Pensions - part 2

109 posts / 0 new
Last post
Unionist Unionist's picture
Pensions - part 2
Unionist Unionist's picture

[url=http://www.theglobeandmail.com/news/opinions/who-will-pay-to-end-the-loo... piece by Jon Kesselman[/color][/url] - largely reflects my thinking as well:

[quote]

The CPP currently covers all employees and self-employed persons on their earnings up to $46,300 a year, with retirement pensions paid at 25 per cent of the worker's average insured earnings. The maximum annual benefits are $10,900, and the average benefits are just $6,000, far below full-time earnings. To finance the scheme, workers and employers each pay premiums that are 4.95 per cent of insured earnings.

Big-CPP fighters have their sights set on at least doubling the benefit rate to 50 per cent, others would fight for 70 per cent, and some aim to raise covered earnings to $70,000 or higher. Their schemes would raise the maximum benefits from threefold to sevenfold. Even for moderate earnings, the benefit would be at least doubled. As in all wars, the expansion of CPP would be costly, carrying with it a large hike in premium rates.

Opponents of Big-CPP insist that the current system of workplace pensions and tax-assisted savings can be remedied. Their arsenal includes a managed voluntary “multi-employer” pension plan, an improvement of the financial security of workplace pensions and an enhancement of the income-tax treatment of individual savings. [...]

Like most conflicts, the battle between Big-CPP proponents and supporters of enhanced voluntary savings and workplace pensions may not yield a clear-cut victory for either side. But some expansion of the Canada Pension Plan or an alternative mandatory scheme for employers and workers who save inadequately will be an essential element in any lasting peace. [/quote]

ottawaobserver

Some expansion of the CPP is mandatory, I agree.  But we also need to do something about the income security of the folks who have lost their current pensions, which is why I also favour a hike in the (income-tested) GIS.  We fund that out of a very targetted taxback of the bonuses paid to the thieves, er executives, at Nortel and other similar outfits.

I haven't been paying close attention to the details of the story, but what is that $1 billion insurance thingy that John Roth is seeking?  Is it civil liability insurance or something?  He, Frank Dunn and Zafirovski (sp?) are at the top of my list of evil greedy people who should be held accountable for destroying decades of hard work and thousands of lives.

Unionist Unionist's picture

[quote=ottawaobserver]

I haven't been paying close attention to the details of the story, but what is that $1 billion insurance thingy that John Roth is seeking?  Is it civil liability insurance or something?

[/quote]

It must be some U.S. type action. I don't understand high finance:

[quote]Former Nortel CEO John Roth filed a U.S. creditor claim on Dec. 1 seeking $1 billion from Nortel if he loses a series of class-action lawsuits filed by former employees. Roth, who took millions with him when he left the company in 2001, wants Nortel to cover up to $1 billion of his costs if he loses a series of class action lawsuits filed by former employees.

John Roth, who was in charge when the company's stock soared in 1999 and 2000, filed a U.S. creditor claim in a U.S. bankruptcy court on Dec. 1 seeking a $1 billion U.S. indemnification from Nortel of his personal assets with respect to those lawsuits. When he left the company he took $130 million with him.

Essentially, Roth is seeking insurance to cover him in case U.S. courts decide he must pay an award to the plaintiffs.[/quote]

[url=http://retire-secure.blogspot.com/][color=red]Source.[/color][/url]

 

DrConway

Re CPP defined contribution.

I remember hearing back in the 1970s it was strictly a defined benefit.

Sunday Hat

Kesslemen's "people have to be protected from their own stupidity" argument will make this pretty easy for the insurance companies to blow this one out of the water:

 

"The "forced savings" aspect of a mandatory universal public pension scheme can address these gaps... By mandating universal coverage, a public scheme also protects the treasury and the taxpaying public against another kind of risk: people with the ability to save for their retirement who fail to do so and thus draw upon income-tested public benefits in old age."

 

Apply that argument to medicare.... yikes.

 

I think doubling the CPP is a good idea but it still won't provide an adequate retirement income - and this condescending language doesn't make the case very well.

