Want to Expand Social Security? Look North
To American progressives, this retirement story should sound familiar. After decades of pension cutbacks and declining unionization, many retiring seniors depend increasingly on underfunded government-run programs. Amid rising inequality, some wealthy seniors can afford to retire, while others must keep working lest they lose their toehold in the middle class. The notion that seniors are entitled to a comfortable retirement is fading, and fast.
But this retirement security saga is unfolding not in the United States, but in Canada. The difference is that Canada, which confronts virtually all the same problems that plague the U.S., has decided to act.
On June 20, Canada’s federal and provincial governments agreed to expand what’s known as the Canadian Pension Plan (CPP), a program analogous to American Social Security and one of three in Canada that supports retirees. The agreement, which officials expect to finalize by the end of the summer, could add thousands of dollars to the yearly retirement incomes of Canadian workers.
“It’s going to make a huge difference in retirement security,” says Angella MacEwen, a senior economist at the Canadian Labour Congress, who notes that the expansion plan will particularly benefit young workers. The plan, which begins to take effect in 2019, will eventually boost the income replacement rate for retiring Canadian seniors from one-quarter to one-third and raise the cap on replaceable income from $54,900 to $82,700 annually.
Expanding CPP is just one of three steps that Canada’s recently-elected Liberal Party has taken to protect current and future retirees. Led by Prime Minister Justin Trudeau, the government also approved a 10 percent increase in the Guaranteed Income Supplement that the government provides to single, low-income seniors. Trudeau also dropped the previous administration’s plans to raise the age of eligibility from 65 to 67 for both the Guaranteed Income Supplement and the country’s third senior citizen pension program, known as Old Age Security.
To American liberals, Canada’s retirement-care progressivism is a frustrating reminder that in the U.S., public debate on Social Security has until recently centered not on how it can be expanded, but how it can be trimmed. To be sure, a number of Democrats—including presidential nominee Hillary Clinton—have been spurred by a strengthening progressive movement to embrace plans to expand social security. But the legislative outlook is uncertain for overhauls to a program often considered the “third rail” of American politics.
“It’s a badge of honor among policy elites to believe that Social Security has to be cut, not increased,” says Monique Morrisey, an economist at the Economic Policy Institute, which supports expanding Social Security. “Elite opinion is so strongly against it.”
But in a country where nearly one-third of workers have no retirement savings, and where even households that do have retirement funds typically possess no more than enough to provide them with $400 a month—reform advocates might do well to look north.
“It’s a model we should follow,” says Jared Bernstein, the former chief economist and economic adviser to Vice President Joe Biden. “I think the growth of retirement insecurity is even more serious here than it is up there.”
Shaun O’Brien, an assistant policy director at the AFL-CIO, agrees. “Expanding Social Security is an important way of fixing the retirement crisis,” he says. “Because it’s a broad-based system, it’s incredibly efficient.”
In Canada, the government will pay for the increase by increasing employer and employee contributions. It’s a technique that Nancy Altman and Eric Kingson, the authors of Social Security Works!, have recommended in their plan for how to fund a U.S. Social Security expansion.
To be sure, while the economics of Canada’s CPP expansion may transfer to the U.S., Canadian politics cannot be imported so easily.
“The U.S. is not Canada,” acknowledges Bernstein. “If you broached the idea here, a million politicians would stand up and tell you that this would cripple growth and explode the debt.”
There are certainly elements of the CPP expansion that American progressives cannot replicate. In Canada, for example, the province of Ontario forced the government’s hand by threatening to create its own, far-more-generous pension plan if the federal government failed to act. The province, however, is home to 40 percent of Canada’s population and thus wields much more power in its federal system than does any single U.S. state.
But there are elements of the CPP expansion that reflect political trends also on display in the United States. The road to the expansion was paved by the program’s broad popularity, a feature that also defines Social Security. Polls routinely show that Americans of all generations oppose cutting Social Security benefits, and what little polling has been done on expansions suggests that a solid majority support making the system more generous.
“I think some type of expansion exists at the intersection of good policy and good politics,” says Bernstein.
Expansion advocates argue that unlike with Obama’s health-care overhaul, expanding Social Security would not require that the government create a new and ill-defined federal program that could easily become a target for conservatives. Instead, Americans would simply receive more of a product that they already know and like.
“It’s never been clear to me why Democrats have been so cautious about it,” says Steven Hill, a senior fellow at the New America Foundation and an advocate for Social Security expansion. “It seems to me there’s no political cost to them for being more bold.”
In Canada, progressive organizations spent years lobbying to expand CPP to make it a political issue with broad popular support, a scenario not unlike what is going on in the United States.
The Canadian Labour Congress “has had a campaign around it for almost ten years now,” says MacEwen, whose union is the largest in Canada. “We have lobbied at both the provincial and the federal level, and we’ve also had an advertising campaign.”
In part because of such efforts, expanding CPP benefits became one of the defining issues in Canada’s 2015 election. And of the three major parties competing for power, only the incumbent Conservatives were opposed.
Even after the Liberals won, the expansion was not a forgone conclusion. Trudeau had to obtain the approval of provincial governments run by conservative parties, some previously opposed to increases, before ushering through the plan to make CPP more generous.
“Trudeau is very popular right now and has a lot of political capital,” says MacEwen. “[Conservatives] are in a pretty weak bargaining position.”
The CPP expansion, then, provides a rough blueprint that American liberals can follow: leverage social security’s popularity to build support for an expansion, and then wait for the most politically auspicious moment.
Progressives appear to have already started down that path. While American proponents of expanding entitlements do not currently enjoy the broad political support enjoyed by their Canadian counterparts, there are signs of progress. The Sanders campaign, and the work of labor unions and of liberal Massachusetts Senator Elizabeth Warren have all prompted Democrats once silent on Social Security to start speaking out, Clinton included. Indeed, even President Barack Obama, who in 2013 came perilously close to cutting Social Security in a budget deal with Republicans, now supports an expansion.
The obvious obstacles remain. “It’s a big ask,” acknowledges Hill. “And I don’t think anyone is naÃ¯ve enough to think that this is going to cruise through a Republican Congress.”
Indeed, even Canada’s CPP expansion is currently experiencing a right-wing-induced hiccup. The conservative-leaning government of British Columbia recently delayed the plan’s formal ratification, announcing that it needed more time to discuss the changes with businesses before officially signing on. Most political observers do not think that the province’s surprise decision seriously jeopardizes the agreement, which the regional government indicates it still supports and which remains wildly popular with its constituents. But the expansion cannot move forward until the provincial government gives the plan its official imprimatur, showing how even a weakened conservative movement can still cause headaches.
Still, the increasingly serious talk of Social Security expansion by Clinton and other Democrats suggests that a Canadian-style breakthrough might start looking like less of a pipe dream, particularly if Democrats win the White House and regain one or even both chambers of Congress on Election Day.
“It’s an incredible sign that, maybe, we’ve reached a new point on this issue,” says Hill. “I would say that [expansion] is more feasible now than it was even three years ago.”