An open letter to Stefan Molyneux
Talking Canada Pension Plan

2014-01-24 in-dignity

I just got a one page flyer from my MP, Peggy Nash inviting us to an event, a Retirement Security Forum with Peggy Nash and Murray Rankin.

The headline of the flyer states
“You deserve to retire in dignity – not poverty”
I wish I could just provide a link to the text of the flyer but I could not find a copy on-line so I will have to type in the whole thing for your benefit. There is a slightly different version of it on the NDP web site.

The front of the flyer says:

While Stephen Harper squanders your hard earned tax dollars on tax breaks for his friends, he’s ignoring the very real challenges that seniors of today and tomorrow face.

Tom Mulcair’s New Democrats are putting the focus back where it belongs – on your priorities:

//             Decent pension, with a boost to CPP and OAS at 65, not 67.
//             Better health care closer to home.
//             Concrete support for caregivers and families.
//             Safe and affordable housing choices.
//             An end to elder abuse and discrimination

Together, we can build a better Canada, where each one of us can find the dignity we deserve.

And the back:

New Democrats move to protect pensions

New Democrats have taken a step forward in protecting workers’ pensions and ensuring employees are not left out in the cold.
Too often, employees are forced to watch as their pension funds are collected by banks and creditors any time a company goes bankrupt. After years of putting money away for retirement, employees are left with crumbs.
New Democrats know that’s unfair. That’s why we introduced a plan to put pensioners at the front of the line of creditors when a company goes under.
Instead of watching their money disappear, under our plan workers would get their unpaid pensions first – before any other creditor.
In the last recession, thousands of workers saw their pensions disappear thanks to bankruptcy. Without any warning – and through no fault of their own – years’ worth of retirement savings vanished. Workers and families were left without a nest egg.
With our economy slowing to a crawl again, workers need to be protected. Adfter all, pensions are deferred wages and no one should have the right to take them away.

New Democrats will continue to fight for your pension, and for retirement security for all Canadians. While Stephen Harper looks out for his insider friends, my colleagues and I are putting families first.

Interesting. I could take it apart, I could ask silly questions to demonstrate the disgustingly manipulative use of language, the innuendos and the phony concerns but we should take this seriously and address what’s at the heart of the message.
Peggy Nash and Murray Rankin will try to sell us a plan and we better understand what it is about. We should ask some serious questions from them about it.

While I do not know, while we cannot know based on this propaganda flyer, it is safe to assume that this initiative is a manifestation of point 1.8g of the 2013 NDP policy booklet:
“Implementing new measures to protect workers’ pensions.”

Going through the page I had to wonder what is ‘dignity’, how often is ‘too often’, what is a ‘decent pension’ and how many ‘thousands of workers saw their pensions disappear thanks to bankruptcy’.

The answers are not that difficult to find. Finding evidence of the claims in the flyer, on the other hand, is almost impossible.

Unless you are an NDP supporter, it will not surprise you that employer provided pensions in Canada are heavily regulated. Especially to protect the employees in case the provider allows the fund to go underfunded – with special provisions and insurances to cover the difference. In Ontario the plans are supervised by the Financial Services Commission of Ontario. The rules are pretty strict; no fund is allowed to go below 80% coverage of its liabilities. Companies cannot just raid their funds at will. There are about 1,800 funds with nearly six million members as you can see in these Statistics Canada tables. What’s noteworthy is that private sector participation is going down while public sector participation is going up – following the trend in labour union membership. Public is up, private is down.

I found several articles addressing the understandable anxieties about the safety of retirement funds.
Four questions about the safety of your pension from and Is your pension safe? from MoneySense magazine should put anybody’s fears about private pension funds to rest.

They are pretty much in agreement that there isn’t much to worry about.
This commentary from the Fraser institute points out that “Canada has one of the lowest rates of senior poverty in the developed world.” It references OECD statistics that you can check for yourself to confirm.

This is not to say that there are no problems. Bill Tufts and Lee Fairbanks wrote a whole book about it:  Pension Ponzi- How Public Sector Unions are Bankrupting Canada’s Health Care, Education and Your Retirement  which goes right to the heart of the problem with the first sentence of its introduction: “Canadians are blissfully unaware that Canada’s economic system is broken, defrauded by the most successful economic organization in history – the public sector union.” It is a problem that’s also addressed although in less alarming terms in the MoneySense article linked above.

This Fraser institute study shows some ideas on how to fix the problem by analyzing the lessons from the Saskatchewan NDP. The lesson is simple; it is the defined benefit plans that are killing us.

You must be wondering why am I drowning you in these links, why am I putting so much effort into demonstrating that the assumption behind this NDP plan are mistaken.
I do so because I do not believe that they are mistaken. I believe that they are deliberately misleading, dressing up an insidious agenda into the sappy language of phony concerns. I want to provide you with the evidence to show that Peggy Nash, her partner on the stage and her boss are trying to con us. What the real agenda is we cannot know, but we can state what we know and we can speculate about what we do not.

Let’s look at the facts

There is no private sector pension crisis. Private sector pensions are well regulated, they are generally performing well, and they are slowly moving away from the uncertainty ridden defined benefit pensions toward the more reasonable defined contribution types.

