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The Progressive Economics Forum

Double the Canada Pension Plan Benefit

Konrad Yakabuski wrote a good final piece on Saturday to cap the interesting and informative Globe series on the pensions crisis. In it he touches on several possible policy solutions, including a universal pension plan.

http://www.theglobeandmail.com/report-on-business/retirement/canadas-gathering-pension-storm/article1323513/

Unfortunately, he does not cite the Canadian Labour Congress proposal to double the CPP as part of a three pronged effort to fix pensions, including an increase to the Guaranteed Income Supplement to deal with poverty in old age, and pension insurance to backstop employer pensions which fall short.

http://www.canadianlabour.ca/news-room/publications/security-adequacy-fairness-labour-s-proposals-future-canadian-pension

As Yakabuski notes,  individual saving for retirement through RRSPs is needed to supplement inadequate public pensions for the many workers (75% of the private sector workforce) who do not belong to an employer sponsored pension plan. Public pensions – the OAS/GIS and the CPP/QPP – have done a good job of  providing a half decent basic retirement income to Canadians but, in combination, they replace only some 40% of earnings for an average worker, and less for those who earn more than the average.  Employer pension plans have serious financing problems of their own, and are going to cover fewer and fewer workers as time goes by. Very few new defined benefit plans are being set up.

RRSPs are a poor solution to eroding employer plans on several grounds.  People do not save nearly enough at an age when it counts.  Individuals on their own cannot pool longevity risk and should save as if they are going to live into extreme old age, even though the great majority will not.  Administrative and investment fees charged to RRSP returns are in the range of 2-3%, vastly higher than in larger pension pools yet alone the CPP,  and enough to cut actual rates of return to a fraction of those in bigger plans. And, RRSPs (as well as defined contribution pensions) do not provide a guaranteed or inflation-linked final benefit, leaving retirees annuitizing their lifetime savings at the mercy of fickle markets. (The price of a lifetime annuity will vary greatly with the level of interest rates, while asset prices, especially equities, are hugely variable.)

The CLC proposal is to double the CPP benefit from 25% to 50% of average earnings by phasing in a fully-funded add on benefit. Prefunding through the gradual accumulation of an additional investment fund means that the required premium increase would be much less than  the current employer/employee combined premium of 9.9%. The plan and premium increase would be phased in over several years, and the full increase in the benefit would go only to those now entering the workforce and future workers. Current workers would, however, gradually build up a better CPP benefit.

The great virtue of using the CPP vehicle is that it provides a fully inflation indexed, fully portable, defined pension benefit at extremely low cost.  Other plans like the ABC (Alberta BC) proposal for provincial defined contribution plans and the similar national proposal put forward by Keith Ambactscheer do create larger pools than individual savings, but fall well short of the CPP.  At the same time,  a doubled CPP would still leave room for employer based plans intended to provide better benefits, notably earlier retirement, than the CPP. Gradually doubling the CPP would take some of the burden off existing employer plans, since the great majority are integrated with CPP (ie the defined benefit provided by the employer plan is usually net of whatever benefit the CPP provides.) That means that the premiums required to fund employer plans would go down as CPP premiums went up.

The financial industry are the big promoters of “fend for yourself ” RRSPs which kick out lucrative returns, to them, but that should not stand in our way.  Our current problems are the result of a compromise with the financial industry in the mid 1960s which left Canadians with a very modest public pension plan compared to most other countries.

The other objection one hears is that lower income workers would be forced to save more for little or no greater return, since the OAS/GIS already delivers a basic benefit. True to a point, but we can raise pensionable earnings and/or increase CPP contribution tax credits so that those with well below average incomes are exempted from higher premiums.

Employers, it is said, will object to paying more. But many employers, including small businesses, are prepared to contribute to an effective pensions vehicle, and current sponsors of pension plans and savings would pay no more than at present.

Doubling the CPP is a more practical proposal than a wholesale swallowing up of current pension plans in one universal pension, and is under active consideration by several provinces. It is an idea whose time has come.

Enjoy and share:

Comments

Comment from Erin Weir
Time: October 26, 2009, 9:16 am

Today’s National Post editorial takes on this proposal. However, The Post seems to criticize doubling CPP benefits immediately, which is not what the CLC or NDP has proposed.

National Post editorial: “Mr. Layton’s CPP/QPP plan would be paid for by increasing the contributions of people now at work, while immediately benefiting current retirees.”

Layton’s speech: “we propose phasing in a doubling of CPP/QPP benefits, in consultation with the provinces.”

