Wednesday, January 26, 2011
Sunday, January 23, 2011
NUPGE and OPSEU are mounting a campaign in opposition to the Ontario corporate tax cut program. Is there any disclosure on these unions? How much are they spending every year? Where are they getting their money? How much are the senior executives in the unions being paid?
Unions are a huge lobby group in Canada. They siphon money paid by taxpayers into the civil service. Why is there no disclosure required for public sector unions?
Check out their parody site here. People For Tax Cuts
Unions are worried about any money that may not be available to pay their outrageous wages, benefits and pension demands. Of course they are saying that it will come out of the pockets of Ontario taxpayers. what they are really worried about is that it will come out of future wages increases and gold-plated pension contributions.
I have to admit that they have a point if the big-cats in the corporate sector are getting a big tax cut. But they miss the point that it is the business sector generating economic activity that feeds us all.
Be sure to check out all the You Tube page with all of the video, all 15 of them!
Fair Pensions For All
Saturday, January 22, 2011
This week I was out to a breakfast for the Minister of Economic Development for Ontario.She was proud of the fact that Ontario's Debt to GDP ratio was running at less than 30%. She spoke of it being important relative to Canada's competitors in the developed world. She then went on to state that is one of the lowest in the world.
The Minister compared Ontario's debt to the country debt of Greece, Ireland and a few other countries I was embarrassed that she was saying something that ridiculous especially when she was with the Revenue Minister of Ontario.
Several stories have popped up lately in the Canadian media saying how good and stable the financial situation is in Canada. What is the real story?
Canada's Debt to GDP ratio
The last report in the Globe and Mail showed Canada's GDP at $1.3 Trillion. The Harper Index
If we look at the debt numbers we see that Canada is not in rosy shape. Compare the numbers that The Economist present in The Global Debt Clock. It puts Canada at 82.5% somewhere between Greece at 119% and Ireland at 65.6%.
To look at the debt numbers we can go to the Minster of Finance Fiscal Reference Tables - October 2010
Newfoundland and Labrador $ 8,457
Prince Edward Island 1,584
Nova Scotia 13,319
New Brunswick 8,353
British Columbia 28,037
Total Provincial Debt 388,333
Table 15- Canada Federal Debt 582,472
Total Combined $ 970,805 Billion
Based on my estimates the Debt to GDP ratio looks to be at 74.6%.
Despite the congratulatory comments Canada is getting from around the world... we have a serious debt problem.
At least there are a few commentators out there that agree with me. An article in the Calgary Sun talks about the issue Canada’s fiscal health ignites fierce fight
Gaudet places debt reduction above all. He argues “federal plans for deficit elimination are too timid. Better fiscal health means shedding some spending.” In December, however, the IMF released a report that suggests it was generally pleased with the way Ottawa is handling the economy, aside from warnings about health-care spending and possible sluggish growth.
“Canada has weathered well the global recession, reflecting a strong economic and financial position at the onset of the crisis and a sizeable macro policy response,” the report says. (That macro response was largely stimulus, and thus deficit, spending.)
It says the “financial system has avoided systemic pressures amid the global turbulence, thanks in good part to strong supervision and regulation.”
None of that pablum for Gaudet. So averse is he to deficits, he’s pushing a drastic plan to balance the budget in short order.
At least I am not a alone in my cynicism of the situation. An article from the Centre for Tax and Budget studies at the Fraser Institute in the National Post declares:
The bottom line is that the government's current plan to return to balance is based on slowing the growth of federal spending increases over the next five years, while hoping revenues catch up as the economy continues to recover.
Interestingly, when the plan was announced in last year's budget, The Globe and Mail noted that the Conservatives had "launch[ed] an age of austerity." The National Post applauded the plan as a "genuine effort to restore balance to the nation's books."
Forgive us for being a little more realistic, but the current plan calls for spending to increase at a rate less than population growth and inflation in every year between 2010-11 and 2014-15, something the Conservative government has not managed to do in the five years it has been in office.
A true austerity plan aimed at balancing the budget would have taken a page from former prime minister Jean Chretien and finance minister Paul Martin's 1995 plan. The reforms by Chretien/Martin eliminated a deficit much larger than the current one (4.8 % of GDP compared with 2.8%), within three years.
Chretien and Martin's 1995 plan proposed cutting program spending by almost 9% over just two years to get a handle on federal spending. These weren't reductions in spending growth. These were actual reductions in spending.
Even more impressive is that Chretien and Martin outperformed their goal and reduced spending by 9.7%.
Finally in an interesting comparison of our situation to the United States, Diane Francis wrote Canada’s profligate provinces
Canada, on the other hand, has a public debt problem that could be more serious than the one south of the border.
