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Harper finally takes some risks

The PM could be looking for trouble—especially on pensions


 
Looking for trouble

Chris Wattie/Reuters

Among Stephen Harper’s defining political traits, his standout skill has long been a knack for presenting himself as a pragmatist who would never overreach. In opposition, Harper succeeded in softening the image of his restored Conservative party to squelch fears he might be cooking up a sweeping right-wing overhaul of the federal government. He won the 2006 election with a platform of narrowly defined policies, like trimming the GST and paying parents a monthly $100-per-kid bonus. As a minority Prime Minister, he had to draft policies unthreatening enough to attract sufficient opposition votes to pass. But now, as he begins his first full calendar year with a House majority, Harper’s customary caution has evaporated. “In the months to come,” he declared in Davos, Switzerland, last week, “our government will undertake major transformations to position Canada for growth over the next generation.”

Major transformations? Plural? And this from a Prime Minister who, only days earlier, had sounded much his old self, pleading for a “practical, incremental” approach, rather than bold measures, for First Nations. It was a different Harper at the World Economic Forum, touting decisive fixes on daunting issues. He zeroed in on at least four big files, though offering frustratingly few details. On pensions, he vowed to make underfunded parts of the system sustainable “for the next generation.” On immigration, he promised “significant reform” to match newcomers to labour force needs. On exports, he pledged both to finalize new trade deals and to end regulatory delays on oil and mining ventures. On industry, he committed his government to finally tackling the perennial problem of lagging Canadian business innovation.

This ambitious agenda was scarcely hinted at in the Prime Minister’s re-election platform just last spring. Looking over his Davos list, it’s not hard to see why Conservative strategists might have deemed some of these ideas too risky for the campaign trail. Sure enough, soon after Harper’s speech, the formidable Canadian Association of Retired Persons served notice of its intention to fight any future curtailing of the Old Age Security or Guaranteed Income Supplement programs, even though the Tories stressed the coming cuts won’t affect seniors already collecting benefits. Harper’s plan to streamline environmental assessments for pipelines and other resource megaprojects is also bound to meet with angry opposition, and shifting the emphasis on immigration to workers with more in-demand skills also risks raising concerns among some of the Tories’ hard-won ethnic community supporters.

So the Prime Minister has bought himself some trouble. But he may also have made a down payment on a more lasting legacy than any steps he took during his minority period would have won him. Among policies launched before last spring’s election, arguably only his bundle of crime bills (still awaiting final passage by the Senate as Parliament resumes sitting this week) and the massive deficit-spending spree unleashed in 2009 (a detour he was forced to take by the global recession) had potential history-making heft. By contrast, Harper’s Davos manifesto woke up experts in a half-dozen fields to the prospect of an unexpected stretch of watershed Conservative activism.

Scaling back retirement entitlements is the most instantly controversial element. The OAS is almost certainly his main target. Most seniors collect it, although part or all is taxed back from those with higher incomes. One possible cost-saving reform: raising the eligibility age above the present 65. Unlike the Canada Pension Plan, which is financed by paycheque deductions, OAS is funded from general tax revenues. The number of seniors qualifying under today’s rules is expected to swell to 9.3 million from 4.7 million over the next two decades. Benefits are on track to balloon to more than $100 billion a year from about $40 billion. Keith Ambachtsheer, director of the University of Toronto’s Rotman International Centre for Pension Management, said benefits for retired baby boomers will have to be covered by higher taxes on the shrinking pool of younger workers. “Is that fair?” Ambachscheer asks. “Is it their fault that they are fewer in numbers than the outsized boomer generation?”

Demographic pressure is also driving immigration reform. Fewer born-in-Canada workers entering the job market means immigrants will have to do more of the economy’s heavy lifting. But in what sorts of occupations? Federal immigration formulas have favoured applicants with post-secondary degrees. Too many end up as variations on the stereotypical cab-driving Ph.D. Immigration Minister Jason Kenney has signalled a shift to seeking new Canadians with practical trade skills. “The bottom line really is productivity,” says York University sociology professor Alan Simmons, author of Immigration and Canada: Global and Transnational Perspectives. “If that means we have to bring people in at other levels—welders, farmers, whatever—that’s better for the longer-term economy.”

Harper’s bid to reform pensions and immigration is the first clear public sign that his government is taking demographic change seriously. Yet the issue has hardly crept up on him. His first Tory election platform, back in 2004, asked, “Will we have enough skilled workers to support an aging population?” Since then, much of the action—until now–has been behind closed doors. By late 2010, well before last spring’s election, top federal bureaucrats were reportedly working urgently on the problem. Early last fall, Finance Minister Jim Flaherty gathered senior business leaders and public servants in Wakefield, Que., for a private summit on how to adapt as a greying population strained health and pension systems. The Conservatives have been far more open in avidly supporting the resource projects that Harper has vowed to free from “delay for the sake of delay.”

