Kids Love Happy Meals

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Election 2015: How Bad Are The Liberals?

In this series CMR will examine the policy proposals set forth by the top three parties in Canada’s 2015 federal election.

PART I: The NDP
PART II: The Liberals (current article)
PART III: The Conservatives

Obviously these parties are all terrible. So the question is simply this: which party will beat you with the biggest stick?

We will refer to the helpful National Post article “Everything you need to know about the parties’ platforms, from taxes to terrorism to the environment.”

In Part I, we looked at the NDP. Their platform is awful, but in all fairness they had a couple of good policies related, including the repeal of Bill C-51 and ending the military campaign against ISIS. On economic issues, they were entirely dreadful other than their teeny tiny tax cut for small business. They earned a score of D-. Let’s see if the Liberals can fare better.

As Canada’s center-left party, one would expect them to be a little less stupid more moderate than the NDP, which is the party of the far left. Practically speaking, they might be closer to the Conservatives (center-right) when it comes to governance.

Economy

– Cut middle-class income-tax bracket to 20.5 per cent from current 22 per cent; create a new tax bracket of 33 per cent for annual incomes of more than $200,000.

Right on, tax cut! For some people, anyway. But it is an incredibly small tax cut. A lousy 1.5%? Come on, Canadians deserve better. Most people won’t even notice this. But they want to increase taxes on the ‘rich’ (though I hesitate to classify someone as rich for earning over $200K per year). This which is politically appealing but does absolutely nothing positive for the economy (it merely shifts money from productive people to the government).

This would probably increase taxation on net, therefore this policy is bad. They should drop the tax increase and keep the tax cut, then at least this policy would be stingy and lame but not bad.

If the Liberals said they were eliminating income tax on anyone in the middle class, then that would be something to get excited about, even if they were increasing taxes on the wealthier brackets. Better yet would be to cut everyone’s taxes.

Heck, even the NDP said they would keep the income tax rates the same! Well, they are probably lying but it’s funny that the NDP is arguably better than the Liberals on federal income taxes.

– Cancel income-splitting for families; party calls it “a $2-billion tax break to the top 15 per cent of Canadians.”

We can say the same thing we said about the NDP wanting to cancel income-splitting: “This would increase the tax burden on any family to which it applies, and is therefore bad. That it applies mostly to the “wealthiest” is true depending on how you define “wealthy,” but it also applies only to those who have someone with whom they can split their income. So it is rather selective and narrow in its tax relief. This is an interesting matter on its own, and of course tax relief for everyone would be better. But regardless of the fairness issue, added tax relief for some is better than added tax relief for none.”

– Introduce a new income-tested, tax-free monthly Canada Child Benefit that would boost payments to all families with children and annual income below $150,000.

As we said in our discussion of the NDP, the Child Tax Benefit is effectively a tax cut to net taxpayers with children, and welfare for net tax-consumers with children. Essentially, this Liberal policy says families with annual income >$150K should pay more. It’s not clear whether lower income folks would get more or less out of the deal versus the status quo.

Overall, this policy is essentially just dumb because it fiddles with something that shouldn’t exist. A better solution would be to just give families income tax cuts. Fiddling around with these tax credits is annoying and a roundabout way to give tax cuts to some and welfare to others. Meanwhile, net taxpayers with no children don’t get squat. The whole Child Benefit system is unfair and stupid.

– Cancel TFSA increase to $10,000, saying it helps well-off Canadians who need it the least.

As we said in our NDP platform review: “The TFSA is one of the only good things the Harper Conservatives have ever done. Reducing the contribution limits means more taxable income and therefore this is an evil NDP policy.” So we can say the same thing here: Evil Liberal policy. Don’t you love the government deciding who is needy and who is not? Plus, not that it should matter, but it’s questionable whether these claims about the TFSA mostly benefiting rich people are true in the first place. Evidence suggests that people at a broad range of income levels benefit from the TFSA.