Sunday Hat

Kesslemen's "people have to be protected from their own stupidity" argument will make this pretty easy for the insurance companies to blow this one out of the water:

 

"The "forced savings" aspect of a mandatory universal public pension scheme can address these gaps... By mandating universal coverage, a public scheme also protects the treasury and the taxpaying public against another kind of risk: people with the ability to save for their retirement who fail to do so and thus draw upon income-tested public benefits in old age."

 

Apply that argument to medicare.... yikes.

 

I think doubling the CPP is a good idea but it still won't provide an adequate retirement income - and this condescending language doesn't make the case very well.

Sunday Hat

Kesslemen's "people have to be protected from their own stupidity" argument will make this pretty easy for the insurance companies to blow this one out of the water:

 

"The "forced savings" aspect of a mandatory universal public pension scheme can address these gaps... By mandating universal coverage, a public scheme also protects the treasury and the taxpaying public against another kind of risk: people with the ability to save for their retirement who fail to do so and thus draw upon income-tested public benefits in old age."

 

Apply that argument to medicare.... yikes.

 

I think doubling the CPP is a good idea but it still won't provide an adequate retirement income - and this condescending language doesn't make the case very well.

Unionist Unionist's picture

[quote=DrConway]

Re CPP defined contribution.

I remember hearing back in the 1970s it was strictly a defined benefit.

[/quote]

It's both. Benefits are defined by a formula, and both employee and employer contributions are defined as a percentage of pay, up to the maximum yearly pensionable earnings ($46,300 this year, going up to $47,200 in 2010).

The opposite of "defined benefit" is not really "defined contribution". A better term, which used to be in vogue, is "money purchase" - i.e., no specific guaranteed benefit formula based on years of service and final average earnings (as in DB plan), but rather, whatever your accrued funds will buy (like an RRSP, which is "money purchase").

 

abnormal

[quote=DrConway]

Re CPP defined contribution.

I remember hearing back in the 1970s it was strictly a defined benefit.

[/quote]

It is.  The fact that it's now partially prefunded doesn't change it's nature.

On an unrelated topic - I screwed up on the number of retirees per worker and inverted the fraction.  The first set of numbers I came up with are American but I would expect Canadian numbers would be similar.

[quote]In 1940, there were 42 workers per retiree. In 1950, the ratio was 16-to-1. Today, there are 3.3 workers per retiree, and within 40 years, it's projected that there will be just two workers per retiree.[/quote]

 

DrConway

Then if it's defined benefit why does the government make all this noise about how many years you've worked and how this affects how much money you get from the CPP?

Or is that just bafflegab that obscures the fact that everybody who's a Canadian citizen over a certain age collects the same base amount from the CPP?

In that case, ok, it's still defined benefit.

As for the pot of money or whatever, if we ignore whatever's in the stock market (and I am surprised that the fund managers seem to actually be exerting some effort... guess they feel guilty enough to do SOMEthing to show for the management expense ratio they clip the feds for) then I see no mystery. Present obligations not met by the pool of funds are met by present revenues going into the fund, essentially operating on the cash basis of accounting.

Therefore doubling payouts does, as a rough rule of thumb, mean doubling payroll taxes.

George Victor

Abnormal: 

[/quote]

"On an unrelated topic - I screwed up on the number of retirees per worker and inverted the fraction.  The first set of numbers I came up with are American but I would expect Canadian numbers would be similar."

[quote]In 1940, there were 42 workers per retiree. In 1950, the ratio was 16-to-1. Today, there are 3.3 workers per retiree, and within 40 years, it's projected that there will be just two workers per retiree.[/quote]

 

[/quote]

Whew, Now I can look my daughter in the eye again. 

But I guess all of this talk about "what's in it for the worker drawing CPP" still leaves me wondering about consideration for those unemployed who make it to 65?  Have you seen the levels of income for OAS and GIS lately?

abnormal

[quote=DrConway]Then if it's defined benefit why does the government make all this noise about how many years you've worked and how this affects how much money you get from the CPP?[/quote]

From Wiki:

[quote]a defined benefit pension plan is a type of pension plan in which an employer promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age, rather than depending on investment returns.[/quote]

It does not mean that everyone receives the same amount, only that the amount is predetermined based on a formula.  A typical private pension plan would pay a fixed percentage of the employee's final salary (or the average of the last five years of salary or some such).  [FYI, if you're reading articles in the UK press this type of pension is typically called a final salary plan on that side of the pond.]

