Drummond on public pensions

Last week economists at the TD Bank called for uniform entrance requirements for the Employment Insurance program (although not as low as we’d like).   This week in an article in the Globe and Mail, TD Bank’s chief economist Don Drummond has called into question the effectiveness of the RRSP system and suggested that we need stronger public pensions, such as higher benefits through the Canada Pension Plan.

“After 50 years of promoting RRSPs, we have to conclude they haven’t turned out as envisaged.  I don’t know why we don’t just recognize this and make the needed adjustments to the retirement income system.”

This strikes me as pretty significant, given that his employer derives a lot of its revenue from shilling RRSPs.

This makes it two weeks in a row that bank economists have expressed support for major issues that the labour movement and progressive economists have been pushing for. 

What’s next?  — and will political leaders take heed?

23 comments

  • Stuart Murray

    If people could change jobs more easily because of a comprehensive universal pension, they would buy and sell houses more often, which is the banks’ big money-maker.

    I think a lifetime of hard work and paying your taxes should result in a CPP payout at age 65 that is above the LICO, around $20K per annum. A couple would end up with $40K. You could get the extra money from scaling back the RRSP subsidy, and continuing the CPP deduction into higher income brackets. Or you could increase premiums or taxes.

  • With the private sector assault on pensions, I truly am surprised at Don Drummond. For a banker he may not be the darth vader type I thought him to be. Maybe the 5 death stars holding Canada’s financial sector hostage, could have a sympathizer within their ranks.

    We are pathetic, winding this whole bursting bubble down on the backs of the retired and the unemployed is just plain old wrong on so many levels and suddenly I feel quite dirty.

    I was gonna say unCanadian but that would be wrong when it comes to our economic masters.

    65 and working at wal-mart is not new, but seniors lining up at the unemployment office might be.

    Can you collect EI when you are 65+ or does that interfere with ones CPP, I am sure there is a clawback in there somewhere.

    pt

  • louis Erlichman

    Drummond is calling for a DC component to the CPP, not an improvement in CPP benefits in the current DB framework, which is the CLC position. A DC component to the CPP, voluntary or mandatory, is less efficient than simply extending the current scheme, and is also a step towards undermining the basic support for the CPP. Beware of bankers bearing gifts.

  • You win. Okay, they’re evil again.

  • Iglika Ivanova

    Why is it so difficult to debate the actual merit of a person’s argument instead of dismissing it out of hand because he/she belongs to a certain group, whether it happens to be “bankers” or “left-leaning think tanks”?

  • What Iglika said.

    Taxonomy is not a substitute for analysis.

  • “Why is it so difficult to debate the actual merit of a person’s argument instead of dismissing it out of hand because he/she belongs to a certain group…”

    Because elephants move in pacs (political action committees).

    “Taxonomy is not a substitute for analysis”

    Tell that to Aristotle, Weberians, and Sesame Street: “Which one is not like the others?”

    Taxonomy is the first step in every anlalysis. Flows are not like stocks, quantity is not like quality, supply is not like demand (well unless you are JB Say) and bankers are not like…well non bankers.

    Seriously though, we have just lived through how many years of rational enough sounding bullshit by the business class (and their sycophants) on what was or was not good economic advice? And sadly (although predictably) much of it self-serving.

    So sure, technically a paedophile can have a very good position on what constitutes child pornography and what constitutes harm to a child. To believe otherwise is to commit to the genetic fallacy. But we can be forgiven for being, shall we say, vigilantly thorough when it comes to advice from paedophiles.

    “Once burnt twice shy”…so the limerick goes.

  • In fact, I think it is quite important to consider the source.

    Taxonomy is where we must start from. Circles are natural, but I am not so sure about squares. So I differentiate between the two on this one attribute and learn.

    A right wing economist (most likely the square), pretending he is a left wing economist (the circle), does, to me, seem quite important.

    I guess the relevance starts to accumulate when the square peg indeed fits into a round hole. There just is something odd about that, and it is a very important artifact of the analysis, albeit an extraneous one. And hey, Don Drummond is one big square peg.

    So I disagree with Iglika, it is something that is quite important.

    Now onto the analysis.

    We need a new national pension strategy and we need it real fast. We also need to have the private sector business interests to abandon this assault on “legacy costs”‘. Pensions are and have been sacred, and how, with such ease they are demonized as an unaffordable luxury. This was a part of the social compact that workers have held out for over a great many years. And to have companies strategically meander in and out of bankruptcy to allow this kind of barbaric attack on the elderly has got to be vocalized and opposed to a much greater degree. We need some quick action or we are going to see a whole lot of pensioners hood winked out of a lifetimes reward.