– Retain tax breaks for small businesses but want to ensure this doesn’t primarily benefit the wealthy.

This doesn’t really mean anything. Small business gets “tax breaks” i.e. lower tax rates if business income is under a certain threshold. Most small business owners are not rich, and even if they were, so what? In small privately held businesses, income flows through to the owner, who gets taxed at his marginal rate. If he is rich, that tax rate is higher.

Side note: You learn a lot about people’s underlying philosophy when they say “less tax” is a “tax break.” In other words, anything less than having 100% of income taxed is a tax break. These disgusting people are basically saying all your income belongs to the state, and anything you are allowed to keep is a “tax break.” Yuck.

– Balance the budget in 2016.

I really hate when politicians say they are going to “balance the budget” and leave out the important part of HOW THEY ARE GOING TO DO THAT. Raising taxes, or cutting spending? Raising taxes is bad and cutting spending is good.

I would argue that if the government is not going to cut spending, running deficits is better than raising taxes, although both are bad. But there is a difference: you really don’t have a choice as to whether you pay taxes or not. You do have a choice about whether you lend the government money. Governments racking up debts is still bad, because it absorbs private capital and pumps it into wasteful government spending, but at least the taxpayer is less directly affected.

– Cancel Conservative plan to increase OAS eligibility age to 67.

Same thing we said about the NDP proposal applies here: “Evaluating this is a little more complicated than most proposals. On the one hand, OAS is welfare for old folks. This involves subsidizing old folks (who tend to have more accumulated wealth) by taxing younger people (who tend to have less accumulated wealth). Taking money from poorer people and giving it to wealthier people is a weird policy. On the other hand, old folks who are/were net taxpayers deserve to get all their money back, so the OAS could be considered on the same terms as taking a tax credit. Overall, the OAS is bad and should just be eliminated, and with that in mind increasing the age limit is probably better because the best result would be increasing the age limit to 1000 so no one could get it.”

– Increase Canada Pension Plan contributions and benefits for Canadians.

No. The CPP is a disgrace to humanity. If people want to put more money into the CPP, I guess that’s their choice, and they should be allowed to do that. In general, however, people should be allowed to opt out of the CPP and take responsibility for their own retirement. The younger generation will be lucky to get anything out of the CPP. Forcing people — at gunpoint, if necessary — to put money into the CPP is a moral and economic atrocity.

Security and Terrorism

 – End the bombing campaign in Iraq and Syria but keep military trainers in Iraq and boost humanitarian aid to help refugees; allow more refugees into the country from Iraq and Syria.

You see, the Liberals start here with something good and then dilute it with something bad. Ending the bombing campaign in Iraq and Syria is a good idea. Entangling ourselves in brutal foreign conflicts is senseless. But the Liberals want to keep military trainers in Iraq — in other words, they want to support one evil faction against another evil faction. The correct choice is actually to not choose an evil faction at all, and stay out.

There should be no humanitarian aid from Ottawa — Canadians should send their own humanitarian aid if they want, and the government should have nothing to do with it. Likewise, dealing with refugees should not be a government issue at all — if people and private organizations want to help refugees by giving them a place to stay and money and such, they should be allowed to do so.

– Make amendments to anti-terrorism Bill C-51 by: limiting the sharing of personal data to 17 government departments and agencies with national security responsibilities; eliminating CSIS’s new power to obtain court warrants to break the law in some cases to disrupt suspected terrorists; adding a three-year sunset provisions on some parts of the law and mandatory parliamentary reviews of the extraordinary security measures.

The Liberals supported C-51, and these amendments are simply a joke. Oh, so personal data will be shared with only 17 departments and agencies with national security responsibilities. (How do we have that many bureaucracies with national security responsibilities? How do we have that many government agencies at all?)

How nice to eliminate CSIS’s power to break the law — after you gave it to them. Give me a break. They routinely break the law anyway so nothing will change without defunding CSIS and prosecuting lawbreakers.