That differentiates it from a defined contribution plan (which are effectively tax advantaged savings plans some of which revert to an annuity upon retirement and some of which simply provide a lump sum at that point in time). There are other variants (for example cash balance plans fit somewhere in between).

[quote]Present obligations not met by the pool of funds are met by present revenues going into the fund, essentially operating on the cash basis of accounting. Therefore doubling payouts does, as a rough rule of thumb, mean doubling payroll taxes.[/quote]

Actually, no. The existing fund has been built up over a number of years - doubling payments would mean that when benefits start to be paid out of the fund it will be depleted much more rapidly than would otherwise have been the case - that's why I say that contributions would have to be more than doubled.

DrConway

There can BE no fund. Not when the CPP as conceived was set up as a generational transfer mechanism. The very idea that government-run pension systems can have pools of funds when thwy're run on the equivalent of the cash basis of accounting is a little ridiculous.

Why else do you think everybody in Congress knows the Social Security Trust Fund is a complete load of hooey? Because all they do is grab the surplus not used to fund present obligations, stick an IOU into the trust fund, and go off and spend the money. There IS no doomsday scenario when obligations exceed revenues: Congress will simply have to spend general revenues into the Social Security budget.

The same principle applies here to CPP (the part not in the stock market). And I had a little bet with myself you would try to throw out more accounting bafflegab to obscure this, and you did.

abnormal

DrC - I suggest you learn something about pensions and accounting before you start accusing people of throwing out bafflegab.

 

DrConway

Do you agree that this is the mechanism by which the CPP transfers funds to people, outside of the funds invested in the stock market?

http://tinypic.com/view.php?pic=2yvryw6&s=6

 

If you agree that this is the mechanism, then where is the need to "build up" an excess? There is no need, because the year to year payments to senior citizens are met by the year to year revenues from payroll taxes.

This is also why I get very annoyed by the doomsdayers who claim that in year X there will be OMG NO MONIES AGH THE SKY R FALLING IN.

There is no such thing! All it means is that yearly revenues from the source (working people) will fall short of yearly revenues to the destination (senior citizens).

I again invite you to explain to me how a pool of funds magically appeared the day the CPP was started, instead of the plain fact that it effectively operated on the cash basis as a generational transfer.

George Victor

Dr. C: "There is no such thing! All it means is that yearly revenues from the source (working people) will fall short of yearly revenues to the destination (senior citizens)."

 

And the future for "non'working" people is assured by.....?

Unionist Unionist's picture

Before we worry about pensions for "non-working" people, how about unemployment insurance? How about wages, for that matter?

 

G. Muffin

[quote=Unionist]Before we worry about pensions for "non-working" people, how about unemployment insurance? How about wages, for that matter?[/quote]

I'm underemployed (4.6 hours a day at $9 plus tip, average 2 to 4 shifts per week) and am dipping into the pension fund at the age of 43.  I get $805 a month.  As soon as I get back on my feet (hah!) I'll contribute more than I take away.  That's what everybody tries to do.

George Victor

[quote=Unionist]

Before we worry about pensions for "non-working" people, how about unemployment insurance? How about wages, for that matter?

 

[/quote]

Well, it's a reply to my question, but obviously not from one who has to worry about the old dears out there making do on $512 plus a couple of hundred in GIS and sharing food with their cat (women more than men, they live longer and in the past, did not work for wages).

Wondered why it took so  much urging to move it off the CPP part of the pension quandry.

peterjcassidy peterjcassidy's picture

CPP has worked well, most people who are supposed to get CPP benefits get them,  while income exceeds outgo.  To double the benefits payable and expand coverage would need a substantial increase in premium .and a phased in approach.  First raise the premiums and then, when the cash is there and you know it is doable, raise the benefits. I think this is doable and should be done.  Jack, Wayne and the federal NDP team have done a great job on this issue.

.

George Victor

et tu Peter? 

