for the lost revenue. The argument that lower corporate taxes pay for themselves by generating growth does not seem to hold water.

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