Sunset provisions at least create the possibility that a bad law will go away, so that’s not a terrible idea because laws are virtually never repealed. But notice how politicians only propose sunset provisions on bad laws. Wouldn’t it just be better to not pass the law, and if it’s already passed, just repeal and try again? Don’t say, “Hey, this law is bad but we will keep it for a few years and then decide whether we still want it, By the way, we probably will.”

The NDP, which says they would repeal C-51, has the Liberals and Conservatives beat when it comes to this awful law.

– Create an all-party national security oversight committee to oversee the 17 government departments and agencies with national security responsibilities.

Committees. The solution is always committees. News flash: Committees are dumb and if you think we need more committees you are quite likely also dumb. They are routinely stacked with members favorable to whoever is setting up the committees in the first place, and inevitably create giant reports no one reads then everything just continues as it was, if not worse.

Government oversight doesn’t fix anything. It just changes the way the government wastes money. Furthermore, it usually doesn’t work as intended, because rather than restricting government activity, it tends to add legitimacy to functions that are bad in the first place. It does this by creating the illusion of “checks and balances” while it white washes bad things.

The only way to reign in abusive government agencies is to cut their budgets or get rid of them.

And again: how do we have 17 government departments and agencies with national security responsibilities? That is way too many. The bureaucratic nightmare in dealing with “national security” must be suffocating.

If the Liberals weren’t clueless and/or dishonest, they would be getting rid of agencies rather than setting up committees.

Environment

– Continue to oppose proposed Northern Gateway pipeline; support Energy East and Keystone XL pipelines.

Frankly, the federal government should have no influence whatsoever in the Northern Gateway pipeline, which is an Alberta/BC issue.

It’s nice that they support Energy East and Keystone XL, in the sense that “supporting” means “not opposing.” The government shouldn’t be advocating for special industry projects one way or another. They should let these issues resolve themselves among legitimate stakeholders.

– Put a price on carbon pollution that allows provinces to design their own carbon pricing policies.

This seems contradictory. If you put a price on carbon pollution, you preclude the provinces from deciding how carbon pollution should be priced — or whether it should be priced at all.

Carbon pricing creates a weird managed market that benefits the most richest, most powerful carbon pollution generators and financial institutions while hurting everyone else. This policy is terrible.

– Partner with provinces and territories to establish national emissions-reduction targets.

Sorry, no. There should be no national emissions-reduction targets.

– Invest millions in clean technologies and enhance tax measures to create more green jobs.

No. We should not have the government pouring taxpayer money into politically connected businesses, destroying jobs in some sectors and to subsidize wasteful jobs in other sectors. However, we should not be opposed to cutting taxes, even if only for certain sectors of the economy. Although a tax cut for all industries is better, selective tax cuts are relative improvements. If they want to have “green” companies pay less tax, sure, I can get on board.

– Introduce an environmental review process with more “teeth.”

Virtually all the worst pollution takes place on government land. The problem isn’t an environmental review process that lacks enough “teeth,” but instead the fact that the government allows pollution on its land at all. Government land should be desocialized and laws of tort and trespass should be enforced. Adding more teeth just means a few more boxes need to be checked before the government will let someone dump toxic waste in publicly owned rivers. Ultimately, they are still letting someone pollute.

– Hold First Ministers’ meeting with premiers within 90 days of the Paris UN climate change conference this December to establish a framework for reducing Canada’s carbon footprint.

Canada doesn’t need to reduce its carbon footprint. Like, at all. So establishing a framework for doing so is dumb.

This proposal is completely moronic. Who cares what the climate change conference in Paris says? It is a conference of goons and fools. Reducing our carbon footprint hurts us and helps countries like India and China. We should be trying to increase our carbon footprint, so that we are wealthier and healthier.

– Increase the amount of Canada’s protected marine and coastal areas to five per cent by 2017 and 10 per cent by 2020.

No. All the marine and coastal areas should be desocialized. The end.

