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Canada’s Aging Population Is Creating A Fiscal Crisis

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6 minute read

From the Frontier Centre for Public Policy

By Ian Madsen

Rising OAS and GIS costs outpacing economic growth, straining the federal budget

Canada’s aging population is creating a financial crisis that policymakers cannot afford to ignore. The rising costs of Old Age Security (OAS) and the Guaranteed Income Supplement (GIS) pose a growing risk to federal finances, yet no dedicated funding has been established to ensure their long-term viability.

The numbers are staggering. The 2024 Financial Accounts (Public Accounts of Canada, Volume I, p. 43) show that spending on elderly benefits rose at a compound annual growth rate (CAGR) of 6.24 per cent between 2015 and 2024, climbing from $44.1 billion to $76.04 billion. Over the same period, total federal program spending increased at a CAGR of 7.24 per cent, from $248.7 billion to $466.7 billion.

Although elderly benefits made up 17.7 per cent of total program spending in 2015, they now account for 16.3 per cent. This decline is not due to reduced spending but rather a surge in pandemic-related government expenditures, which temporarily outpaced OAS-GIS growth. Nevertheless, the trajectory is clear: elderly benefits are now the federal government’s third-largest expense, behind only ‘Other Transfer Payments’ and ‘Operating Expenses.’

While these figures already indicate a growing fiscal challenge, government projections suggest the problem will only get worse. According to the federal Fall Economic Statement (Table A1.11, p. 211), economic growth is expected to average four per cent annually until 2029-30. Yet OAS-GIS costs are projected to grow at a compound annual growth rate of 6.5 per cent, outpacing both GDP growth and other program spending. By 2029-30, spending on elderly benefits is expected to reach $104.4 billion, or 18.3 per cent of all program expenditures.

Government projections highlight the rapid growth in elderly benefits over the next six years, as shown in the table below:

Fiscal Year                  Elderly Benefits ($B)                Total Program Expenses ($B)              Percentage of Total Program Expenses
2023-24                       76.0                                          466.7                                                   16.2 per cent
2024-25                       80.9                                          485.7                                                   16.7 per cent
2025-26                       85.5                                          500.3                                                   17.1 per cent
2026-27                       90.1                                          509.3                                                   17.7 per cent
2027-28                       94.6                                          529.7                                                   17.9 per cent
2028-29                       99.5                                          549.7                                                   18.1 per cent
2029-30                       104.4                                        570.3                                                   18.3 per cent

As the table shows, OAS-GIS spending is rising as a proportion of total government expenditures. This mirrors the original crisis in the Canada Pension Plan (CPP), when benefits outpaced contributions as the population aged.

The CPP once faced a similar sustainability crisis, and its reform in 1997 offers a potential model for addressing the challenges of OAS-GIS today. The federal government overhauled the CPP by creating the Canada Pension Plan Investment Board (CPPIB), which now manages $570 billion in assets. At the time, CPP benefits were paid through general government revenues rather than dedicated investments.

The solution involved higher contribution rates and the creation of an independent investment board to manage the fund sustainably.

These changes secured the CPP’s future, but OAS-GIS remains entirely dependent on government revenue, with no financial backing of its own. That makes it even more vulnerable to economic downturns and demographic shifts.

Policymakers must take decisive action to secure its future. One option is to tighten eligibility criteria to curb uncontrolled spending. Cost-of-living adjustments should also be limited to official inflation measures, ensuring sustainability without unfairly burdening low-income seniors.

The federal government must acknowledge the problem before it becomes unmanageable. The next finance minister should seek input from actuaries, investment professionals, economists and the public to explore feasible long-term solutions. A dedicated OAS-GIS Investment Board, similar to the CPPIB, could help ensure the program’s sustainability. The government already expanded CPP in 2019—there is precedent for such an approach.

Since OAS-GIS has no existing assets, the government will need to inject capital into the program. This could be done through annual surpluses deemed excessive for current needs or through long-term debt financing. Issuing 30-, 40- or even 50-year bonds specifically designed to fund OAS-GIS could provide a market-friendly, fiscally responsible path to solvency. If properly structured, such a plan could improve Canada’s credit rating rather than weaken it, ultimately reducing borrowing costs.