Comment from David
Time: October 26, 2009, 11:22 am

AAAAAAH! This is a very scary proposal.

You list banks, low income earners and employers as possible objectors of raising CPP benefits, but you forgot another significant group: young people.

Us young people are already going to have big enough tax bills in the coming years as you Baby Boomers get old and need more health care. It’s not fair to us to stack a higher pension bill on top of that.

Did it occur to you that perhaps “people do not save nearly enough at an age when it counts” with RRSPs is because pension benefits are already pretty good in Canada? Making CPP benefits more generous will only create a bigger disincentive for people to save for themselves.

Bad idea.

Comment from travis fast
Time: October 26, 2009, 12:44 pm

David wrote,

“people do not save nearly enough at an age when it counts” with RRSPs is because pension benefits are already pretty good in Canada?”

Dear David,

I did not and do not save enough while it counts because I did not and do not have enough income to save. I tried for the eight years of grad school but for some reason I just could not find the cash to make RRSP contributions. Nor an incentive I should add, given my income was so low I did not need the tax credit. Now I am paying back my student loans and have a new born: so there goes the RRSP contribution, the house and the Car.

I for one would not mind paying slightly higher contributions into a more robust public plan.

But inadvertently David you have hit on a rational for increasing the top marginal tax rate given the soon to be retiring are in their best paying years.

Comment from Keith Newman
Time: October 26, 2009, 1:24 pm

Andrew: I’m not up on the mechanics of the CLC plan to double CPP. Does it involve pre-funding as you seem to say in your fifth paragraph? If so I don’t see the point. The prevision of pensions is a matter of distribution. If in the future Canadians want to direct more income to older people then it can do so through taxes. Pre-funding amounts to speculation on financial markets. Ownership of shares of corporations, for example, constitutes a call on future corporate profits. The federal government already takes a share of corporate profits through taxation. If need be it can increase the corporate tax rate in the future.

David: The point of Andrew’s post is that pensions are not adequate. Expecting people to accumulate considerable quantities of financial assets over their lifetime is unfair and unnecessary. It amounts to speculation in financial markets for 30 to 50 years! Few people have an interest in doing that. Consequently they turn what personal savings they have over to financial institutions that skim 2% off the top year in, year out, reducing considerably the amount left over for retirement income. In the case of private pension plans the per capita costs are much less but the exposure to risk is largely the same. Speculative decisions must still be made regarding the future prospects of financial assets: company shares, various bonds, etc. The upshot is that only a public plan based on transfers can provide adequate, risk free income to older people with the advantages Andrew describes above. The level of income transfer is ultimately a political decision.
The CLC proposal to double CPP is in fact very modest. Ultimately the CPP should be expanded to the point that most private pension plans are unnecessary. The people employed in the private pension industry could then be redeployed to more useful work. They should be supported by a generous government transition program to help them do so.

Comment from David
Time: October 26, 2009, 1:46 pm

Travis says “I did not and do not have enough income to save” but adds “I for one would not mind paying slightly higher contributions into a more robust public plan.” I don’t get the logic behind this kind of statement. I he has extra income to pay extra contributions with, clearly he has enough income to save. Perhaps part of the reason he doesn’t have enough income to save is because he’s already being taxed at a fairly high rate. Government doesn’t have to do everything for us — we can save for ourselves.

Kevin: You say, “The upshot is that only a public plan based on transfers can provide adequate, risk free income to older people.” But public plans aren’t risk free. Presumably the government is investing the money on the public’s behalf, which is just as risky as private sector investments. Additionally, any shortfall in public pensions get passed on to taxpayers, but unlike private plans where it’s the plan member who suffers, suddenly young people are having to pick up the bill for a growing older generation. I don’t want to be stuck with that bill. What’s unfair and unneccessary about allowing people to make their own savings decisions rather than having the government mandate them? Restricting what individuals can do with their own money is far more unfair and unneccessary.

Comment from Andrew Jackson
Time: October 26, 2009, 3:15 pm

David. Guilty as charged. I should have mentioned the possible objection. If you want to champion poverty in old age as the necessary price of freedom, go ahead. I’ll still insist individual arrangements won’t work for you or others.

Keith. I think a paygo supplement would involve a big subsidy from our kids to we ageing baby boomers which is hard to justify. The CLC has not taken a position, but I find the idea of investing the proceeds of CPP expansion in government bonds an attractive one – sufficient to fund the public investment led growth we so badly need over the next few years.