– Phase out subsidies for the fossil fuel industry.

Well, yes, absolutely! Now this probably wouldn’t result in any less spending overall, because the subsidies cut from A would just go to B, but in and of itself this is a good policy. The government should not subsidize any industries.

– Along with the U.S. and Mexico, develop a North American clean energy and environmental agreement.

ABSOLUTELY NOT! These kinds of agreement, whether they are ‘free trade’ agreements or ‘environmental’ agreements, result in harmful political integration and a surrender of sovereignty. We have less than 10% the population of the rest of North America. Canada would be surrendering power to other countries that don’t share our values. The agreement would harmonize regulations and benefit the most powerful and politically connected special interests.

Infrastructure and Transport

– Boost infrastructure funding through “alternative sources of capital” such as having large pension funds invest in major infrastructure projects in urban and rural communities.

The details are very fuzzy on what the Liberals intend for this. They have not given any concrete plan. They say they want to entice investment from private pension funds to invest in Canadian infrastructure projects. That could mean all sorts of things. In all fairness, we cannot judge this policy (but it will probably be bad).

– Provide infrastructure funding for affordable housing, public transit, transportation, climate change and “smart cities.”

NO!!! I mean, this is just dreadful. The federal government should not fund any of these things. The fact it extracts money from the provinces, takes a huge cut for itself, and then parcels out the rest based on political influence makes things worse. It would be far better to just cut that part of Ottawa’s budget and leave all infrastructure decisions in the hands of the provinces.

And don’t you shudder to think what happens when the government starts dishing out cash for “smart cities”? Smart to whom? Ottawa? All the stupidest possible public infrastructure fantasies will have their crazy advocates fighting over the federal money that’s up for grabs. Someone please save us.

– Hold a big city mayors’ meeting in Ottawa annually to discuss pressing infrastructure issues facing cities.

This is completely useless. A bunch of big city tax-devouring beggars rack up a big bill on a fancy trip to Ottawa so they can hang around with Justin Trudeau and talk about how much federal money they need, without which their cities will be lousy. Waste of time and money, and surely leading to nothing positive in the future.

Foreign Affairs and Defense

– Make Canada a “world leader” at multinational institutions.

National Post could have left it out of the article. This doesn’t mean anything. I am sure Justin Trudeau would like to give lots of speeches at the United Nations or something, but that doesn’t help anybody.

Realistically speaking, Canada probably shouldn’t even be in most of these “multinational institutions.” They do not represent Canada’s interests and tend to be counterproductive regarding the goals of prosperity and justice throughout the world.

Canada can be a “world leader” by advocating for peace and free markets, and be demonstrating those values to the world with its own domestic policies. This is not what the Liberals are offering.

– Reopen nine Veterans Affairs regional offices closed by the Conservative government.

I understand why this riles people up. The government treats veterans very poorly. But these are fake cuts. Veteran Affairs spends more money in total each year, so even if some regional offices close and a bunch of bureaucrats get fired in one place, the money is being spent elsewhere in Veteran Affairs. Are the veterans better or worse off than before? It’s impossible to say for sure. That is the problem with government spending.

You’d be better off just getting eliminating all tax on military families and getting rid of Veteran Affairs Canada. Any money that Ottawa would otherwise tax and spend would just stay in the provinces and their health care systems could deal with sick and injured people.

– Create a cabinet committee to oversee and manage Canada’s relationship with the United States.

One of the worst ideas I have ever heard.

– Host a new trilateral summit with the United States and Mexico.

No.

Social Issues

– Strengthen the federal government’s role in safeguarding the national health-care system; meet with the premiers on how to improve the system in areas such as wait times, affordability of prescription drugs, and availability of homecare.

What is it with the Liberals and having all these meetings and committees?

Anyway, we really need to rethink our heath care system. We should leave the money in the provinces and let them figure it out. When something is as important as health care, you want your influence to be closer to home. Therefore, the Liberal desire to strengthen Ottawa’s role in “safeguarding” the health care system is the exact opposite direction we should go.

