4 - THE INDEPENDENT, BIGGAR, SK
THURSDAY, MAY 8, 2014
Letter to the Editor… Dear Editor: (I wrote the following letter 10 years ago hoping for a change in U.S. Policy. Sadly, this has not happened and the results are painfully evident. So hard to see!) War – what’s it good for? I am a former U.S. Citizen and a Korean War Vet. I moved my family from the U.S. Because of the insanity of the Vietnam War and to prevent my four sons from being asked to support the U.S. Policy of world dominance and empire-building.
When I volunteered as a paratrooper in the U.S. Army I was 18, naive and brain washed, wanting to do my “patriotic” duty. I gave several years of my life but now realize how wrong I was and hope that the current “crop” of young men will realize that the U.S. Policy of violence against violence only leads to further violence; that war can never solve problems; that there is no such thing as a just war; that God does not bless war. This violence is doomed to fail because it only stirs up further
violence and hate. In my opinion President Bush really “missed the boat” when he attacked Afghanistan after 9-11 instead of implementing international policies to overcome evil with goodness, not further evel. Young men everywhere – don’t be fooled! Think for yourself before it’s too late. There are so many opportunities to do good and help others in this world. Bob Wiseman Biggar
Plans to expand government pensions based on faulty assumptions by Philip Cross With talks to expand the Canada Pension Plan having stalled, the Ontario government has pledged to roll out its own provincial version. The impulse for a ‘big CPP’ hinges on the assumption that Canadians are too ignorant or misguided to plan for retirement themselves and the meddling hand of government bureaucrats can help them. In a new study published by the Fraser Institute, I question many of the assumptions behind the drive for ‘big CPP’ in Ontario and elsewhere. To begin, Canada’s current cohort of retirees aren’t facing a retirement income crisis. People are living longer, healthier and wealthier lives in retirement. The few pockets of poverty among seniors, such as single elderly women who have never worked, are best addressed by better targeting government benefits, not a wholesale expansion of the CPP. The crisis publicized by the pension ‘industry’
resides in the future and relies on assumptions and projections in models which are questionable. The model results are based on the traditional three pillars of Canada’s pension system—social security payments from government, the mandatory CPP, and voluntary pensions like RRSPs. This downplays the role of assets people hold in a fourth pillar outside the pension system, which total $8.6 trillion including real estate and various saving and investments, compared with $2.6 trillion held inside the pension system. And it completely ignores a largely undocumented but vital fifth pillar of support to retirees from family and friends; for example, 10 per cent of seniors live with their families, with unknown amounts of money and in-kind support flowing back and forth across generations, including inheritances. There are many problems with modelbased extrapolations of pension incomes
years in the future. For example, models assume that the replacement rate of working income with pension income is fixed over time, when it more likely declines as older age curtails spending on travel and entertainment. Banks routinely exhort retirees to replace 70 per cent or more of their working income, when some experts find 50 per cent would be adequate for most. But the fundamental problem with targeting replacement rates is that they are an opinion, not an observable fact. A prospective retiree can rationally choose to retire early, accepting a lower standard of living to spend more time pursuing leisure activities or with family. Another challenge with model-based projections results from a growing number of older Canadians staying in the labour force. Nearly half of Canadians over the age of 55 are still in the labour force, including one quarter aged 65 to 69 (a near doubling
of the rate over a short period). Canadians are increasingly working past what used to be the traditional (and often mandatory) age of retirement and this shift is playing havoc with forecasts of the labour force. This should give pause to anyone basing policy prescriptions that increase payroll taxes for virtually all working Canadians today on model simulations of the distant future. Every extra year elderly Canadians spend working generates more income and reduces the time savings are withdrawn for retirement. However, a major problem with using models to simulate the future of retirement is the underlying assumption that prospective retirees don’t understand their financial circumstances. In models, Canadians march towards retirement either blissfully unaware of the lower standard of living waiting for them or utterly incapable of altering their behaviour
by saving more or working longer in response to that knowledge. In real life, there’s ample evidence that Canadians alter their behaviour in response to a keen awareness of their circumstances and act decisively and rationally to control them. Some accept lower incomes in order to retire early while others work longer when circumstances dictate; they save less voluntarily when government increases mandatory saving; they save more in their own pension accounts when employerbased pension plan benefits erode; they elect to receive C/QPP benefits earlier or later than the traditional 65 years as they see fit; they shift consumption between the early and later stages of retirement; they save more in their later years to leave an inheritance; and they understand government will provide support as their health deteriorates in their final years. Canadians are anything but the robotic automatons
portrayed in models, doomed to endlessly repeat past patterns of behaviour, incapable of learning and adapting their lifestyle to the changing world around them. They are actively involved in making the myriad of decisions that affect their pensions and their retirement. If there is an expanded role for government to play in the future retirement system, it’s filling in the few cracks through which pensioners can fall into poverty. Philip Cross spent 36 years at Statistics Canada, the last few years as its Chief Economic Analyst. He wrote Statistics Canada’s monthly assessment of the economy for years, as well as many feature articles for the Canadian Economic Observer. After leaving Statistics Canada, he worked for the MacdonaldLaurier Institute. He is a member of the Business Cycle Dating Committee at the CD Howe Institute. He has been widely-quoted over the years, and now writes a bi-weekly oped for the National Post and other papers.
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