G. Muffin

Do we need to have CPP at all?  It's a bloated and inefficient bureaucracy.  I had one hell of a time convincing them that I was disabled.

Why not push for more RRSPs instead?  

oldgoat

CCP disability benifits, to which I assume you're referring are an admistrative nightmare trying to co-ordinate benifits with their provencial counterparts which for all their own problems are a lot better.  In Ontario if you qualify for ODSP you're really better off not getting CPP.

 

BTW, Hi! Wink

G. Muffin

[quote=oldgoat]

CCP disability benifits, to which I assume you're referring are an admistrative nightmsre trying to co-ordinate benifits with their provencial counterparts which for all their own problems are a lot better.  In Ontario if you qualify for ODSP your really better off not getting CPP.

 

BTW, Hi! Wink

[/quote]

All I know is that CPP gives me $805.  I am entitled to provincial benefits up to an amount ($95) which brings the total to $900. Everybody is entitled to $900.  The feds don't claw back until I earn $4,600 in a year (not going to make it this year!).  The province (BC) allows me to earn up to $500 per month without clawing back.  I only received 2 or 3 months worth of BC money before my work disqualified me.  The advantage to the provincial plan is that you get free basic dental care, free psychiatric medication, a gimp bus pass for $45 annually, so I'm still registered with them even though I don't get any money.  

Mine is a special case (aren't we all?) in that I have a job that does not threaten my mental health.  I work at a cubicle farm and people address each other by their employee numbers.  If I don't want to come in, I don't bother.  If #A353 is empty and my employer needs the work done, they have a call in list.  I also do not have to abide by a schedule.  I get there, I work 4 1/2 hours or so, I go home. Regular pay plus bonus works out to $14.08 per hour.  I'm old enough that that seems like a decent salary for a dumbo job.

I see I've strayed off topic so I'll end it here.

Merry Christmas, Oldgoat!  Thanks for your support.

1weasel

[quote=G. Pie]Why not push for more RRSPs instead?  

[/quote]

Management fees that cut into earnings are one reason.  More important is that few people take full advantage of RRSPs since it is a discretionary purchase.  There is always something to spend money on, good or bad, than voluntarily save for retirement.

canuquetoo

Expanding CPP and deducting larger premiums for an involuntary retirement savings plan makes much sense. RRSPs are a vehicle for unscrupulous 'financial planners' to peddle mutual funds and other financial products that pay commissions and fees to said planner from the high MERs (management expense ratio) charged by Funds on an annual basis.

MERs of ~2% annually can be avoided by simply choosing one's own blue chip Canadian stocks, having the stock purchase registered in one's own name, rather than the broker and then joining the company's DRIP.

 A Dividend Reinvestment Plan allows the shareholder to have all dividends automatically invested in more shares, purchased from the corporation's treasury at up to a 5% discount, allows fractional shares, allows additional share purchases at a discount directly from treasury AND, charges NO fees or commissions.

Why pay some shyster 2% per annum to manage a mutual fund made up of the same stocks one can purchase themselves on the open market? DRIPS avoid brokerage fees, financial 'planner' commissions and all the other assorted impositions of the banksters.

Save YOUR Money - tell the 'planners' to take a hike.

For those individuals who won't take the time to inform themselves on personal financial planning and take responsibility for their own future, an expanded CPP or even open plans like municipal pension plans that individuals ( and their employer contributions) can join make sense.

 

 

G. Muffin

[quote=peterjcassidy]CPP has worked well, most people who are supposed to get CPP benefits get them,  [/quote]

Horse shit.  The people who need help the most do not have the resources to fill in the application. CPP Disability means a 16 page application form.  I've been a legal secretary for over a decade and was utterly flummoxed by it.  I filled out part of it, my sister filled out another part, and the social worker filled out the rest.  If I had been happily living under a bridge like I wanted to, it would have been impossible.  They denied me for years until they saw the light and gave me a lump sum back payment.  Which I blew.  Because I was manic.  And the Representation Agreement Act cruelly denies me the rights that I deserve:  the services of a proxy when I have diminished capacity.