Bill TuftsThe Canadian federal government likes to go around the world crowing about its low public debt. Not true. Canada’s federal government certainly cleaned up its act since 1996 when its debt to GDP ratio hit 68.4%. Today it is 45%.
But that’s only half the story.A simple extrapolation of their deficits will land them in the same category as Greece or 130% of GDP if their cultures of spending don’t change.
Canada’s debts are at a ratio of 90% of GDP mostly due to chronic overspending by Quebec and Ontario. Their profligacy is in stark contrast with Canada’s three westernmost provinces.
Fair Pensions For All
Posted by Bill T at 9:13 PM
Thursday, January 20, 2011
The CLC is pissed and wants to find out who the party pooper is. Who killed CPP reform? CLC asks
The Canadian Labour Congress (CLC) is looking for the culprits that stymied the enhancements to the Canada Pension Plan (CPP).
The CLC publicly announced that in late December 2010 the group filed two Access to Information requests to seek internal government and external lobbying materials related to the CPP and private sector pooled registered pension plans.
“Last summer, Jim Flaherty said that improving the CPP was the best way to ensure the retirement security of Canadians,” says CLC president Ken Georgetti. “But the minister has changed his mind and now favours vastly inferior private sector plans. We want to know who got to the government, and we hope this Access to Information request will provide that information.”...
“They were going to go ahead with a two-pronged approach to retirement security, and a significant part of that was an enhancement to the Canada Pension Plan,” he says in the clip. “It seems to me that the power of the financial services industry just showed how quickly they can change the mind of a government that was persuaded by facts, to turn them around and reward these banks that actually put us into the depression we have found ourselves with regard to our economy.”
Clash of the Titans
The lead-up to Kananskis was an eventful time. This lead-up was covered in my blog On the Trail to Kananaskis.
This is an important time for pension reform in Canada.
Next month in Kananskis the finance ministers of Canada are getting together to develop a plan for improving Canada's retirement security system. One the table are two proposals, one to improve CPP and the other to add an additional, or supplementary plan on top of the CPP.
Organized Labour Plan
The public sector unions are in support of boosting the CPP pension. They are correct that something needs to be done and this plan will be a bonanza for them.
Public sector unions already have the advantage of being able to get full pensions, when qualified, as early as age 55.
As we know know the result was indeed the supplementary pension top-up or as we call it now the Pooled Retirement Pensions Plan.The CLC has put together a good analysis of their position and the problems for Canadians on the CLC website. Retirement Security for Everyone . They have also provided a good overview of the statistics in each province. What Do They Mean for each Province?
The key point for this initiative is that the CPP changes public sector unions recommend will have a windfall effect on public sector pensions. Public sector plans are currently integrated with CPP, their plan to double CPP will greatly reduce the pension shortfalls that many public sector face today.
Beware of unions bearing pension solutions.
The CLC is being deceptive in not disclosing a major benefit for them in an enhanced CPP. It will eliminate the shortfalls from the gold-plated public sector pensions. Catherine Swift covered this issue and her editorial to the National Post.Is the Piggybank Broken? — Demand fairness
I must confess when I first saw the zeal with which this proposal was being promoted by government worker unions, I was perplexed. Weren’t these the people with the generous pension plans? The plans that have very early retirement provisions, indexed to inflation so their real value never declines, and that include extended health benefits that the rest of us can only dream about? Why would these entitled folks even care about CPP, which was only designed to provide a fairly basic level of retirement support — $11,000 annually at best?
And then it struck me. All public-sector pension funds in Canada are in a major deficit position. Simply put, they don’t have enough money to fund the promises they have made to existing and future retirees. And yes, fellow private-sector taxpayer, you and I are on the hook for these deficits.
At the federal government level alone, current deficits are about $200-billion — big bucks. Provinces and municipalities are experiencing a similar pension tsunami. If the public-sector unions succeed in convincing governments to substantially increase CPP premiums, then the deficits that currently exist in public-sector pension funds will be sharply reduced. And that will in turn lessen the pressure to make major structural changes in public-sector pensions to bring them in line with their private-sector equivalents, perpetuating the pension apartheid that currently exists.
Posted by Bill T at 7:31 PM
Tuesday, January 18, 2011
It has been quiet on the pension front for a while after the Finance Ministers meeting in Kananaskis.
Kananaskis helped to solve some of the country's pension problems. One big burden for taxpayers will continue, this is the cost of public sector pensions.
As I have watched the pension issue it has traveled across the big pond from Europe and arrived in the US and is on it's way to Canada. It has been a slow moving Titanic, picking up some speed with the recent financial crisis. The icebergs have been spotted but the Titanic cannot be stopped.
