The Canadian Centre for Policy Alternatives (CCPA) recommends rolling back the retirement age, doubling Canada Pension Plan (CPP) coverage, capping RRSP contributions, and scrapping the new Pooled Registered Pension Plans (PRPPs), in its new alternative federal budget.
Overall, the CCPA says that its budget would replace “growth-killing austerity” with a plan that strengthens the economy, leads to a better quality of life for all Canadians, and eliminates the deficit by 2016. It says its plan would reduce poverty and inequality by investing in child care, pharmacare, affordable housing, income supports, and post-secondary education.
It also aims to tackle the ongoing crisis for First Nations housing, drinking water, education; implements a long term plan for infrastructure investment; proposes a new top personal income tax bracket, closing the biggest tax loopholes, and introduces a withholding tax on tax havens.
“Canada’s problem is not deficits. The problem is stagnant growth. And austerity is not the cure,” it says. “In fact, austerity reinforces stagnancy, pulling much-needed spending out of the economy just when it is recovering. With 1.4 million Canadians unemployed, and the federal government still in a strong fiscal position, further depressing weak economic growth through ill-conceived austerity policies is not the answer.”
The CCPA says that its proposed budget would take the economy off its path to austerity. “Deficit reduction will take a backseat to job creation, and more — not less — government spending in the economy. New programs such as national child care, community-based health care, and long-term care facilities will provide Canadians with much-needed services while stimulating employment in these areas. New funding for water systems on First Nation reserves and in our cities, along with longer-term transfers to municipalities for infrastructure to repair our crumbling roads, will be provided,” it says.
The result, it estimates, is that its budget leads to a larger deficit compared to the government, particularly in years one and two of the forecast, although it still foresees eliminating the deficit by 2015-2016, and it says the debt-to-GDP ratio declines throughout its forecast horizon. “But the real benefit is in employment,” it says, estimating that between 200,000 and 300,000 full time jobs are created in any given year, lowering the unemployment rate to 6% by 2014.
In terms of the retirement savings system, the CCPA says it would reverse the decision to raise the age of eligibility for Old Age Security (OAS) from 65 to 67 and, restore age 65 as the age at which individuals become eligible for OAS and the Guaranteed Income Supplement (GIS). It would also increase the GIS “to ensure that all senior households meet at least the after-tax low-income measure poverty line, which is approximately $19,000 for a single-person household in 2013, at an estimated cost of $1.4 billion per year.
It would increase contribution rates phased in over seven years, in order to double the CPP’s replacement rate from 25% to 50% of a retiree’s pensionable earnings; and phase in a new regime of indexing for public pensions (OAS, GIS and CPP) based on wages instead of prices. Also, the basic personal exemption would be doubled to offset the impact on lower-income workers.
In terms of private savings options, the CCPA says it would cap RRSP contributions at $20,000 a year, saving an estimated $232 million a year, and allowing the provinces to collect more in taxes. It would also withdraw the “flawed PRPP legislation, and enhance the only parts of our pension system that have actually demonstrated success over successive generations — OAS/GIS and the Canada Pension Plan.”