Comment from Keith Newman
Time: October 26, 2009, 3:32 pm

David: There is no need for the federal government to invest money for the public. The federal government does not need to `save money` for future spending. The government redirects income generated in the economy from one group to another at whatever point of time we are in. It does this through taxation. There is no risk and there is no shortfall.
If the government were to accumulate financial assets, this does not change the total income in the economy available for distribution. It is a pointless exercise as far as distribution is concerned.
The amounts directed to older people are determined through the political process.

Comment from Travis Fast
Time: October 26, 2009, 5:50 pm

David, buddy, your knocking on the wrong door with:

“Government doesn’t have to do everything for us”

I have been working since I put my first newspaper in a screen door at 12 years old. Its only been since my thirties that I took work in putatively public institutions where I work for anywhere between 1/2 and 1/5th of lesser educated professionals. So I have never assumed the government ought to do anything for me as such. Sure I took student loans and I know pay 2 and 3/4 % above the commercial banks prime. With my current salary I can afford an amortization period of 12 years. That means I will 2 times the nominal value of the loan. Government sure did me a service there.

Presently, between the pay differential and the tax burden I figure I work more for the public than the public works for me. Now doctors you might have a case.

But hey civilisation costs a lot of money.

You further opine:

“What’s unfair and unneccessary about allowing people to make their own savings decisions rather than having the government mandate them?”

There are a lot of people who just watched 1/2 to a third of their private “savings” disappear. Have you been paying attention AT ALL during the last two years? Or did you just crawl out from under a Hayekian rock?

You make it sound as though a robust public system precludes private saving. It does not. It enforces a floor. Think of it this way. It ensures you will not have to pay later for all those who fall into poverty for making dumb investment decisions. It is an insurance policy for you against people dumber than you. Sounds better phrased myopically as such…no?

And you further opine:

“Restricting what individuals can do with their own money is far more unfair and unneccessary (sic).”

We do this all the time. I can not buy a switch-blade, nor an automatic assault rifle, nor a fully armed Raptor…legally. Nor can I legally buy cocaine etc. Or a slave for that matter.

The tyranny…the horror of it all. How will I sleep tonight?

Comment from David
Time: October 26, 2009, 11:24 pm

Wow, I don’t think I’m making any friends with this line of argument. Where to start?

Keith: OK, you’re right. The federal government doesn’t have to save — it can just play Robin Hood and take from the young to give to the old. It’ll win votes too, since we young folk don’t show up to the polls. I’m starting out in the work force, and my generation is going to be paying through the nose if CPP benefits double. Birth rates have been falling so the pension system is already stretched, and making a new commitment to redistribute from young to old — when health care costs already seem have no upper bound in sight — sounds absolutely terrible to me. But if you’re old, I don’t blame you for seeing things differently.

Travis: First, the financial crisis is not fun for anyone, but investments are supposed to even out over the long run. Presumably, the one-third loss shouldn’t be so bad when you look at how much a lot of savings probably went up the last 10 or 15 years with the tech boom.

I think you misconstrued what I was trying to say about government not having to do everything for us. I wasn’t trying to insinuate that you rely on government to get by. That’s sort of my point — every added thing we need government to do (like doubling CPP) is something people like you and me have to pay for. Government benefits don’t come for free, and so we need to question if they make us better off than what we’d do with the extra cash in our pocket. I’d expect a lot more cash in my pocket without doubling CPP.

As for CPP ensuring I “will not have to pay later for all those who fall into poverty for making dumb investment decisions,” I’ve got three points. First, CPP covers everyone, so raising benefits will help a lot of people who are not anywhere near at risk of falling into povery. If reducing poverty is the goal, we should probably be looking at OAS (or even welfare or disability benefits). Second, the policy may help some people stay out of poverty but it may also put more people at risk by incentivizing them to save less. Sure, people can still save privately, but more people won’t if they think government will take care of them. That’s a heavy burden to put on government. Third, if I’m prudent enough to save for my old age when my neighbour decides to splurge in his younger years and then finds he’s a little strapped for cash when he’s older, what’s wrong with that? People choose to make different intertemporal consumption decisions.

OK, I think I’ll go crawl back under my Hayekian rock now 🙂

Comment from rcp
Time: October 27, 2009, 7:30 am

I think I generally agree with David. A few additional points:

If we are concerned about seniors living in poverty, then boosting GIS is a quicker fix than boosting CPP.