Even today, OAS-GIS spending exceeds the annual federal deficit, a clear warning sign that this issue can no longer be ignored. If no action is taken, Canada will face soaring elderly benefits with no sustainable way to fund them.

The time to act is now. Delaying reform will only make the crisis worse, burdening future generations with an unsustainable system. Policymakers have a choice: build a sustainable future for OAS-GIS or allow it to become a fiscal disaster.

Ian Madsen is the Senior Policy Analyst at the Frontier Centre for Public Policy.

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US Energy Secretary says price of energy determined by politicians and policies

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From the Daily Caller News Foundation

By David Blackmon

During the latest marathon cabinet meeting on Dec. 2, Energy Secretary Chris Wright made news when he told President Donald Trump that “The biggest determinant of the price of energy is politicians, political leaders, and polices — that’s what drives energy prices.”

He’s right about that, and it is why the back-and-forth struggle over federal energy and climate policy plays such a key role in America’s economy and society. Just 10 months into this second Trump presidency, the administration’s policies are already having a profound impact, both at home and abroad.

While the rapid expansion of AI datacenters over the past year is currently being blamed by many for driving up electric costs, power bills were skyrocketing long before that big tech boom began, driven in large part by the policies of the Obama and Biden administration designed to regulate and subsidize an energy transition into reality. As I’ve pointed out here in the past, driving up the costs of all forms of energy to encourage conservation is a central objective of the climate alarm-driven transition, and that part of the green agenda has been highly effective.

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President Trump, Wright, and other key appointees like Interior Secretary Doug Burgum and EPA Administrator Lee Zeldin have moved aggressively throughout 2025 to repeal much of that onerous regulatory agenda. The GOP congressional majorities succeeded in phasing out Biden’s costly green energy subsidies as part of the One Big Beautiful Bill Act, which Trump signed into law on July 4. As the federal regulatory structure eases and subsidy costs diminish, it is reasonable to expect a gradual easing of electricity and other energy prices.

This year’s fading out of public fear over climate change and its attendant fright narrative spells bad news for the climate alarm movement. The resulting cracks in the green facade have manifested rapidly in recent weeks.

Climate-focused conflict groups that rely on public fears to drive donations have fallen on hard times. According to a report in the New York Times, the Sierra Club has lost 60 percent of the membership it reported in 2019 and the group’s management team has fallen into infighting over elements of the group’s agenda. Greenpeace is struggling just to stay afloat after losing a huge court judgment for defaming pipeline company Energy Transfer during its efforts to stop the building of the Dakota Access Pipeline.

350.org, an advocacy group founded by Bill McKibben, shut down its U.S. operations in November amid funding woes that had forced planned 25 percent budget cuts for 2025 and 2026. Employees at EDF voted to form their own union after the group went through several rounds of budget cuts and layoffs in recent months.

The fading of climate fears in turn caused the ESG management and investing fad to also fall out of favor, leading to a flood of companies backtracking on green investments and climate commitments. The Net Zero Banking Alliance disbanded after most of America’s big banks – Goldman Sachs, J.P. Morgan Chase, Citigroup, Wells Fargo and others – chose to drop out of its membership.

The EV industry is also struggling. As the Trump White House moves to repeal Biden-era auto mileage requirements, Ford Motor Company is preparing to shut down production of its vaunted F-150 Lightning electric pickup, and Stellantis cancelled plans to roll out a full-size EV truck of its own. Overall EV sales in the U.S. collapsed in October and November following the repeal of the $7,500 per car IRA subsidy effective Sept 30.

The administration’s policy actions have already ended any new leasing for costly and unneeded offshore wind projects in federal waters and have forced the suspension or abandonment of several projects that were already moving ahead. Capital has continued to flow into the solar industry, but even that industry’s ability to expand seems likely to fade once the federal subsidies are fully repealed at the end of 2027.