    I just can’t believe there is not more of a media assault on the corporations for this behaviour, in fact the silence should be deemed as part of the frontal assault.

    Capitalism sure has unwound itself. THe contradictions are starting to get real loud and having leaders like Harper fanning the flames should get this bonfire into a wild fire soon enough.

    Pissed off pensioners can be effective foot soldiers, a sea of blue on parliament hill might make Harper sweat a little more.

    Let the force be with us!

  • Iglika and Stephen, it seems to me that Louis’ argument was about the substance of the proposal (defined contribution versus defined benefit) rather than just the fact that it came from a banker.

    To be precise, the banks do not make money “shilling RRSPs.” They make money shilling mutual funds and other securities that individuals could hold in RRSPs, defined-contribution pension accounts or non-registered accounts. Increasing the total pool of personal savings is undoubtedly good for business at TD, whether it occurs through RRSPs or other vehicles.

  • Paul hits it!

    “And to have companies strategically meander in and out of bankruptcy”

    And that is the perverse incentive structure of bankruptcy. Meander in and give the low on the rung creditors like pensions and health care funds the shaft and give the high on the rung bond holders a trim. Not to mention that it is one hell of union busting strategy.

    Here is a novel idea: change the bankruptcy law so that pensions and health care commitments are the highest and bond holders the lowest. Then see how many owners opt for bankruptcy instead of doing debt for equity swaps.

  • Iglika Ivanova

    Erin, my comment was not directed at anyone in particular, least of all at Louis who actually considered the argument and not just the source. Rather, it’s inspired by my frustration of not being taken seriously by many in the mainstream because I happen to be employed by a “left-leaning” think tank.

    While I understand the value of putting experiences/things/people in broad classes as an important tool humans use to make sense of the world around them, I have to say it’s no substitute to critical thinking. This is especially true when we consider complex, multi-faceted issues (such as how best to provide income security for seniors).

    On a purely utilitarian note, I don’t think we’re doing ourselves (as progressives) any favours by automatically dismissing arguments because “a banker suggested it and bankers are evil”. Such attitudes create polarization and if everyone behaved that way, social change would be impossible. If people only listen to the arguments of those that belong to groups they’ve traditionally agreed with, then we are all doomed to spend our days preaching to the converted (as nobody else would hear us out). If we want people who have traditionally been suspicious of us “lefties” to abandon their stereotypes and critically evaluate our arguments then we owe the same courtesy to those we’ve traditionally disagreed with.

  • my frustration of not being taken seriously by many in the mainstream because I happen to be employed by a “left-leaning” think tank.

    Ahh, so much vanity, so little time…

    As a grocery store clerk/cashier who now does social policy research in his free time, I worry about how seriously I can take the findings of left-leaning think tanks whose employees are worried about how seriously the mainstream takes their views!

    Seriously, though, the professionalization of dissent carries with it a danger of co-optation, incorporation and self-censorship that deserves a lot more scrutiny than it receives. Sometimes I get the impression that my research results are not taken seriously enough by those who ‘happen’ to be employed by left-leaning think tanks. And worse, I worry that it’s not due to substance or relevance but because the professional progressive ‘seriousness agenda’ is set by funding exigencies and concerns about what the mainstream will take seriously.

  • Iglika Ivanova

    With all due respect, Sandwichman, I do what I do not out of a desire to “dissent” but because I think that a better way to organize and operate our society is possible and I am interested in persuading people to demand policy changes to that effect. My research, then, is meant to educate and inspire people.

    And while I think it’s great to educate and inspire those who already agree that we need change, I don’t see meaningful change happening unless we can persuade the majority of people that it’s needed and this is what I refer to as “mainstream.”

    If you derive value from being perceived as fringe and marginalized, Sandwichman, go right ahead. I, however, have no such aspirations.

  • Rather, it’s inspired by my frustration of not being taken seriously by many in the mainstream because I happen to be employed by a “left-leaning” think tank.

    Heh. My problem is the reverse.

  • “With all due respect” Iglika, one need not “desire” to dissent. Dissent is simply the position of views that are outside the mainstream. Basically, it’s the mainstream that establishes what is dissent, not the dissenters (or should that be the dysenteriat?).

