Beggaring the present for Flaherty's future

Michael Johansen
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Federal finance minister Jim Flaherty (the reigning Lord of All Our Money) has decreed that we Canadians are not saving enough for our retirement. He finds that unacceptable and he wants to force us to do it - for our own good, no doubt.

Flaherty (with the support of some finance ministers from several of the provinces, but not necessarily from Newfoundland and Labrador) has decided that the 4.95 per cent of their annual income that employed people pay into the Canada Pension Plan, the 4.95 per cent that their bosses contribute, and the 9.9 per cent that self-employed people have to cough up all on their own every year, is much too little.

He says the pension fund is not in any particular danger, but in his judgment it's just not sufficiently robust. Flaherty is promising that we'll all get more when we retire, but first we all have to pay more now. How much more, he doesn't say.

First of all, as highly paid and pensioned politicians don't seem to understand, if average Canadians aren't saving their money it's because they don't have any.
Various governments and governmental agencies already take about half of a citizen's income, while most if not all of the rest goes towards staying alive.
Usually it's all needed to pay for food, clothing, shelter and transportation, and all those other essential medical and dental services governments won't cover. If there's any money left over after that (and even if there isn't), the banks take as much as they can as interest on all the debt they hold.

No doubt, if average Canadians had the money they would save it for their retirements - if that, as free citizens, was what they wanted to do with it.
It's not for Flaherty, or anyone else who makes so much money he has no trouble finding some to save, to say that we Canadians aren't handling our money properly.
Nor should it be for Flaherty (as part of a minority Reformed Conservative government) to say the solution to our problem (or rather, to the problems he's imagining) is that we should give more of our hard-earned cash to him.
If he has his way and he manages to convert enough provinces to his plan, employed citizens will soon learn what the self-employed already know: what it's like to pay almost 10 per cent of their incomes to CPP every year.
What will the self-employed have to learn? How to cope with giving up 15 per cent? Twenty, more likely.

The federal government is trying to break a compromise reached a dozen years ago to balance the increasing demands the soon-to-retire baby boomers will make on the CPP fund with the limited ability of younger generations to pay for their elders' retirements.
Instead of raising rates to a total of 14.2 per cent of income by 2030, as originally planned, they were raised gradually from 5.85 to 9.9 per cent by 2003. There they have remained ever since and there they should remain, according to the plan.
All the finance ministers and their officials recognized that if the rates went up any higher they would become too expensive for workers to pay. Even as late as 2006 the provincial and federal finance ministers, according to the CPP's 2007-2008 annual report, "… concluded that the CPP is on sound financial footing." The same report states that the best way of maintaining that soundness for the foreseeable future is to neither lower nor raise the optimum 9.9 per cent rate.

Now, however, Flaherty thinks Canadians aren't saving enough, so he's going to fix something that isn't broken by making us all pay more. Flaherty wants us to beggar the present for the promise of a richer future. He's demanding too much. As well - and perhaps most importantly - we only have his word that our pension money won't go the way of the late, lamented unemployment insurance fund.

Michael Johansen is a writer in Labrador.

Geographic location: Newfoundland and Labrador

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