Oh, dear, I seem to be nattering on about the Mental Illness Act again.  Good night.

abnormal

[quote=G. Pie]

Do we need to have CPP at all?  It's a bloated and inefficient bureaucracy.  [/quote]

You can make that statement about a lot of programs - bureaucracies have a tendency to become self-sustaining and, unless checked, try to grow without limit.  The truly bad thing about that (other than the fact that they become nightmares to deal with) is the fact that they soak up a lot of money that could be used to fund the CPP itself or, failing that, other programs.

[quote]Why not push for more RRSPs instead?  [/quote]

CPP and RRSP's function quite differently.  Stripped to its bare essentials an RRSP is nothing but a tax advantaged savings plan - if you don't have surplus income to save you don't have an RRSP.  And even if you do have money to save the tax benefits are purely a function of your marginal tax rate.  If you're in a high tax bracket the benefits can be significant, but you have to have income in order to benefit.  Having said that, anything that would increase the level of personal savings is a good thing so expanding the limits on RRSP's isn't bad in itself.  It just doesn't help the same people that an increase in CPP benefits would.

 

George Victor

Until they turn 65.

Then what are the options for a "good life" - or even a half-decent one if there are no savings anywhere? Saving was not possible?

Really hard to get an answer to that one. Back in the early 80s folks would have been all over it, pointing to the absence of womens' rights in the current pensions dilemma.  That does not seem to stir interest any more, for some reason.

 

Magog45 Magog45's picture

I favour keeping things mostly as they are with some small changes around the edges, perhaps a law requiring companies to keep private plans fully funded as per their agreed apon responsibilities and perhaps the implimentation of a 401k type of system where the employer matchs the employee contribution up to a defined maximum. Also when a company goes bankrupt pension and severance should be first rather than last to be paid, and the owners shouldn't be able to hide behind a bunch of numbered companies, they have to take responsibility.

mybabble

Transparancey is vital to the  CPP program and the lack of it and the lack of accountability are what has left people looking pretty stupid.  And Kesselmen is looking pretty stupid himself as he shares government's and industries views of the people it lords over and their lack of knowledge and understanding are just the thing to bank on. 

mybabble

Quote "Really hard to get an answer to that one. Back in the early 80s folks would have been all over it, pointing to the absence of womens' rights in the current pensions dilemma.  That does not seem to stir interest any more, for some reason."

You got that right, as Canadians are carrying a torch across the country that says women just aren't good enough for the Olympics as hatred is now something to celebrate as women pick up the flame that discrimanates against them leaving us all in shame.

George Victor

quote:

"I favour keeping things mostly as they are with some small changes around the edges, perhaps a law requiring companies to keep private plans fully funded as per their agreed apon responsibilities and perhaps the implimentation of a 401k type of system where the employer matchs the employee contribution up to a defined maximum. Also when a company goes bankrupt pension and severance should be first rather than last to be paid, and the owners shouldn't be able to hide behind a bunch of numbered companies, they have to take responsibility."

 

Magog, what if there never was either "workplace", or, as a result, CPP? That's the group that nobody, but nobody, wants ro recognize exists.

ottawaobserver

I believe I did above, when I talked about increasing the GIS.  Also, G. Pie confuses regular CPP with CPP Disability, which is notoriously bureaucratic.

With employers having much shorter lifespans and tighter margins, I respectfully disagree with Magog45's preference: I just don't think it's even realistic to try and rely on employers to organize proper pensions savings for their employees.

And while I might agree with canuquetoo's investment philosophy, the level of financial literacy it requires is let's be honest beyond much of the population who will most badly need income security in their retirement.

I agree that vehicles which promote personal savings are worth supporting, but the current RRSP regime is just so frikkin' rich at the top, and doesn't do much to help people who paid into company pension plans all their lives (thus losing the RRSP contribution room), and then lose those pensions.

So, again, I favour an enriched GIS (Guaranteed Income Supplement; the income-tested portion of Old Age Security), a move to double CPP insurable earnings, allowing companies to hand over their pension plans to the CPP, and cutting back on RRSP contribution limits at the top-end.  Also, we need to look at the tax treatment of various kinds of retirement income as a way of helping.

