Michael Bloomberg welcomed Justin Trudeau to his corporate home in New York this week with a love letter of such intensity that even Stephen Harper would blush. Bloomberg wrote a column for his global financial media behemoth that called Canada’s Prime Minister “energetic and pragmatic” and compared Trudeau to John F. Kennedy. “The value of the Canadian dollar and the price of oil, one of the nation’s top exports, have both tumbled to near record lows,” the billionaire and former three-term mayor of New York wrote ahead of Trudeau’s arrival for town-hall event on live television. “But those details—and the apparent demise of the Keystone XL pipeline—don’t begin to tell the story of what lies ahead for the economy of Canada, America’s second-largest trading partner.”
Canada’s main stock market increased about one per cent between the time of Trudeau’s visit to the Bloomberg LP headquarters and the early trading hours of March 18. That’s probably because the U.S. Federal Reserve indicated it was less keen about raising interest rates. But for fun, let’s give Bloomberg’s endorsement of Trudeau’s economic strategy a little of the credit. There is no one on Wall Street with a louder bullhorn than the former mayor.
There certainly is a lot to like about Trudeau’s economic policy agenda. Next week, he will plunge the federal government into deficit, recognizing the unique opportunity presented by ultra-low interest rates to renovate the infrastructure that supports Canada’s economy. There is every reason to think the program will pay for itself through faster economic growth over the medium term. But even if it doesn’t, the potential for improving Canadians’ quality of life through better transit, safer water, and so forth is justification enough. Health and happiness isn’t always free. Canada’s new government is also right on climate change. The previous government was indifferent to the future costs of a lackadaisical approach to constraining carbon. Trudeau has put his country back on the right side of history. But Trudeau isn’t perfect. He used the Bloomberg stage to state that he intends to follow through on an unfortunate election promise: reversing the previous government’s decision to raise the age at which Canadians start receiving payments from the Old Age Security program to 67 from 65. “Tweaking the age like that is a very simplistic solution, that won’t work, to a very complex problem,” Trudeau said of an initiative that was meant to save more than $10 billion a year once fully implemented in 2030.
The Prime Minister likes to say that his policies are based on clear, pragmatic thinking. His promise to once again lower the retirement age felt like a political calculation by a third-place party that needed to embarrass a right-wing government and outflank a left-wing official Opposition. Trudeau seems to have forgotten that voters will forgive politicians a few unkept promises if they actually win. Raising the retirement age isn’t simplistic, it is necessary. The International Monetary Fund for years has documented that asking ever healthier taxpayers to wait a little longer for their pension benefits is among the handful of measures that will allow developed economies to save their public retirement systems for bankruptcy. There is nothing unfair about doing so. Life expectancy for Canadian men when Trudeau and I were born in the 1970s was no more than 70. Now it’s closer to 75 and rising all the time. We’re living longer than the architects of the pension system ever imagined. It’s entirely reasonable to adjust benefits accordingly.
Despite the weight of evidence, the previous government was among the few in the world that worked up the courage to make the change. Trudeau struggled to justify his decision at the Bloomberg event. He called himself fiscally responsible, and he said the issue of demographic pressure on public pensions demands study. Those are reasons to leave the age increase is place, at least until the study is complete. Trudeau mentioned the need to improve the health of Canadians, a well-meaning goal that would keep people alive longer and further strain pensions. He also justified himself by observing that it was cruel to expect manual labourers to work past the age of 65—surely a concern that could have been answered more elegantly.
Stephen Tapp, a former Bank of Canada economist who now is research director at the Institute for Research on Public Policy, reckons the reversal will cost 0.2 percentage points of gross domestic product annually over the longer term. Trudeau said he will seek a more “nuanced” response to funding public pensions. If those responses existed, they likely would have been discovered by now. But that probably will be the next prime minister’s problem. Trudeau has chosen short-term political gain over making life easier for those who follow him.