The prime example is the lengthy review now confronting Enbridge’s $5.5-billion Northern Gateway pipeline, meant to pump Alberta oil to the port in Kitimat, B.C., to slake China’s energy thirst. However, some experts doubt the rules Harper gripes about actually scare off companies when the pay-off is potentially so huge. “Does one really believe,” asks Bram Noble, professor at the University of Saskatchewan’s School of Environment and Sustainability, “that environmental assessment regulations are so onerous that they will deter investors in the energy sector—a non-renewable resource base with an increasing global demand?”

Even more controversial than shortening environmental reviews would be any move by Ottawa to restrict the chances for First Nations groups—like those opposing the Northern Gateway—to intervene when their traditional territories are in play.

The issues surrounding trade deals seem less explosive. Still, Harper can’t assume smooth sailing on them either. The Canada-European Union free trade agreement he expects to conclude this year would require provinces and municipalities to stop favouring local firms and let EU companies compete. Plenty of possibilities for friction there. The Prime Minister’s plans to complete a free trade pact with India next year, and for Canada to join the Trans-Pacific Partnership, could also put the interests of sheltered sectors in danger. And even as trade barriers tumble, Canadian industries with lacklustre productivity will struggle to break into new markets. Harper rather dryly voiced his dissatisfaction with the way heavy federal spending on research has not translated into private sector innovation. “We believe,” he said, “that Canada’s less-than-optimal results for those investments is a significant problem for our country.”

His solution is to move on some of the proposals from a report delivered last fall by a task force, headed by software executive Tom Jenkins, on the innovation deficit. Jeremy Leonard, research director at the Montreal-based Institute for Research on Public Policy, says Ottawa’s priority should be to set up easier ways for companies seeking a competitive edge to connect with university researchers. It makes sense. Yet the long-standing failure of Canadian firms to keep up with R & D levels in other countries remains something of a mystery. Don Drummond, an influential economist and former senior federal official, recently published a paper called “Confessions of a Serial Productivity Researcher.” In it, Drummond argues that since taxes have been cut to internationally competitive levels, and other core policies adjusted to be good for growth, the persistence of a “terrible productivity record” must have something to do with the country’s “business culture.”

Harper will be hard pressed to deliver a clear policy win over such a nebulous problem. In fact, any of the goals he set at Davos are complex enough to confound even the most determined politician. His proven forte for limited measures—imposing a minimum penalty for a certain crime, or offering a tax break to specified group, or phasing out a subsidy to political parties—won’t do the trick. Boutique policies will not make a dent in files as sprawling as exports and innovation, immigration and pensions. This master of the politics of managing expectations has, for the first time as Prime Minister, set them daringly high.


 

Harper finally takes some risks

  1. I THINK GOVT. SCRAP ALL OLD FILES OF PARENTS AND GRAND PARENTS FOR GOOD, STOP GIVING PENSION , WHO NEVER WORK IN CANADA  AND WHO WORK WORK HERE THEY GET BASED ON THEIR LENGTH OF WORKING YEARS,GOVT HAVE NO MONEY FOR HEALTH CARE AND BRINGING MORE SENIORS HERE IN CANADA, ONE DAY WE FACE THE  LIKE GREECE PROBLEM.WAKE UP CANADA WAKE UP BEFORE ITS TOO LATE

    • What’s that? I don’t think i’ve got my hearing aide turned up high enough – could you speak up? 

  2. “Major transformations? Plural? And this from a Prime Minister who, only days earlier, had sounded much his old self, pleading for a “practical, incremental” approach, rather than bold measures, for First Nations”

    Exactement! And let’s not kid ourselves that FN’s leaders and those sceptical among the chiefs in attendance have not noticed and drawn appropriate inferences either.

    “… the persistence of a “terrible productivity record” must have something to do with the country’s “business culture.”

    What’s new? It has been an open secret that our branch plant mentality has been holding us back since forever. There’s research that supports the view that most corps conduct the bulk of their R&D where they hang their hats – at head office. Quelle surprise! 

    It will indeed be interesting to see if Harper can manage the big picture as adroitly as he has manipulated the small uber partisan one – in my partisan opinion he only does incremental and small – easier to control all the pieces. To go bigt he’s going to have to trust the Canadian public at some point…now that’s a big risk, one that i doubt he’s the man for the job. 

  3. “Harper rather dryly voiced his dissatisfaction with the way heavy
    federal spending on research has not translated into private sector
    innovation…”
    “… the long-standing failure of Canadian firms to keep up with R & D levels in other countries remains something of a mystery”

    Harper has an idea to fix all of this….

    “The Canada-European Union free trade agreement he expects to conclude
    this year would require provinces and municipalities to stop favouring
    local firms and let EU companies compete”

    There we go! Stop buying Canadian! That will ensure Canadian private sector innovation…right? That is bound to motivate Canadian firms to spend on innovation and R&D!!! SEE, all fixed!