Government pensions are in trouble in many places around the world. They are failures at best, shameless Ponzi schemes at worst. There are experiments around the world to change for the better, but neither Canada nor the US are ready to face the politically inconvenient problem. This short video on Social Security vs. Private Retirement will give you the numbers.

There is no systemic old age poverty crisis in Canada beyond the general poverty problems that should be addressed separately from the pension system and without the need to further regulate private pension funds.

The only real crisis around is the state some public service union provided pension funds are in. Many of them are about 50% underfunded. Unlike private funds, they can be raided (or “saved”) by politicians at the taxpayers’ expense.
Some public service organizations are also trying to move away from defined benefit plans but labour unions are fighting the effort.
There is a serious crisis in the US where many municipalities are tittering on the brink of bankruptcy while some actually did go bankrupt – Detroit being the most prominent example. Even though Canadian municipalities are not in such bad shape, many are struggling and even the CBC suggests that they should learn from the lesson of Detroit.

What the NDP is suggesting is to change bankruptcy rules so that the soft debt of pension liabilities will take take precedence over the hard liabilities of bonds and bank loans.

Let’s speculate

What would happen if a law as proposed would be enacted?

Such law would make lending to a company much riskier which would demonstrate itself in higher interest rates, ergo higher operating costs, ergo less competitiveness, ergo less profit or less sales, ergo less employment. If I was a CEO of a company with a pension fund, I would try to get rid of it immediately and would definitely refrain from offering one if my company didn’t have one.

The net result would be not unlike any other socialist policy, achieving the exact opposite of its stated goal.

The logic is so obvious that it is hard to imagine why anybody would propose it until you realize that there are organizations that could benefit from it. Such law would be a tremendous bonus for labour unions, especially public service ones that do not have to worry about pricing themselves out of the market.  With such law in place, they can have even more outrageous demands than they already have widening even further the gap between the lifetime earning potentials of private and public sector workers. One would also hope that with such a law private sector labour unions would shoot themselves in the foot making unionized, pension offering companies less competitive.

The one thing such law would not accomplish, is bettering the life of the elderly poor.

Now you have to start wondering:  Which political party has the cosiest relationship with Canadian labour unions of all sorts? Once you found the answer, you can keep wondering about the credibility of Peggy Nash’s concerns about the elderly and start speculating about the ways her concerns are overlapping with the interest of her most significant supporters. But we should give her the benefit of the doubt. Let’s see how she would answer the following questions.

The questions I would like to ask from Peggy Nash

  1. Why here, why now? Why in this riding? Who among us are affected by the problem?
    How many people in this audience? How many businesses in this riding?
  2. In Ontario, pension plans are supervised by the Financial Services Commission of Ontario.
    It is provincial jurisdiction. You are a federal MP. Why are you meddling in provincial affairs?
  3. Are you telling us that they are not doing their job? Where is the crises?
  4. You have a pretty loaded accusation of Stephen Harper. You are accusing him with outright, naked corruption. Where is your evidence? Who are the friends that Harper is squandering my tax dollars on?
  5. How does Tom Mulcair know what my priorities are? Nobody ever asked me.
  6. What is ‘dignity’? How do you measure it? How can you put a dollar figure on its value?
    Is the cost of dignity the same across Canada?
  7. Are you currently contributing your own (after tax) money to some retired person so they can live in dignity?  If not, why do you want to force me to do so?
  8. Even if your assumptions were correct, there would be better ways to deal with the problem. Is this the best idea the NDP can have?
  9. The Saskatchewan NDP saved its pension plan by transforming it into a defined contribution plan. Would you support such sensible policy all across the country in both the private and the public sector?
  10. How many people are affected by this danger and what is the extent of their exposure?  Can you give us at least an estimate?
  11. Can you show us a single victim of this horrendous problem that you are trying to save us from?
    Someone who lives in dire poverty because he had to “watch his pension disappear thanks to bankruptcy?”
  12. The economic consequences of your proposal are clearly predictable. Do you really think that you can rape the laws of economics or you just don’t care as long as your union buddies get their satisfaction?
  13. Canadians should, supposedly, be able to rely on the different pensions offered by the Government of Canada, without any additional pension system. Isn’t the very fact that we are talking about this an open admission that the Canadian Pension system is broken?
  14. Only about 40% of Canadian workers have employer provided pensions. You don’t care about the dignity of the rest?
  15. Shouldn’t CPP and OAS be enough to allow people to “live in dignity?” Shouldn’t you focus your efforts on that instead of trying to destroy the alternatives that are working quite well?
  16. A retired friend asked me: “How come my wife and I get CPP and OAS even though I have a fairly decent pension and adequate retirement savings?
  17. Why aren’t CPP and OAS benefits only provided to retired persons who aren’t “living with dignity”?
  18. It could be said that this idea is quite transparent; it is quite obvious that you are representing the interest of you financial backers, public service labour unions against the interest of actual hard working Canadians. It could be said that you are nothing but huckster, a puppet of the labour unions. What do you have to say to that?
  19. This idea of yours is not just very stupid, not just dangerous and counterproductive, but clearly, obviously corrupt.  Did you really think that we will not see through it? Do you really think that we are that stupid? That makes me feel indignant.

Whatever the answers to these questions are, the idea that will be discussed in this ‘forum’, the idea pushed by these two union hucksters are dangerous and somebody needs to stand up to them.

Be there with me.

Special thanks to Jim McIntosh for providing some of the questions

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