    Why is that when I hear the phrase “with all due respect,” I brace myself for the impending condescension? Just what is that remark about my “deriving value from being perceived as fringe and marginalized” supposed to refer to? Do you perceive me as fringe or marginalized? I certainly don’t.

  • “If you derive value from being perceived as fringe and marginalized…go right ahead. I, however, have no such aspirations.”

    Was that a quote from Tony Blair?

    And to be fair SM spends most of his time trying to convince people that do not already agree with him. He tried it once here I believe. So it must be that he needs a new more centrist idea so that he will not live a life on the fringe. But then what of his original idea? Small price to pay for respectability I suppose.

    Also you do not need a majority in democracies with FPP electoral systems. A reasonably sized, geographically well concentrated fringe will do the trick. As the Cons have proven sometimes mobilizing and expanding your “fringe” base is a more viable strategy than trying to conquer the mushy middle. So unreliable the center.

  • Iglika Ivanova

    How did we get so far from my original point, which was that people should not dismiss arguments by virtue of their author’s belonging to a certain group? I never said that the author’s affiliations are completely irrelevant, only that the actual substance of the argument has to be considered.

  • So it must be that he needs a new more centrist idea so that he will not live a life on the fringe.

    How about this one, Travis:
    EU recommends shorter working hours to prevent layoffs…

    Actions by Member States and social partners must aim at maintaining as many people as possible in jobs. To this end, a temporary adjustment of working hours can be an effective policy option for firms of all sizes, with the support of public funding including the European Social Fund (ESF); it can be an opportunity for re-training to facilitate internal job transfers or transitions to other companies and/or sectors in line with flexicurity.

    Welcome to the fringe, Europe! First it was the state of Queensland, then it was the U.K.’s “official watchdog on sustainability” and now the European Union. Gee, it’s gettin’ crowded out here on the fringe. Glad I don’t have to worry about bankers and left-leanin’ think tankers closen’ in on these here margins…

  • For Iglika’s information, my main area of social policy research is the systematic and utterly unreasonable exclusion by (mainstream) economists of arguments for work time reduction “by virtue of their author’s belonging to a certain group” (i.e.. workers or unionists). Here’s the abstract of one of my published articles:

    The lump-of-labor fallacy has been called one of the “best known fallacies in economics.” It is widely cited in disparagement of policies for reducing the standard hours of work, yet the authenticity of the fallacy claim is questionable, and explanations of it are inconsistent and contradictory. This article discusses recent occurrences of the fallacy claim and investigates anomalies in the claim and its history. S.J. Chapman’s coherent and formerly highly regarded theory of the hours of labor is reviewed, and it is shown how that theory could lend credence to the job-creating potentiality of shorter working time policies. It concludes that substituting a dubious fallacy claim for an authentic economic theory may have obstructed fruitful dialogue about working time and the appropriate policies for regulating it.

    The bogus claim ‘somehow’ found its way into hundreds of economics principles textbooks over the years and, yes, has often been cited by… bankers. Yet I am always willing to pay careful attention to the substance of bankers’ arguments (in addition to scrutinizing their motives).

  • Iglika wrote:

    “How did we get so far from my original point, which was that people should not dismiss arguments by virtue of their author’s belonging to a certain group?”

    Well the actual post was on pensions. Then you commented that we should seemingly take Donny seriously which was kind of weird because no one had, at that point, suggested we should not. In fact, Tobby’s original post went so far as to suggest that Donny was going against his material interest. And it seems that that was the real point of contention. Then you commented and the conversation shifted to treating all views as equal until duly disembowelled by the cunning of objective logic. Then some guy started in with an attack on Aristotle for some reason and has been barking from the corners ever since. Then you shifted the conversation one more time to strategies for furthering the left agenda by trying to preach to the unconverted while wearing a suit and tie. That was bound to push the conversation even further away from pensions. Which it did, and here we are refusing to argue about either the original post, or the parallel threads of which you inspired.

    Thus it was that we came to be flogging three dead threads.

  • flogging three dead threads.
    three dead threads?
    See how they run,
    See how they run!

  • We also need to re-examine the defined benefit pension plans in the extended public sector to ensure that they are responsibly managed. Why are there dozens of funds instead of one or a few? Why are fund managers permitted such wide latitude in the way they invest these funds? Why aren’t workers and their representatives on the fund management oversight committees etc.?

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