Moves like this will give the CPP Investment Board a lot more funds to invest.  They lost a bit during the downturn, and while it would be extremely dangerous to intervene too much in directing their investment mandates, we'll need to think carefully about who we hire to manage that money, how much we put under active management versus the safer traditional vehicles, what else we use it for if anything, and what incentives we're prepared to support for the money managers and which ones we aren't.

G. Muffin

[quote=1weasel]

[quote=G. Pie]Why not push for more RRSPs instead?  

[/quote]

Management fees that cut into earnings are one reason.[/quote]

Who pays management fees?  What are they charging for?  Do they take your money out for walkies every day? (Dave Barry)

[quote]More important is that few people take full advantage of RRSPs since it is a discretionary purchase.[/quote]

Even more important is that some of us have foresight and realize that when we retire, the ultra conservative government will say "Oh, okay, all those silly people who saved for their own retirement don't get CPP" and a class war will erupt.

[quote]There is always something to spend money on, good or bad, than voluntarily save for retirement.[/quote]

Definitely.  I'd rather have Kraft Dinner (microwaveable, naturally) than set aside something for a rainy day.

But don't listen to me, I'm crazy.  I think I'm rich beyond anyone's wildest dreams.  I have a group, as in more than one, of friends whom I can call at 3:30 in the morning without me getting an earful.  I have wonderful neighbours.  I have most of my faculties.  I can work, go to school, watch TV all day, pick my nose, whatever, and this country will still take care of me.  It makes me weep. Kidding but not really.  

George Victor

Last October, this thread started out under the heading  "Pensions - the Conservatives next wedge issue." 

Lo and behold, a front page story on the Globe front page  today says "Ottawa targets public service pension plan for cutbacks. Tories consider dropping warly retirement provisions as they review civil servants' plan in attempt to control ballooning deficit.

"The generous pension plan enjoyed by federal civil servants is being targeted for possible cuts, including an end to early-retirement provisions for new hires, federal documents and sources say. Newly released documents show that a group of deputy ministers has been taking a hard look at the federal pension plan, with concerns that fewer and fewer private-sector plans offer the same type of benefits...

"Any major change to the Public Service Superannuation Act, however, will be stiffly opposed by unions, which are trying to contain the growing criticism of their members' plans in an era of dwindling private-sector pensions."

And so it goes.

abnormal

GV, I saw that article this morning and was surprised that any politician would seriously suggest something like that (after all, to a politician long term means until the next election).  Having said that, if any politician is going to do something (pro or con) this is the time. 

Public pension plans seem to be going into meltdown pretty much everywhere.  To look [url=http://globaleconomicanalysis.blogspot.com/2008/11/state-of-new-jersey-i... of the border[/u][/url]:

[quote]New Jersey is $60 billion in the hole on pension funding and the Governor is planning on skipping payments in a "pension payment holiday" until 2012 so as to not increase property taxes. To top it off, the ongoing plan assumptions are 8.25%. Sorry NJ, that simply is not going to happen.[/quote]

Rhode Island is in at least as bad shape. Meanwhile on the west coast [url=http://www.washingtonpost.com/wp-dyn/content/article/2008/09/10/AR200809... California[/url] declared bankruptcy (upheld by the courts) in order to free themselves from the municipality's pension obligations.

[quote]Vallejo's unions contend that the city is solvent enough to meet its obligations. But last Friday a court disagreed, holding that the city is eligible for bankruptcy protection. A lawyer for Vallejo says the unions will have to negotiate a "plan of adjustment." Other cities are watching...[/quote]

In the UK it appears that [url=http://thetimes-tribune.com/news/school-pension-costs-to-increase-72-per... employee pension plan funding[/url] is scheduled to increase by 72% next year and it's anticipated required contributions will spike to almost 30% of salary by 2012. 

And while it's nice to argue that the taxpayer will have to pick up the tab there's no such thing as infinite taxing power. Even if they could tax 100%, there would be a limit on the amount of money that would bring in. But of course, well before that mark, people would just move away.

Fidel

[quote=abnormal] But of course, well before that mark, people would just move away.[/quote]

Let's hope our Bay Street stooges in Ottawa and Queen's Parks lose lotsa voter support in future elections before the neoliberal baloney does finally collapse around their ears.

abnormal

Fidel, which baloney are you refering to? 

