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Quebec Students Should Be Protesting the Elderly

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The rioting students of Quebec got scant sympathy even before they started smashing windows and detonating smoke bombs.

Polls suggest that Quebecers generally support Jean Charest government's plan to raise tuitions in small increments over the next five (and now possibly seven) years. Even when all the increases are phased in, Quebec students will still pay less than students anywhere else in Canada, only 17% of the cost of their own education.

So what have these kids got to complain about? Unfortunately, more than their elders care to admit.

The Canadian fiscal system, like those of all developed countries, tilts heavily toward the elderly. It's not just that pensions and health-care spending outweigh education and college spending (although of course they do). In addition, the cohorts born before 1960 have received a better deal from government at every phase of life than will, in all likelihood, the
cohorts born after 1990.

Members of the pre-1960 cohort paid less tax when young. More of that tax was used to buy things they themselves consumed; less to support the retirement of the (smaller and shorter-lived) cohorts before them.

As they age, the pre-1960 cohorts will enjoy more benefits from government than they themselves ever paid for. They will draw more support from the post-1990 cohorts than they themselves paid toward their elders. And because so many of the benefits for the pre-1960 cohorts have been (and will be) financed by debt, the pre-1960 cohorts will be drawing support from the post-1990 cohorts for years to come.

In the past, this redistribution from young to old could be justified by economic growth. When we taxed the young to support the old, we could assume we were taxing the (richer) future to support a (poorer) past.

This point carried great force so long as we were taxing the cohorts born before 1960 to support the cohorts born before 1930. The pre-1930 cohorts really were dealt a hard hand: depression and war. But the people born between 1930 and 1960 were history¹s big winners. They enjoyed booming prosperity in the first half of their lives, and are now looking forward to
generous governmental support in the second half.

But the mechanism for delivering the support expected by pre-1960 cohorts is breaking down.

On the present trajectory, the post-1990 cohorts will not gain anything like the huge increase of wealth over their elders as did the pre-1960 cohorts. If anything, many of the individual members of the post-1990 cohort will be poorer than their counterparts born before 1960.

The people born before 1960 came of age in a society where the proceeds of economic growth were broadly shared. If the country got richer, everybody in the country got richer.

But in today's more globalized economy, the proceeds of growth are shared less broadly. The United States is an extreme case: By one estimate, in the year 2010, 93% of the benefits of economic growth were captured by the top 1% of the population. But similar trends can be seen in every advanced democracy, including Canada.

Back in the 1970s, the most important wealth gap was the gap between countries: Almost everybody in a country such as Canada was richer than almost everybody in a country such as China. Now we are moving toward a world in which the gap is widening within countries.

Which means that even when the world economy again resumes growing, many of the younger people in the post-1990 cohorts will never equal the average incomes of the pre-1960 cohorts, even as they face decades of heavy taxation over the remainder of their working lives to support the retirements (and pay the debts) of the cohorts before them.

None of this is to say that the Quebec protesters deserve any sympathy. They are a radical fringe. And besides, they are part of the problem: a richer-than-average tranche of their own cohort demanding support from the taxes of less affluent people.

But whatever we think of the protesters, the protests point to a real and true problem. Throughout the Western world, politicians are confronting the question: Who will bear how much of the burden of adjusting budgets to grim new post-2008 realities? Canadian politicians have been more responsible and more concerned with fairness than most. But even in Canada, and much more in Japan, Europe and the United States, the answer being heard louder and
louder is: Spare the old, burden the young.

This blog is cross-posted on the National Post.