– Restore door-to-door home mail delivery by Canada Post.

Whatever. This basically just subsidizes Amazon. Mail delivery should be entirely privatized.

– Reinstate the long-form census and make Statistics Canada independent.

The long-form census is ridiculous and it’s insane that some think the government should threaten people with imprisonment if they don’t want to fill it out. What is wrong with people?

Democratic Reform and Governance

– Introduce changes to strengthen the Access to Information system and ensure this applies to the Prime Minister’s Office and ministers’ offices.

Supposedly they want to make all government data open by default otherwise the government must provide written response in 30 days blah blah blah. I think the people should have access to all the government’s data without restriction, but I don’t necessarily think the Liberals would help with this. The changes to the Access to Information Act, written by government lawyers, would probably just add more ways to avoid producing information.

Government agencies have secrets because they exist. You wouldn’t care about the Access to Information Act if the government didn’t have so much power.

– Create a quarterly, more detailed parliamentary expense report, and open up the secretive House of Commons Board of Internal Economy.

Theoretically we could get some entertainment and scandals out of this. Ultimately it wouldn’t matter much. So Ottawa would hire a few more bureaucrats to provide more detailed accounting of how parliament wastes money. Big deal. Why don’t we just… cut their budgets? Members of Parliament shouldn’t even get a salary.

– Create a non-partisan, independent process for advising the prime minister on Senate appointments.

Lame. No one cares. No one likes the Senate.

– Allow more time for questions and answers during question period, and introduce a prime minister’s question period.

Might occasionally be good for theatre, but otherwise has no meaningful impact on anything. The money will still be spent. At best it might slow things down — fewer laws, fewer ways to hurt Canadians. That would be good.

– Ban partisan government ads and appoint an Advertising Commissioner to help the Auditor General provide oversight on government advertising.

Lame. Why can’t we just ban all government advertising?

– Revamp the electoral process by eliminating the first-past-the-post voting system; will study measures such as ranked ballots, proportional representation, mandatory voting, and online voting.

All of the different electoral approaches to democratic majoritarianism are varieties of bad, and I’m not sure how they would rank. But one thing is for sure — mandatory voting is evil. Threatening people with fines and violence if they don’t pick one gangs of jerks or another is just cruel. The Liberals are evil just for considering mandatory voting. If anything, the ability to vote needs to be restricted. Anyone who works for the government or gets the majority of their income from the government should be prohibited from voting.

Justice

– Legalize pot and allow it to be sold – and taxed – in approved outlets. Liberal Leader Justin Trudeau says he expects people would not be allowed to buy the drug until they turn 18 or 19, depending on the province in which they live.

This is an improvement over the status quo. Putting sin taxes on it and allowing only “approved outlets” are bad ideas but this would lead to fewer injustices related to the drug war. The drug war is a complete failure. Surely the money would be spent elsewhere, maybe just allocating more resources to other parts of the drug war. Nonetheless, this would probably result in less state aggression against people overall.

  – Consider reviewing mandatory minimum sentences.

Depends on the crime, I guess.

– Require judicial nominees to the Supreme Court of Canada to speak both official languages.

Yawn. No one cares.

Aboriginal Issues

– Rebuild the relationship between aboriginal and non-aboriginal Canadians.

This doesn’t tell us anything. There is only one right way to do this: abolish the Department of Aboriginal Affairs and Northern Development, and desocialize all First Nations, Inuit, and Metis land.

– Call a national inquiry into murdered and missing aboriginal women.

Inquiries, committees, meetings…

– Implement all 94 recommendations from Truth and Reconciliation Commission.

Has anyone read all of these? Mostly they just feed into the problem — demanding meaningless gestures, money, and more interference from the Canadian state, which has done such damage to the indigenous Canadians. They should be demanding freedom. They should be trying to get the federal government out of their lives completely.