Fidel

[quote=abnormal]

Fidel, which baloney are you refering to? [/quote]

Well in the US recently, there is this: [url=http://www.dollarsandsense.org/blog/2009/12/krugman-vs-hudson-on-samuels... vs. Hudson on Samuelson[/url]

Hudson said recently that the people who were there in Bush I and Clinton administrations had a free hand in 1990's Russia. Those crooks are still there embedded in Obama's entourage and will do to America what they did to Russia with their Russian and European friends during the perestroika years, which is to pauperize the country. The current wealth and income gaps between rich and poor in America will become chasmic.

In Canada? Nothing. Whether we have Tories or Liberals or both at the helm as now, we get nothing worthwhile mentioning for the next ten years. Some are saying that over next ten years, there will be a revolution in economic theory. As it was in the 1930's, Asia bustles and surges ahead while the west is mired in economic stagnation. We already have a situation with liquid war in Central Asia and Middle East. The crooks and liars and crooked-liars may try to start a big war as a way out of  current economic crises of their own doing.

abnormal

Fidel, interesting but what does it have to do with the topic under discussion (and specifically what does it have to do with my post)?

George Victor

The Krugman bit is interesting, abnormal, because he tells us (in effect) how we got here...with our pensions and everything else:

 

'Actually, there was a time when many people thought that institutional economics, which was very much focused on historical context, the complexity of human behavior, and all that, would be the wave of the future. So why didn't that happen? Why did the model-builders, led by Samuelson, take over instead?

 

 

 

 

"The answer, in a word, was the Great Depression.

Faced with the Depression, institutional economics turned out to have very little to offer, except to say that it was a complex phenomenon with deep historical roots, and surely there was no easy answer. Meanwhile, model-oriented economists turned quickly to Keynes-who was very much a builder of little models. And what they said was, "This is a failure of effective demand. You can cure it by pushing this button." The fiscal expansion of World War II, although not intended as a Keynesian policy, proved them right."

So Samuelson-type economics didn't win because of its power to cloud men's minds. It won because in the greatest economic crisis in history, it had something useful to say."

In the decades that followed, economists themselves forgot this history; today's equation-mongers, for the most part, have no idea how much they owe to the Keynesian revolution. But in terms of shaping economics, it was the Depression that did it. "

 

Some "institutionalist" appeared again in the year Samuelson won his Nobel, to try to create economic models in which zero growth economies worked. Krugman does not explain this, and I cannot recall him explaining how his discipline proposes to end growth on a finite planet. Maybe, like Keynes, when asked "but what about in the long run", replied, "in the long run we are dead".

 

Fidel's right, we have to return to institutional thinking...but of course here the institution under consideration is pensions. I think it has to be melded with environmental considerations...just as some of us wanted in the 1970s.

abnormal

GV, I hear what you're saying but I don't think it addresses the issue. 

On the topic of pensions, we're faced with a population where the majority of people have no pension and many (most?) of those that do have pensions will find they're totally inadequate.  Add to that the fact that it appears that a significant number of pension plans, even in the public sector, are on a path to meltdown and we've got a problem.

It's well and good to say we've got to change our approach to things but how do we apply that new approach to the problem that we're faced with?

Fidel

[quote=abnormal]

GV, I hear what you're saying but I don't think it addresses the issue.[/quote]

I think what you're trying to say is, where will the money come from to properly fund public pensions? 

There was a time in the 1930's when Canadian seniors were living in poverty. The CCF demanded that Tory, then Liberal governments help out Canadian citizens whose working lives had come to an end, but were still citizens of this country nonetheless. I think it was Mackenzie King who told the CCF that there was no money, and asked CCF members if they thought money grew on trees? Meanwhile the CCF were prodding the Liberals to nationalise the Bank of Canada, and which unlike the US Federal Reserve of banks, is still nationalised today.

The second world war broke out, and CCFer MJ Coldwell later wrote about it that, suddenly, there was all kinds of money to fund Canada's war effort. The Liberals suddenly realized that money does grow on trees when they have the political will to make it happen. This was just one example of the history of feigned political impotence in Ottawa. The impotence is entirely self-imposed when it comes to Canada's two old line parties, Liberals and Tories alike.

