Finance and National Revenue Minister Francois-Philippe Champagne shakes hands with Prime Minister Mark Carney after delivering the federal budget.Sean Kilpatrick/The Canadian Press
Leading into his first budget, Prime Minister Mark Carney acknowledged that Canadians face a moment in which we must summon the courage to make sacrifices for the common good.
Conservative Leader Pierre Poilievre, for his part, is right to emphasize that younger Canadians already do much of the sacrificing. They pay record rents and are taking on crushing mortgages in a difficult job market, thereby protecting many older homeowners who count on inflated property values to fund their retirements.
Yet the 2025 budget sidesteps a hard truth: Neither the Prime Minister who tabled it nor the Opposition Leader who critiques it has found the courage to ask financially secure retirees to share equally in this national moment of sacrifice.
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Mr. Carney’s ambition to serve as builder-in-chief will remain out of reach until this tension is resolved. His efforts are constrained by a deficit decades in the making – the legacy of governments that failed to plan enough revenue to fund an aging population.
Our economy cannot easily grow its way out of that hole. For too long, Canada has relied on lazy GDP growth driven by rising home values rather than investment in machinery, intellectual property and talent. Now, population aging slows growth further, as do U.S. President Donald Trump’s trade disruptions, attacks on climate co-operation and talk of annexing Canada.
In this context, Budget 2025 shows progress and a measure of courage, but not yet at the scale needed for real repair.
The deficit and the crowding-out effect
The deficit is projected to be $78.3-billion this year, falling to $56.6-billion by 2029. Buried in this red ink lies the same structural tension that has haunted Ottawa for decades: growth in spending tied to age.
The biggest pressure point is Old Age Security. It has taken more new spending than any other program over the past decade – and will take even more in the years ahead. OAS cost $76-billion in 2023 and is on track to hit $104-billion by 2029. That $28-billion increase looms over every other line in the budget.
By comparison, new housing measures rise by only $1.6-billion over the same period, pending renewal of the National Housing Strategy. Postsecondary education gets $1.9-billion, youth employment less than a billion, child care $2.9-billion and business tax incentives $3.2-billion. Even a $15-billion defence buildup can’t compete with the surge in OAS.
This imbalance isn’t just an accounting issue; it’s a moral one. Ottawa continues to ask younger and middle-income families to sacrifice long before it asks the same of financially comfortable retirees.
Canada claws back the Canada Child Benefit at household incomes above $81,000 – but allows OAS to flow freely until a couple makes $182,000. In effect, middle-income parents raising children are asked to tighten their belts while retired couples with six-figure incomes continue to collect $18,000 subsidies. That is not shared sacrifice. It is structural ageism against young people written into fiscal policy.
A failure to plan for an aging population
The imbalance in today’s budget was foretold a generation ago. In the mid-1990s, the Chrétien government warned that Canada’s population would age sharply, with the ratio of working-age people per senior dropping from seven in the 1970s to just three today.
To its credit, Ottawa acted decisively in one area: It increased Canada Pension Plan contributions by nearly 70 per cent, requiring boomers to pay more to cover the benefits they would receive down the road.
But the foresight ended there. OAS and medical care were left as is, with no plan to prefund the costs of population aging. As predicted, those costs are now crowding out the fiscal space for investments that would help younger Canadians build homes, raise families and strengthen productivity.
Both of Canada’s leading political voices have acknowledged this problem. When Mr. Poilievre’s party was last in government, he warned that by the early 2030s “the number of people on OAS will double, the cost will triple, and the number of taxpayers supporting each retiree will fall by half.”
Mr. Carney echoed the same warning in his book Values: “Social-welfare systems designed and enjoyed by previous generations will prove, absent reform, unaffordable for future ones.”
For once, the Opposition Leader and the Prime Minister agree on the diagnosis. Now they need the courage to deliver the cure.
The missed opportunity
Generation Squeeze and others have proposed a pragmatic fix: begin clawing back OAS at $100,000 of household income rather than $182,000 per couple. This single change would save roughly $7-billion a year, enough to give every low-income retiree $5,000 more, thus eliminating seniors’ poverty while expanding affordability measures for younger Canadians and trimming the deficit.
We also recommend repurposing the $7-billion spent each year on the age and pension income tax credits to offset rising OAS costs. These two tax breaks largely bypass low-income retirees – an inefficiency Canada can no longer afford.
The Generation Squeeze proposal to reform OAS is supported by three-quarters of Canadians. It’s affirmed by The Globe and Mail editorial board, the publisher of The Hub and the lead reporter for the National Observer – representing thought leaders from the right, centre and left. It’s reinforced both by anti-poverty advocates and by centre-right think tanks concerned with fiscal discipline.
It’s time to end the one-sided sacrifice
Budget 2025 remains trapped in a pattern of one-sided sacrifice – the quiet over-extraction from younger and future generations that Mr. Poilievre has rightly highlighted in his “young people have sacrificed enough” speeches.
Not only does most new federal spending flow to older Canadians, there’s no plan to compensate younger ones for the sacrifices they’re making to protect the housing wealth of those who came before – all because politicians fear a backlash if home values drop substantially.
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Unfortunately, Mr. Poilievre’s compassion for the sacrifices of young people doesn’t extend to the most consequential form of intergenerational theft: the depletion of Earth itself. He minimizes the fact that younger and future Canadians are being left to shoulder the growing risks and costs of our inaction.
On this front, the Prime Minister deserves credit for committing to strengthen the industrial price on pollution in Budget 2025. We must not betray our kids by expecting them to pay dearly for the pollution Mr. Poilievre would let industry dump for free.
Patience and resolve
A fair reading of Budget 2025 should grant the new Prime Minister some latitude. Structural reform is never easy in a minority Parliament. Yet patience must not slip into complacency.
The challenge ahead is not merely to balance the books, but to rebalance the burdens of sacrifice – aligning what each generation gives and gets and investing where need and productivity returns are greatest.
Dr. Paul Kershaw is a policy professor at UBC and founder of Generation Squeeze, Canada’s leading voice for generational fairness. You can follow Gen Squeeze on X, Facebook, Bluesky, and Instagram, as well as subscribe to Paul’s Hard Truths podcast.