Individuals can pool mortality risk by buying single premium immediate annuities. With registered funds, you can even buy an annuity where payments increase at say 3% per year. There is currently no tax-efficient way to do this in Canada with nonregistered funds – I think there should be. It’s true that the price will fluctuate with current interest rates but that’s not a mortality pooling objection per se – it’s more an argument for a staggered purchase.

You don’t have to pay 2-3% per year to run your RRSP. Open a self-directed brokerage account and buy exchange-traded funds with MER’s of 0.5% or less.

Oh, and buying switchblades, cocaine and slaves is just a tad different than investing for retirement 😉

Comment from Travis Fast
Time: October 27, 2009, 9:51 am

David writes:

“First, the financial crisis is not fun for anyone, but investments are supposed to even out over the long run.”

Glib understatement: the force is strong with this faithful padawan he has mastered the primary rhetorical stance.

All cold comfort to someone who was 63 in 2007. But if everything evens out over the long run to some average level of return then the notion that individual investors can beat the long run indexed average is a chimera and people would do better, all things considered, in a public pension plan.

RCP writes (one only wonders what the acronym stands for)

“You don’t have to pay 2-3% per year to run your RRSP. Open a self-directed brokerage account and buy exchange-traded funds with MER’s of 0.5% or less.”

When rich conservative people (RCPs) who spend the bulk of their time investing as their chosen occupation, give the rest of us savvy investment advice I wonder if they have forgotten the most fundamental source of economic growth: Specialization and the social division of labour.

I wont bore you with the pin factory. The moral of the story is that we as a society get richer if we all do what we do best rather than trying to do everything ourselves. It is inefficient for everyone to become retirement investment gurus trying to beat the average indexed rate of return. It is more efficient if we all do more of what we do best rather than trying to moonlight as financial gurus. Given the public plan beat all the major private plans during the last down turn and did so for less cost it would seem a public plan is to be preferred.

But I do understand why the private investment community resents the competition with a public plan and would detest the idea of a more robust public one.
To paraphrase the glib padawan: “re-training is not fun for anyone.”

David writes:

“First, CPP covers everyone, so raising benefits will help a lot of people who are not anywhere near at risk of falling into povery(sic).”

Yes but Nick Rowe posted a link to his co-authored paper where he outlines why those who subscribe to the holy behavioural writ (and you must because you are in an economics department in NA) ought to prefer universal to targeted plans.

Also retirement income is taxed so to the extent that some have robust incomes their public supplement will be taxed back and when you combine this with the imputed compounded value of their public plan contributions it is probably close to a wash.

David writes:

“Sure, people can still save privately, but more people won’t if they think government will take care of them. That’s a heavy burden to put on government.”

Um people pay into the public plan so it is not the government taking care of them. C’mon David keep it together here: You can’t argue in one breath that a public plan amounts to forced savings and in another argue that it is a freebie from the granny state.

And then this:

“People choose to make different intertemporal consumption decisions.”

Full marks for making the rounds on the litany. You do realize that is an elegance assumption to make the model tractable and not a statement of fact. Or are your masters teaching the assumptions as reality. I have always thought they did but they always swear in public they don’t. Do tell all.

Finally RCP writes:

“Oh, and buying switchblades, cocaine and slaves is just a tad different than investing for retirement”

Let us re-write this so it conforms to the operative word in the original post “Choice.” David was concerned that the public plan forced people to make certain kinds of choices as to what they could or could not buy. I responded by saying that this happens all the time in practice.

But you do beg the question RCP what is the difference between the “objects” in question and being deprived of making a choice on which to spend your money on?

Here is a hint. I would start with the slave example and work my way up the list. But let us make it a little more difficult: let us assume the putative slave is freely offering to sell themselves into bondage such that no direct coercion can be assumed. Why should you be deprived from buying a slave?

Well RCP sorts this out the rest of us can thank g-d liberal jurisprudence is more advanced than liberal economic theory:),

Comment from Keith Newman
Time: October 27, 2009, 3:50 pm

Andrew:
Much is made of the fact that in 20 years, say, there will be a lot more retired people and proportionately fewer workers. To solve this problem it is often said we need to figure out a way to provide seniors with enough money to pay for the goods and services they’ll need. Pre-funding the CPP is based on the assumption that the problem of fewer workers and more retirees can be ‘solved’ by making sure the retirees have sufficient money to buy what they need. But that is not the real problem. The real problem is to ensure the remaining workers are sufficiently productive to create the goods and services that will be required for all those alive in the future, active workers and retirees alike. To do this we need to spend on education and invest in technology, energy efficient infrastructure, and the industries of future.