The first issues in pensions were spotted in Europe. When Sarkozy came into power in France he identified the problems with pensions. We know the rest of the story and the riots that persisted as he tried to implement minor changes. Next the story moved to the UK and Ireland. The problems on the island intensified with the onset of the financial crisis. Both these countries are in the process of dealing the pension issue now.
Next stop was the United States.
The pension issue has reached a crescendo in the US. Many states are in severe financial difficulty over their pensions and are having to make drastic changes. Fingers are pointed in all directions as to who was at fault.
Two interesting articles are presented in USA Today. One article Lavish benefits hurt states points the blame at unions and politicians.
The fact is, the financial situation for many states is dire. Like the federal government, they are getting clobbered by rising health costs. Unlike the federal government, they have a massive problem of lavish retirement benefits for public employees. The Pew Center on the Statesunderfunded these plans by $1 trillion. estimates that state and local governments have promised $3.35 trillion in benefit plans and have
In some states and localities, it is not uncommon to see pensions of 2.5%-3% of a worker's final salary, times the number of years worked. At 3%, a worker can retire in his or her 50s, after 33 years of service, and continue drawing the same income. With deals like this, plus retiree health benefits, New York City now spends $144,000 a year for a sanitation worker, according to the Manhattan Institute think tank.
These lavish deals are draining money from core services, including teachers in the classroom, cops on the beat, prison beds, libraries and parks. In some states, even cuts in these programs, plus tax hikes, aren't enough to balance their budgets.
It is time for a major rethinking. An obvious solution is one that most Americans know well — 401(k)-type savings plans. Their widespread usage would make it harder to hide liabilities from taxpayers while reducing "pension envy" between private and public sector workers. At the least, such plans should be universal for new state and local hires.
A prime reason that pension costs have spiraled out of control is that spineless public officials can satisfy an important constituency by creating liabilities that won't come due until well after they leave office. When that important constituency is organized labor, which can apply political pressure and, in most states, bargain collectively, this possibility soon becomes an imperative.
The Other article in USA Today puts the Blame Wall Street
Let's be clear: Underfunded pension systems resulted from unprecedented losses of asset values caused by reckless behavior on Wall Street and the refusal of some politicians to make their required payments. As recently as 2007, pension funds had, collectively, 96% of the assets required to meet future expenditures. But Wall Street drove America's economy and retirement security into a ditch. And now both pension and 401(k) accounts alike must be rebuilt.
An excellent interview with the mayor of San Diego talks about how the blames falls not just on one party but many. California Foundation for Fiscal Responsibility
The Fiscal Reality
The reality is that defined benefit pensions have become a Ponzi Scheme that cannot be stopped and like all ponzi schemes will end with someone holding the bag.
Unfortunately it will not end well for anybody. It is destined to be a lose-lose situation for both pensioners and taxpayers. Pensioners at the bad end will find they have paid for pensions all of their working careers and find the pensions short. Taxpayers will learn that dollars are going to retired workers rather than the roads, schools and hospitals that deserve their taxes.
It is a trade-off for the pensions and benefits of retired workers or the goods and services that government are supposed to provide. There is an excellent article here from Seeking Alpha called Why Public Sector Union Compensation Matters
Now the generosity of the public sector pensions is even being questioned by the brethren in the private sector unions. As the article states:
As Bill McGurn points out in a recent Wall Street Journal column, public sector unions don’t just have to worry about a taxpayer revolt. They also must be concerned about a mutiny among private sector unions. Private sector unions with insight into corporate balance sheets and market competition recognize that $1 million pensions are unrealistic burdens to place on employers. Attempts to change the subject and blame “corporate greed” simply do not resonate. Put simply, it is difficult to conceive a way to address the current – and projected – state fiscal crisis without dramatic reductions in state and local employee benefits.
Finally the issue is coming to Canada. As Dr Suess told in the Grinch ... It started in low... then it started to grow. Two recent articles in Canada record the growing concern with pensions in Canada. Like the rest of the world the issue will cause much grief.
The public sector should be treading lightly on the pension issue and try and protect what they have. Unfortunately they will stick to demands that will end catastrophe.Good news for taxpayers or a dose of double dipping?
Have you heard St. Thomas-Elgin General Hospital CEO Paul Collins retired last year?
As it turns out, Collins' retirement lasted perhaps a day or two and then Babcock and the board rehired Collins and installed him in his former post at the same compensation, almost $205,000 in 2009, at the same time he is collecting his pension.
Bill Tufts - Fair Pensions For All
Posted by Bill T at 3:35 PM