Canadians must understand cost of Ottawa’s programs

As the October federal election approaches, we’re in great need of a blunt discussion about the demands Canadians place on the federal government and what we’re willing to pay for those demands. A critical part of that discussion must be the trade-offs between universal programs that (at least theoretically) cover all Canadians compared to targeted programs for those deemed to be in need.

One of the signature policies of the federal government has been the creation of the Canada Child Benefit (CCB), which absorbed two previous federal programs and was then expanded. The CCB, a tax-free monthly payment made to eligible families with children under the age of 18, now reaches an estimated 3.6 million families. As of July 1, 2019, the annual benefit (before potential reductions) is $6,639 per child under six and $5,602 for children aged six to 17.

The CCB is “targeted” in the sense that benefits are reduced (by between 7 per cent and 23 per cent) for families with income between $31,120 and $67,426, depending on the number of children. For families with income above $67,426, the benefit is reduced by an additional 3.2 per cent to 9.5 per cent, again depending on the number of children.

At first glance, the clawback of benefits suggests the program effectively targets families with income below $31,120. However, closer examination shows that middle- and upper-income households receive payments.

For instance, depending on the number of children and their ages, families with income well over $200,000 can be eligible for benefits. An online calculator allows Canadians to estimate their potential CCB. A family with $100,000 in household income (with two children between the ages of six and 17) in British Columbia, for instance, would receive an estimated benefit of $4,446. Alternatively, a family living in Ontario with $130,000 in income with one child under six and one between six and 17 would receive an estimated benefit of $3,773.

It’s pretty clear the CCB is not a program that exclusively—or even largely—targets low-income families. Indeed, the broad benefits paid to many Canadians families explain the current program’s price—a planned $24.3 billion this year—more than EI, equalization and the federal transfer to the provinces to support social programs.

The idea of “targeted” benefits is even more important now given that national pharmacare looks certain to be a central issue in the fall. The Trudeau government’s commission investigating national pharmacare recently recommended—and federal Health Minister Ginette Petitpas Taylor seems to have at least informally supported—a national universal government plan.

In other words, Ottawa is signalling that it’s not interested in targeting assistance to those in need, but rather in creating a new national government pharmacare program to cover all Canadians. Given that the federal government is already in deficit and doesn’t expect to return to balance until at least 2040, and the fact that federal spending is already at an historically unprecedented level, it’s not clear how the government can afford a universal plan without significantly increasing the deficit and/or taxes. Indeed, several economists have already raised concerns about the cost estimates of a universal plan.

A frank discussion of the costs and benefits of universal versus targeted programs, what’s meant by targeting assistance, and what Canadians are willing to pay in additional taxes—either now or in the future—is needed now.