Taking payroll taxes for the CPP from workers and putting them into financial assets in the CPP Fund does not accomplish this. It just lowers aggregate demand, not a good idea when there is plenty of excess capacity around, today evidenced by unemployment above 8% and capacity utilization below 70%. It would be preferable to leave the money in the hands of those workers to maintain demand and help restore the health of the economy. Part of that new demand will become investment in future industries. Additional government spending to support education and investment in modern infrastructure and industry is needed as well.

The resulting growth of the economy in more efficient and clean ways will provide the ability to provide more resources for future workers, active and retired.

So in 20 years, just like today, the living will produce and consume their real output of goods and services. The government will influence the current year distribution of that output. Distribution is about who gets all the goods and services that are produced and distribution can be altered by the political process at any time.

The pay as you go system of the CPP is problematic if it results in pre-funding of benefits or for that matter payroll tax levels that cause an excessive drop in aggregate demand. Pre-funding is counterproductive and amounts to speculation in financial markets. If we are to expand the CPP, our pension plan based on work income, it seems to me it may well need to include some measure of government expenditure to support it to ensure it does not undermine aggregate demand. This is not currently permitted.

While it is also true that OAS should be increased substantially, this is a not a plan based on income earned through work and fulfills a different function.

A recent description of the Canadian pension system entitled `What can we do about pensions?` by Monica Townson is available at http://www.policyalternatives.ca/.

rcp: a low cost ETF still involves speculative risk in financial markets. Why should an individual’s retirement income be at the mercy of that?

Comment from David
Time: October 27, 2009, 4:07 pm

I’ll poke my head out from my Hayekian rock to respond to Travis again.

– We can agree to disagree on the financial crisis and returns balancing out over the long run. However, I don’t agree with your assertion that “if … individual investors [can’t] beat the long run indexed average … people would do better, all things considered, in a public pension plan.” Why? Who says the government is more efficient in administering pension benefits than the private sector? What about the flexibility in terms of different risks that private sector plans offer? Or flexibility in intertemporal consumption?

– Your argument that income tax will make rich people’s public pension incomes a wash is optimistic. I don’t think we have a 100% marginal tax rate for most non-impovershed seniors. As for Nick Rowe’s paper, sure, if you’re worried about minimizing the effects of clawback you’ll want to give a benefit to everyone. But I’m more worried about costs than clawback with this proposal.

– You say I “can’t argue in one breath that a public plan amounts to forced savings and in another argue that it is a freebie from the granny state.” It is a freebie insofar as old people would be suddenly getting twice the pension benefits even though they weren’t paying the taxes for it when they were younger. If the concern is that people aren’t saving enough for retirement, a precedent of government bailing old people out when they don’t save enough sure doesn’t make the problem any better.

– I don’t understand what your concern is with my assertion that people make different intertemporal consumption decisions. Are you saying that everyone has the same consumption preferences over time? I don’t see any model specified anywhere in this thread, so perhaps you could clarify what you’re talking about.

Comment from Travis Fast
Time: October 27, 2009, 8:32 pm

David writes:

“- We can agree to disagree on the financial crisis and returns balancing out over the long run.”

Funny I thought we had agreed to agree on this proposition.

Weird. I only said it was glib understatement.

My grand-mother used to go on and on and on about some such gross injustice and my grandfather who was not a very religious man would habitually retort: shut up Clara it will all come out in the wash. Mostly I took my grandfathers view of things but I could never understand what exactly was suppose to come out in the wash.

Later in life, Keynes hit me like a lightening-rod. Death. Cold comfort indeed. Point to grandma.

And David writes:

“Who says the government is more efficient in administering pension benefits than the private sector?”

Economies of scale says so that is who. Again you do realize that is an elegance assumption do you not? (don’t pull-up dumb, you know what I am saying).

“As for Nick Rowe’s paper, sure, if you’re worried about minimizing the effects of clawback you’ll want to give a benefit to everyone. But I’m more worried about costs than clawback with this proposal.”

Ah a concern for absolute cost. I like that. But it betrays a certain amount of everyday common sense that is a little beneath the mastery you seek. Good thing though, at least you won’t find yourself driving around in circles on public roads or stealing the toilet paper from your quasi public university in an attempt to lower your EMTR. Repent brother, repent you have contradicted the holy behavioural writ.

As an aside I am not sure you have grasped Nick’s paper but that is for him to say.

Costs: see above and below.