George Victor

[quote=abnormal]

GV, I hear what you're saying but I don't think it addresses the issue. 

On the topic of pensions, we're faced with a population where the majority of people have no pension and many (most?) of those that do have pensions will find they're totally inadequate.  Add to that the fact that it appears that a significant number of pension plans, even in the public sector, are on a path to meltdown and we've got a problem.

It's well and good to say we've got to change our approach to things but how do we apply that new approach to the problem that we're faced with?

[/quote]

Yes, ab, that is why I opened this thread two months ago with stated concerns about the way Cons would respond to the obvious need for structural changes in pension funding.

And yes, Fidel, it's all about funding in a new, post-industrial and not-quite-ended, still globalized world.  But, of course, it's all about what to do politically, eh? You know, how to explain - whatever socialist decide to do - to the Great Unread so that they don't support Steve?

Sure like to see a solution, something to take forth on the hustings, besides Jack's (necessary but not sufficient) add 0n to CPP. You know, for those not working now and perhaps not going to work again folks?  (And yes, I know, adding something to the GIS was mentioned in passing...

Unionist Unionist's picture

George, I have some economic news for you. Everyone who does not work is supported by someone who works - whether that someone is in their home or just some taxpayer or employee or whatever. If we don't tackle retirement security for those who work, you can swiftly forget about security for those who don't. Sorry for finally responding to your litany, but I just thought that some basic economics might be in order. And I could be all wrong and washed up, because I never studied the stuff. Maybe money grows on trees planted on Parliament Hill or something.

 

George Victor

So concern for those without adequate pensions has to await settlement of the problem of unemployment?

But, of course, those people cannot wait for the successful conclusion of your deliberations, U, precisely BECAUSE money does not grow on trees.  Particularly now that the Conservatives are going to use the "money doesn't grow on trees" argument to beat back two-thirds of a century of gains in social welfare.

Sorry old boy, but this isn't just a debating society's concerns (I hope), with prizes for rhetorical flights, points for logical counterpunches.

Unionist Unionist's picture

[quote=George Victor]

So concern for those without adequate pensions has to await settlement of the problem of unemployment? [/quote]

No, it has to be dependent on settlement of the problem of pensions for the [b]employed[/b], who are the ones who create the disposable wealth for everyone in the society.

[quote]But, of course, those people cannot wait for the successful conclusion of your deliberations, U, precisely BECAUSE money does not grow on trees.  Particularly now that the Conservatives are going to use the "money doesn't grow on trees" argument to beat back two-thirds of a century of gains in social welfare.[/quote]

This is about pensions - deferred earnings. Pensions for workers are not government subsidies. They consist of wealth created by workers and set aside for the future, plus other money created by workers and appropriated by their employers, and set aside for the future. You want to talk about poverty and unemployment, there are no doubt other threads where that might be appropriate. Here, it just diverts from and confuses the issue.

[quote]Sorry old boy, but this isn't just a debating society's concerns (I hope), with prizes for rhetorical flights, points for logical counterpunches.

[/quote]

Invest in a mirror. Pensions are a real issue, yet your focus seems to be on guaranteed income supplements - which have [b]nothing to do[/b] with pensions.

 

George Victor

But of course, my concern is for those without the pensions that you want to sustain.  People who only have their (now) $516 plus the oh so generous GIS.  Think of it, U. This is not detracting from your struggle for workers, this is simply to say let's do something for ALL who are in dire straights/straits (remember the Trudeau quip?). Some made it a geographical game. But since PET's time, we've come to see that worker advances in life chances ended about the time of his early years in office. And just coincidentally, that was about the time that gains in life chances were privatized, and the working class began to speculate in the market.

Any connection do you think? (And that is an honest question, not an invitation to attack).  : D

p.s.  And you will remember PET's concerns for "rising expectations".  (Jeez, the old memory cells not doing badly this morning - not for a septuagenarian who stayed up till 12  (01).  

Unionist Unionist's picture

Happy New Year, George.

Pages

Topic locked