In a
great essay, Lawrence Reed points out that government’s constant efforts to reform its own policies is an implicit admission that they couldn’t get things right the first 50 attempts. This is instructive; as Ontario’s political debate now turns on pension reform. The Ontario Liberal Party leader, Kathleen Wynne, has made it a campaign priority to establish a new mandatory pension plan for Ontarians.
According to Wynne and at least one of her “experts” Canadians do not contribute the full amount to their Retirement Savings Plans each year solely because they aren’t forced to do so (yes, they actually said that). Not only are we too stupid to be able to plan our own retirement, but also not able to maximize the use of our current government offerings. This squarely lays the blame for the current deficiency of personal retirement planning on the doorstep of teachers.
It is teachers, after all, who have spent their careers educating the people Wynne finds so incompetent. Of course, the Liberal Party will never alienate one of their strongest bases of support by outright blaming them. However this inescapable assumption is at the foundation of Wynne’s proposed policy. Public school teachers have unfettered access to almost every mind in the country for at least 12 years. You would think that somewhere along that line kids would have been taught to produce more than they consume and save the difference for a time when they’re no longer able to work.
The disdain for the common-person is only overshadowed by the sheer arrogance and piggishness of the new pension proposal.
Ontario is in dire financial straits and individual taxpayers are shouldering a debt burden
twice that of Californian taxpayers who have already seen three of their cities declare bankruptcy. Perhaps people would save more to the ailing Premier’s liking if they weren’t taxed so heavily in order to support the bloated welfare-state that current and previous administrations have worked so tirelessly to establish. After income taxes, EI, CPP, OHT, WSIB and the myriad other taxes Ontarians must pay both directly and indirectly, it’s a wonder they’re able to save at all.
The Ontario Retirement Pension Plan (ORPP) underscores the government’s fetish with defined-benefit-type pensions that have proven so volatile in recent years; with liabilities exploding out of control in the low-interest rate environment created by the Bank of Canada. Yet these plans are hailed as the ultimate in retirement security. If a company goes under, their plan is unlikely to survive and the retirees are out of a paycheque. In that event the Pension Benefits Guarantee Fund (PBGF) exists to step in. However the last set of financial statements shows only a surplus of $76 million in the PBGF (a deficit of $6 million in 2011) to backstop any company plans that happen to go under. Is this safety?
For some unknown reason Wynne thinks that if people don’t have a pension, then they aren’t prepared for retirement. What about people who choose instead to invest in real estate, precious metals or in their own stock portfolio? I’ve been auditing and analyzing pension funds for over 8 years and never have I found a defined-benefit plan that could equal the return on investment that other avenues provide.
Despite denials that this is nothing more than an additional tax, the astute are aware of what’s really happening. The CPP was established as a Ponzi-scheme, with “contributions” being borrowed in to the general revenue of the federal government and used to pay immediate expenditures. It also became a slush fund for the Provinces to borrow from. As of 2013, about $24 billion is still to be paid back and there is currently no plan to do so.
The heroine of this story, Wynne, wants her own Provincially-controlled slush fund and uses the same rhetoric used to sell the CPP to foist her own scheme onto the presumed unwashed masses of Ontario. An “Investment in the future”, she calls it; the future of working individuals or the future of Wynne and her establishment? The ORPP is simply repeating the same formula, pretending to be original. The real reason behind this push is hinted at in the budget itself:
‘By unlocking value from its assets and encouraging more Ontarians to save through a proposed new Ontario Retirement Pension Plan, new pools of capital would be available for Ontario-based projects such as building roads, bridges and new transit.’
Ontario’s teachers have managed to nearly close a $45 billion funding deficit in their own retirement plan in just two years. On the other hand, the Ontario government has only run 8 small fiscal surpluses in the last 30 years. The other 22 have been an orgy of deficit spending. Perhaps Wynne should focus on her own fiscal house instead of being the accusatory black pot.
What would the end result of this policy be? Despite what many in government appear to believe, businesses are not these magical, bottomless pots of money. The contributions for the new plan will have to come from somewhere and that will be straight out of the employees paycheques... including the so-called “employer portion”. It makes no difference to an employer whether it’s paying the government or the employee directly.
The costs can be significant as well and will have far-reaching consequences. Magna, which has 19,000 employees in Ontario,
has said that the new plan would represent a “significant cost” and will forego opening any new plants in the Province if the ORPP comes in to being. Businesses have a fixed sum of cash they’re able to spend on salaries and benefits. When the government forces one up, the other must come down. It’s simple arithmetic.
Apparently math works differently in politics.
Chris is a Chartered Accountant practicing in the Greater Toronto Area. Formerly an auditor to Fortune 500 companies with Deloitte & Touche, he now provides project management and consulting services to mid to large enterprises, specializing in financial institutions. His work has included helping launch a successful stock brokerage, insurance and tech company. Chris is also the Vice-Chairman of the Mises Institute of Canada and an advisory board member of the Bitcoin Alliance of Canada. His company website is mycfoweb.ca.