And you continue:

“Your argument that income tax will make rich people’s public pension incomes a wash is optimistic. I don’t think we have a 100% marginal tax rate for most non-impovershed (sic) seniors.”

No, we have progressive tax brackets and we have the imputed value of the compound contributions people have made to the public system so we don’t need a 100% MTR to get money transferred from rich seniors to poor ones. If you need a table I will draw one up on the re re re rebuttal.

Then David unfortunately writes this:

“You say I “can’t argue in one breath that a public plan amounts to forced savings and in another argue that it is a freebie from the granny state.” It is a freebie insofar as old people would be suddenly getting twice the pension benefits even though they weren’t paying the taxes for it when they were younger.”

Okay, okay, (in the voice of Joe Pesci) a red herring squared. Keep it together. You do realize we are arguing about a specific policy proposal. The one presented as the main blog post. Inter alia it is clear that it is a phased in, graduated plan. Must I quote text? Yes I must…and lifted directly from the animating text we find that:

“The CLC proposal is to double the CPP benefit from 25% to 50% of average earnings by phasing in a fully-funded add on benefit. Prefunding through the gradual accumulation of an additional investment fund means that the required premium increase would be much less than the current employer/employee combined premium of 9.9%. The plan and premium increase would be phased in over several years, and the full increase in the benefit would go only to those now entering the workforce and future workers. Current workers would, however, gradually build up a better CPP benefit.”

Still here young padawan? For some crazy reason the CLC anticipated and accommodated people like you. Crazy I know. But in the context of the stated proposal no you can’t argue both. And you tried to do both by at first acknowledging that it was graduated hence your prattling on about forcing you to save and then you dropped the specifics so you could “and also” argue about theft.

“Or flexibility in intertemporal consumption?”

Dude you are the one who winged about people spending like fools when they were young. Does not a public pension plan mitigate that possibility?

And does intertemporal have any real substantial meaning in world where all past, present and future income is known? I know you think intertemporal sounds cool and exotic but it is pretty much agreed that you all don’t do time.

A scrap of advice: ignore time it is just there to stop everything from happening at once. And I am told that if you go back far enough in time; time begins to flow in two directions. Far out huh! Although, at that point, it makes a mockery of intertemporality.

“I don’t see any model specified anywhere in this thread, so perhaps you could clarify what you’re talking about.”

You can’t steal my point and credit your account.

Look you are not ready yet to descend to the pubic domain. Here is how the pros do it. First, act as though the model in the back of your head is reality and everyone else is too uneducated to see it. Ignore the fact that it is suppose to be reality so we don’t really need to see for it to be operative. Then formalize it so the conclusions are baked in by the assumptions. Then present your taughtology in algebraic form and then –now listen this is key– re-arrange and move one variable at time from the left to the right-hand side of the equation. Sometimes you can even be a real pratt and move a variable back to the left and see if your reader caught it (warning dangerous tactic). Now come back to the conclusion that is given by the assumptions. When questioned about the assumptions cede the field on the basis that you are simply too smart for this league.

Bottom line: I will take a robust public plan that returns the long run indexed and risk adjusted average over a private individual plan which I either have to micro mange or pay hefty fees. And this coming from someone who has a very good pension plan and will likely be taxed at one of the highest EMTR when he retires. That is, I am willing to get a little skunked on the chance I might need the public plan. And hey for eighty bucks extra month can you really beat that?

Like I said civilisation costs money. But not always so much.

Good luck in all your future endeavours.

Comment from rcp
Time: October 28, 2009, 6:00 am

Travis, you seem a little hostile.

1) My initials are rcp. If you _have_ to make it into an acronym then I’m holding out for “Reactionary Capitalist Pig”, in keeping with the tone of your recent posts.

2) You have set up a false dichotomy between a) a public plan and b) high investment expenses. I provided a factual counterexample. You are free to ignore it if you like paying 2-3% per year to financial institutions. If you don’t like to do that, you might want to think about the counterexample.

3) You know perfectly well that buying switchblades, cocaine, and slaves is quite different from investing for retirement, if only because coercion and addiction are different from rationality and foresight. I think you just got carried away.

Comment from charlie
Time: October 28, 2009, 9:47 am

To all ,
Enjoy the comments, but for this little old member of the working class, maybe I understood half but still enjoyable.

Two points , not from an economical view point but more from a social work or political point.