– Create more transparency and accountability with First Nations; pass legislation in consultation with First Nations people on implementing the reforms.

– Provide stable, predictable funding for First Nations education to close the “unacceptable gap” in learning outcomes for First Nations students.

With funding comes control. More federal control over First Nations. This is more the same. First Nations need sovereignty and property rights, not more ‘help’ from Ottawa.

Conclusion

That was quite the slog. After all that, there can be no doubt the Liberal Party’s platform is genuinely wretched — a tissue of economic stupidity and amazingly pointless proposals. Their tax cuts are pathetic. You wouldn’t even notice. They definitely want to increase taxes and the burden of government in various ways. The aboriginal policies were a joke. Overall the Liberals only had a few things that were actually good, particularly their scaling down of the drug war and not bombing countries that haven’t attacked us.

Compared to the NDP, the Liberals had more completely pointless proposals and they seem to like committees a lot more. Both are dedicated to economically disastrous climate change issues and neither will do anything to make Canada better overall. The NDP was definitely better on C-51, but worse on the drug war.

Overall score:

D-

Next time: We look at the platform of the ruling party — the Conservatives! You know it will be awful, but can they score higher than the NDP or Liberals? 

Cyprus: could something like that happen in Canada?

Marc Faber contends that at some point, everywhere will become like Cyprus.

It will happen everywhere in the world. In Western democracies, you have more people that vote for a living than work for a living. I think you have to be prepared to lose 20 to 30 percent. I think you’re lucky if you don’t lose your life … If you look at what happened in Cyprus, basically people with money will lose part of their wealth, either through expropriation or higher taxation.”

But in Canada? No way!

Well… maybe. Check out page 144 of the 2013 “Economic Action Plan” (I hate that term):

The Government proposes to implement a “bail-in” regime for systemically important banks. This regime will be designed to ensure that, in the unlikely event that a systemically important bank depletes its capital, the bank can be recapitalized and returned to viability through the very rapid conversion of certain bank liabilities into regulatory capital. This will reduce risks for taxpayers. The Government will consult stakeholders on how best to implement a bail-in regime in Canada. Implementation timelines will allow for a smooth transition for affected institutions, investors and other market participants.

The details are not made explicit in the budget document. But remember, your deposit is the bank’s liability. When the budget talks about “certain liabilities” being converted into “regulatory capital,” it kinda sounds like Canadian government might be willing to enact a Cyprus-esque solution to a banking crisis.

Apparently, this is not what they mean. Instead, Ottawa wants banks to issue “contingent capital bonds,” something Carney has advocated. These bonds would provide an above-average return. The catch is that if the bank gets into trouble, the bond is converted into shares. The bank would then have emergency capital without a taxpayer-funded bailout.

I think this is a stupid idea. Sure, I suppose banks should be able to issue whatever kind of bonds they want. However, Ottawa claims it wants to “limit the unfair advantage that could be gained by Canada’s systemically important banks through the mistaken belief by investors and other market participants that these institutions are “too big to fail.” The contingent capital bond doesn’t really do anything about that. The moral hazard still is there, because there remains an implicit assumption — which seems to permeate all Western nations at this time — that if anything bad happens to a bank that made bad investments, the entire world will explode. So the government or the central bank will have no choice but to intervene to “save the world (banks)”! We don’t even know that the government itself would not buy these bonds. Or, in a serious crisis, why they couldn’t just buy preferred bank stocks, like a Paulson plan style of bailout/bail-in.

If the implicit guarantee is still there (and why would it not be? Canada’s banks were bailed out in the financial crisis), then contingent capital bonds don’t address the moral hazard issue. Instead, they just let the moral hazard continue with a wink and a nudge, while someone gets a higher yield bond out of the deal. Meanwhile, the explicit generators of moral hazard, like the BoC, CDIC, and the CMHC, continue to exist without change.