Truly, public policy matters where energy is concerned. It drives corporate strategies, capital investments, resource development and movement, and ultimately influences the cost of energy in all its forms and products. The speed at which Trump and his key appointees have driven this principle home since Jan. 20 has been truly stunning.

David Blackmon is an energy writer and consultant based in Texas. He spent 40 years in the oil and gas business, where he specialized in public policy and communications.

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Oil tanker traffic surges but spills stay at zero after Trans Mountain Expansion

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From the Canadian Energy Centre

Bigger project maintains decades-long marine safety record

The Trans Mountain system continues its decades-long record of zero marine spills, even as oil tanker traffic has surged more than 800 per cent since the pipeline’s expansion in May 2024.

The number of tankers calling at Trans Mountain’s Westridge Marine Terminal in the Port of Vancouver in one month now rivals the number that used to go through in one year.

A global trend toward safer tanker operations

Trans Mountain’s safe operations are part of a worldwide trend. Global oil tanker traffic is up, yet spills are down, according to the International Tanker Owners Pollution Federation, a London, UK-based nonprofit that provides data and response support.

Graph courtesy International Tanker Owners Pollution Federation

Transport Canada reports a 95 per cent drop in ship-source oil spills and spill volumes since the 1970s, driven by stronger ship design, improved response and better regulations.

“Tankers are now designed much more safely. They are double-hulled and compartmentalized to mitigate spills,” said Mike Lowry, spokesperson for the Western Canada Marine Response Corporation (WCMRC).

WCMRC: Ready to protect the West Coast

One of WCMRC’s new response vessels arrives in Barkley Sound. Photo courtesy Western Canada Marine Response Corporation

From eight marine bases including Vancouver and Prince Rupert, WCMRC stands at the ready to protect all 27,000 kilometres of Canada’s western coastline.

Lowry sees the corporation as similar to firefighters — training to respond to an event they hope they never have to see.

In September, it conducted a large-scale training exercise for a worst-case spill scenario. This included the KJ Gardner — Canada’s largest spill response vessel and a part of WCMRC’s fleet since 2024.

“It’s part of the work we do to make sure everybody is trained and prepared to use our assets just in case,” Lowry said.

Expanding capacity for Trans Mountain

The K.J. Gardner is the largest-ever spill response vessel in Canada. Photo courtesy Western Canada Marine Response Corporation

WCMRC’s fleet and capabilities were doubled with a $170-million expansion to support the Trans Mountain project.

Between 2012 and 2024, the company grew from 13 people and $12 million in assets to more than 200 people and $213 million in assets.

“About 80 per cent of our employees are mariners who work as deckhands, captains and marine engineers on our vessels,” Lowry said.

“Most of the incidents we respond to are small marine diesel spills — the last one was a fuel leak from a forest logging vessel near Nanaimo — so we have deployed our fleet in other ways.”

Tanker safety starts with strong rules and local expertise

Tanker loading at the Westridge Marine Terminal in the Port of Vancouver. Photo courtesy Trans Mountain Corporation

Speaking on the ARC Energy Ideas podcast, Trans Mountain CEO Mark Maki said tanker safety starts with strong regulations, including the use of local pilots to guide vessels into the harbour.

“On the Mississippi River, you have Mississippi River pilots because they know how the river behaves. Same thing would apply here in Vancouver Harbour. Tides are strong, so people who are familiar with the harbor and have years and decades of experience are making sure the ships go in and out safely,” Maki said.

“A high standard is applied to any ship that calls, and our facility has to meet very strict requirements. And we have rejected ships, just said, ‘Nope, that one doesn’t fit the bill.’ A ship calling on our facilities is very, very carefully looked at.”

Working with communities to protect sensitive areas

Beyond escorting ships and preparing for spills, WCMRC partners with coastal communities to map sensitive areas that need rapid protection including salmon streams, clam beds and culturally important sites like burial grounds.

“We want to empower communities and nations to be more prepared and involved,” Lowry said.

“They can help us identify and protect the areas that they value or view as sensitive by working with our mapping people to identify those areas in advance. If we know where those are ahead of time, we can develop a protection strategy for them.”

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