Public vs private and freedom of choice are all interesting but in the real world ( sorry for the cliche) but if people don’t or cannot save or have their savings disappear because of imploding markets then society , public and private will step in to help. May it be through government , social services agencies , churches or individual families and friends. We will pay.

Which leads to the second about the youth paying for the last generation. Well they do and always have. Younger people help to take care of their elders. Call it a social contract. You know they go to war and fight fascists so that we can be raised in a free society or work all their lives , raising and providing for us, paying for our education. And now it is our turn , our duty, you could call it.
And keep in mind when the elders die then we will receive their accumulated wealth .

As for rcp’s comment, it didn’t sound hostile to me. More like Travis was enjoying himself in a fairly free wheeling debate and if you cannot stand the heat , then perhaps you should vacate the cooking area.
charlie

Comment from travis fast
Time: October 28, 2009, 11:51 am

“3) You know perfectly well that buying switchblades, cocaine, and slaves is quite different from investing for retirement, if only because coercion and addiction are different from rationality and foresight.”

What is the principle that enables society to declare some choices illegal even when coercion, and addiction are not relevant? You keep saying pensions are just different. How so? With rationality and foresight one could experiment with coke and not become an addict. Why should we as society ban people from buying? Similarly, someone can freely offer to sell themselves into bondage why should one be prohibited from buying a slave in that case? No coercion there. Switch-blades why should one be prevented from buying one to put in a locked display case in their living room? Being rational with foresight I will know not carry a switch-blade in my pocket because it is (1) a concealed weapon and (2) it is a really dumb thing to reach for in panic. Why should be I banned from purchasing one just because someone else *might* be less prudent than I.

So what is the difference between all these choices / restrictions? Lay out the *principle* that allows us to make these determinations as a society. From whence does the *value* come that enables us to make these determinations and distinctions?

Anyway if you were to actually attempt to work through all these examples and discover the animating logic you would find that it is not too hard to make a case why people should be “forced to be free” in their retirement. In the same way we attempt “force people to be free” in their sobriety even if they intended to be sober all along. Same goes for mandatory minimum third party liability insurance for vehicles. Shall I continue?

Comment from rcp
Time: October 28, 2009, 1:16 pm

If you want to argue that slavery is not inherently coercive feel free – I won’t stop you.

I find the phrase “forced to be free” kind of chilling in a Hegelian kind of way – an echo of “freedom is the recognition of necessity”. I personally don’t feel a need to be coerced.

In any case, you have ignored my substantive point on expenses to stick with your hobby horse – enjoy!

Comment from Travis Fast
Time: October 28, 2009, 5:42 pm

I promised myself I would not. But here goes anyway. Let me take the last three points of RCP or PRC in the reverse order…how was that for a faux Hegalianism from 1-10?

But I digress.

My hobby horse: Ney Ney Ney! I did not raise “choice” your comrade David did and you implicitly agreed with him when you initially wrote:

“I think I generally agree with David. A few additional points:”

Brings to mind Descartes: I *think* I assume myself.

Look do not go agreeing in general if you do not want to take on the burden of the ideas tabled therein. Would you sir sign a contract without reading it? I did not bring up Choice you two dunderheads did. So to H E double hockey sticks to you and the horse YOU rode in on.

On expenses:

Two propositions: if you do not want to micro mange then you have pay heavier fees. As Keith said sometime ago in the thread about the micro management option, which I did not like on efficiency grounds:

“a low cost ETF still involves speculative risk in financial markets. Why should an individual’s retirement income be at the mercy of that?”

As to chilling Hegelianisms and the fact that you “personally don’t feel a need to be coerced.”

It is weird that Hegel should get credited for Rousseau and Engles should get credit for Hegel. But civilisation works like that and that is why I really can’t get out of bed for intellectual property rights or tenure.

But I was really making reference to Rousseau. Yes society forces us to be free. And I would be the first to concede that this existential fact is not without controversy or room for disagreement. But I invited you to open up that conversation two times and you refused.

I am not sure how your intransigence becomes my hobby horse.

Then this gem:

“If you want to argue that slavery is not inherently coercive feel free – I won’t stop you.”

I am sure you won’t. But that is not what I argued. Twice was put forward the hypothetical: “what if one freely offers themselves for sale. Why should one be barred from buying that person.”

You say slavery is inherently coercive. Why because you are a reactionary capitalist pig (your preferred designation) and you saw Roots and said hey man this chattel slavery is bogus (points to you)? So let us be clear, we are not talking about chattel slavery. Can you think of a reason why we don not allow one person to ***freely*** sell themselves in a contractual arrangement to another?

