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Jim Flaherty, pensions, and economic doublespeak


Finance Minister Jim Flaherty says the economy is too weak to support a modest, phased-in increase in Canada Pension Plan (CPP) premiums divided between employers and employees.

This is disputed by experts, and also contradicts Conservative messaging in two important ways.

First, in every other context, from the Speech from the Throne, to the recent Economic and Fiscal Update, the Conservatives have bragged about Canada's economic performance and highlighted the chances of a strong recovery. Except when it comes to the CPP debate, "the land is strong."

Second, in every other context, the Conservatives share the widespread concern that Canadians are saving too little, and running up too much debt.

Flaherty has significantly hiked the limits on the amount that can be borrowed for new insured mortgages and warned Canadians of the dangers of taking on too much debt as interest rates rise due to (you guessed it) a strengthening economy.

He also wants to encourage people to save more for retirement through his pooled registered pension plans (PRPPs), acknowledging that many people are saving far too little for retirement. If PRPPs worked, Canadians would save more. Unlike with CPP expansion, however, much of their savings would be lost to the financial industry through high fees. But they would be saving more, just in a different way than through the CPP.

So, Flaherty says the economy is strong enough to support an increase in national savings and that Canadians must increase savings in every context other than a modest expansion of the CPP.

The financial industry and the Canadian Federation of Independent Business also want Canadians to save more. They just don't want to help out through low fees and employer contributions to pension savings.

So, the real issue at play is not economics, but the political issue of who will be asked to contribute to better pensions. Even with a supposedly strong economy, the Conservatives see no value in undertaking to build retirement security together — it's everyone for themselves. 

Photo: cliff1066. Used under a Creative Commons BY 2.0 licence