Canada’s Big Five banks hold nearly $3 trillion in assets. Their capitalization is about 8%.  So their leverage is so great that they would not withstand even a moderate crisis on a “bail-in” of converted contingent capital bonds. A 20-30% hit on assets would crush them. The idea is a joke.

Yet, the Canadian government, for all its ineptitude, must reasonably fear that a critical Canadian bank failure is a plausible situation. Whatever their “bail-in” plan entails, you must remember that CDIC insurance covers only $100,000 of your chequing and savings deposits, and short-term GICs. It doesn’t cover your stock account or your RRSP accounts. Don’t count on the ‘geniuses’ in Ottawa to regulate the economy so effectively that all your money will be safe.

— Read more at CBC —

Canadian university budgets: standing at the edge of the abyss.

The Globe & Mail reports that Canadian universities face a budget nightmare brought on by pension shortfalls. Article highlights:

… Most faculty and staff have defined benefit pensions, which promise a set retirement income based on service and salary. But those funds suddenly cratered when markets crashed in 2008, most losing 15 to 30 per cent of their value. …

Two years ago, Dalhousie University’s $726-million pension plan lost 16 per cent of its value, leaving a $129-million solvency deficit – the amount that needs to be added so that if the university suddenly folded, it could honour the plan. …

The University of Toronto’s pension fund was the hardest hit, losing 29 per cent in 2008. As a result, the school expects to owe an extra $50-million a year on top of $100-million it already contributes from a $1.5-billion operating budget. Since an arbitrator recently ruled against a proposed premium hike for faculty and librarians, cuts to services are the likely solution again. …

Saskatchewan is in the midst of a three-year moratorium on solvency payments, while Manitoba and Quebec universities already enjoy permanent exemptions. So does Alberta’s UAPP, which the employers and employees run jointly, making employees “part of the problem, part of the solution,” Mr. Gupta said. But because UAPP lost 20 per cent in 2008, its employees now fork over nearly 2.4 per cent more of their salaries than they did two years ago.

Canadian universities are public institutions. The bloated pensions in the public sector are the product of the bubble mentality. When times were good, fund managers did not anticipate anything but steadily rising returns. They did not anticipate 2008. Now all the lavish promises of myriad pension plans seem unrealistic, to say the least. To keep these generous promises, universities will have to cut services for students who are already paying too much for their schools.

The article mentions about $2.06 billion pension deficits among select plans. And this is merely a snapshot of nine different institutions. In a small country like Canada, $2 billion is serious money. The final price tag will ultimately be much higher. And university pensions are just a snippet of a more general problem — unrealistically generous pensions in the public sector will become a cancer on Ottawa’s budget.

As with most western democracies, Ottawa is bound to obligations that it will be unable to meet without default, either through repudiation or Bank of Canada money printing. Ottawa is on the hook for $208 billion in public pensions, which is $65 billion more than Ottawa’s crony accounting previously suggested. This says nothing of the CPP, which will not withstand future demographic burdens, and is made up of 33% per cent fixed income, mostly government bonds, which will be decimated by the mass inflation that is sure to come. Then there are the obligations of individual provinces to various unions which are likewise unsustainable.

When the private pensions of Chrysler and GM were bust, governments intervened. University staff do not have the votes that inefficient auto workers have. But over time, as more pension funds are threatened, Ottawa’s nationalization of different retirement accounts is a very real possibility. This would be done in the name of the general welfare, of course. A government guaranteed return, say at the rate of Canada’s long-term bond, would be more reliable than the ups and downs of capital markets.

This is already reality in some parts of the world. This radical idea even gets serious consideration in the US.

Why would a government want to do this anyway? Two reasons: 1) It can help defer the bankruptcy for the CPP and federal employee pensions; 2) it confers control over Canadian capitalism because common stock carries voting rights. Think about how the US government got the president of GM to step down.

These dangers are not immediate, but they must be considered as you prepare for the future. The main lesson — whether you are a government employee sucking blood from the economy, or a productive worker whose blood is getting sucked — you cannot count on government promises for retirement.

 

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