At this point I am just going to answer the fucking question for you. Here we go, ready or not, right back where I started from:

Because it demeans humanity and whatever particular specific benefits that might accrue to the individual who would willingly sell themselves are outweighed by detrimental effects such arrangements if generalized would have on the human condition. Like letting seniors starve to death because they were risk takers in their youth.

Should we really insist on famine as a public policy to remedy reckless youthful behaviour as David would have it. Do you agree that we should. Yes or no.

Yes, Yes brother “forced to be free”: pensioner and would-be slave alike. The horror of it all. How will I sleep tonight with such a chilling third hand-idea running wild on the internets?

Hi Ho Silver!

Comment from Travis Fast
Time: October 28, 2009, 5:46 pm

Charlie,

Let me say thanks for the comment and apologize for my generation. But this one is truly dimmer than its grand-parents. In our defence, it is the boomers who have been doing the voting and the representing by and large.

Comment from David
Time: October 28, 2009, 8:00 pm

I never insisted on famine as a public policy to remedy reckless youthful behaviour. We have a social safety net to deal with famine and poverty. Doubling CPP isn’t about famine or poverty — it’s about redistribution from young to old.

Comment from rcp
Time: October 29, 2009, 6:08 am

Much as all this thread driftage has been informative, let’s try to focus on the topic at hand: doubling the CPP, or not. Here are a couple of observations:

1) It’s perfectly reasonable to wonder whether intergenerational equity would be preserved. CPP was introduced with a combined employer / employee contribution rate of 3.6%, which was far too low. The contribution rate had to almost triple to 9.9% during the 1990’s to keep the plan on a sound footing. The cohort that retired between 1976 (when benefits were fully phased-in) and 1991 or so got a great deal: those of us not planning on retiring for a while, not so much. It could happen again.

2) No-one here has come out in favour of senior poverty. It’s perfectly reasonable to ask whether boosting GIS is a better fix for senior policy than doubling CPP. The Rowe et. al. paper focuses on effective marginal tax rates and the effect on labour participation, but this is presumably not as big a deal for someone who’s already made the decision to retire. It will have an effect on whether phased retirement or all-or-nothing retirement makes more sense.

Comment from andrew jackson
Time: October 29, 2009, 6:21 am

An interesting discussion to date. To clarify a couple of points – I think it is entirely appropriate and needed to move on both the OAS/GIS and CPP fronts … and the CLC pension paper does both. OAS/GIS are tax financed means to address the problem of low income in old age and should be improved, in the first instance by boosting the GIS to a level which actually puts seniors over the poverty line. (Yes we can and should debate where the line is drawn.) The major objective of the CPP is income replacement, and doubling is the benefit is intended to make it do that much more effectively for those with average, somewhat below average, and above average incomes.

Comment from Alexi
Time: November 3, 2009, 9:47 am

Quoting David (above): “Doubling CPP isn’t about famine or poverty — it’s about redistribution from young to old.”

Actually, David, looking at the proposal at hand (rather than the one you seem to be assuming): this version of doubling the CPP can only be said to redistribute from young to old if you’re considering it with a time machine.

At the risk of boring you with the details above, this plan is “fully-funded” and “phased-in” — such that people’s CPP payouts are *only* increased based on their increased contributions, rather than doubling the benefits in pay to everyone. [This is why the propsed contribution rate doesn’t double the current one – because at present, young people *are* funding the pension of the older generation… which is not a factor in this plan.]

So, effectively, I suppose you *could* argue that they’re redistributing the wealth of a young you to an older you — but I believe that’s the definition of “saving”. All this plan is doing, effectively, is *making* people save because, no matter what you may argue about how wonderful it is to save and how we should all be free to chose to do so, etc, etc, the statistics are pretty clear in showing that, sadly, most people don’t (or, at least, don’t anywhere near enough…)

And, maybe it’s me, but I’d rather see people have to save by a plan like this rather than have to use my tax money later to bail them out via GIS.

Comment from hinotes
Time: December 13, 2009, 12:46 pm

RRSP’s, are the worst investment, you can make. I fell into that trap. They were to be, a good investment that could be used when you are at a lower income. The government thieves, 20% off the top, you are forced to add them to your income, you are taxed again, and you are in more trouble, next tax year. Seniors have no tax wright offs, so, the government gets well over half your money. Like the government, citizens have to learn, to get ahead, you have to be a criminal, and to steal from others, as their corruption proves to the citizens who are victimized by our governing officials.

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