    Ahh the prophetic insight… “Will we have enough skilled workers to support an aging population?”
    NOT if we export jobs to the Canada-European Union free trade agreement by requiring provinces and municipalities to ‘buy foreign’ Stevo!

    Keith Ambachtsheer, director of the University of Toronto’s Rotman International Centre for Pension Management; No Keith it is NOT fair, who told you life was fair? Is it fair that boomers who have paid for a lifetime into the pension scheme get their benefits cut just before they are eligible to start collecting them? Fair? Well it IS fair according to Stevo!
    Shortly after this huge period of ‘unfairness’ there will appear a huge decrease in pension costs which will create a huge surplus in the funds… unless Stevo gets there first and strips the money out of it… no wait… what am I saying… he already plans to strip the pensions… Yea Stevo!

    How can this quagmire of capitalist manipulation be called a policy or a plan for the future?

    • What a ridiculous statement by Mr. Ambachscheer. Is it the boomers’ fault they were born into their generation? Get a grip, Mr. A.

      It’s not like we haven’t been funding our parents’ pensions, not to mention our children’s education and mortgages …. Well the joke’s on us now, isn’t it?

      Lower the income threshold for OAS clawback. It’s way too high at $70K. At least try that first before upping the age to 67

  4. Well, I suppose the easy way out for a PM at this time in our history would be to ignore the fact that we will have a shrinking number of workers to fund a doubling of OAS costs, to ignore the fact that the provinces will continue to have major shortfalls in healthcare funding,and to magically come up with a formula—let/s call it the Kelowna Accord—that will solve all the First Nations issues. This method of operation would probably bring us closer to a Southern Europe type of economic meltdown
    in the long term but would ensure electoral success in the short term.

    Or, a PM with courage could have confidence that there are enough Canadians with common sense to know that there must be some relatively minor changes made to the funding and structure of large government expenditures like Healthcare and Pensions to ensure that they will be available for future generations. There will be some selfish people who insist that they are entitled to their entitlements, however I am confident that a sufficient majority will not want to dump our lifestyle costs on our sons and daughters.

  5. “If that means we have to bring people in at other levels—welders, farmers, whatever—that’s better for the longer-term economy.”

    Why not hire train and hire Canadians first, including aboriginals ?  Wouldn’t that make more sense ?  Plus it would reduce unemployment.  Seems like a no-brainer to mel


  6. Don Drummond, an influential economist and former senior federal official, recently published a paper called “Confessions of a Serial Productivity Researcher.” In it, Drummond argues that since taxes have been cut to internationally competitive levels, and other core policies adjusted to be good for growth, the persistence of a “terrible productivity record” must have something to do with the country’s “business culture.”

    Drummond obviously gets it -“business culture” and probably doesn’t spend a good part of his day tweeting/blogging about economic theories that clearly don’t apply here.

  7. Harper mentioned pensions for the benefit of the wealthy European investors so they would not be against the Canada Europe Trade Agreement.  Investors want to maximize their profits.  Harper is anti CPP,  favouring Personal pension plans.  By his passing legislation so employers could opt-out of CPP,  the plan would eventually disappear.  By his cutting corporate taxes and royalties even more,  OAS and GIS will also be unsustainable and will be scrapped.  Only Personal Pension Plans will exist at the mercy of the unscrupulous brokers—taking up to 40-50 percent of employee contributions as fees.  The New CANADA, according to Harper, will be just another 3rd world feudal  country.  Foreign investors will be free to loot and pillage Canada and NOT pay any taxes.  Employees will have to work at rates of pay comparable to 3rd world sweat shops—because of all the FREE-TRADE treaties– and pay for pensions and medical and education and essential services out of their own pockets–just like the 3rd world does now.  The  future does NOT look too rosey for the average worker — just for the filthy rich.  The cost of living in Canada has been pushed to un-affordability already.   So much for the best country to live in.  By simply enriching CPP by only 15%,  the pension pay-out after 35 years would be twice what it is now—NOT much of a sacrifice now for a brighter future and even may be able to cut out OAS and GIS.   Certainly not what the greedy foreign investors want.   Harper needs to be dethroned ! !

  8.    I don’t agree with Harper often, but good on him for tackling the OAS.  Everyone knows that retirement is a “third rail”.  The Canadian Association of Retired Persons is already up in arms.  The thing about government entitlements is everyone thinks Ottawa needs to trim the fat, unless its on thier piece of pork, and thats what makes OAS touchy.  Not everyone will collect welfare, or UI, or get a student loan, but everyone wants to retire… and thats the problem.
       The average life expectance in Canada is 80.7 years.  Thats almost 16 years feeding from the government trough.  In 1951 Canada adopted the Old Age Security Act based on the American system.  At the time the average recipient would benefit for only 2-5 years, and furthermore, the American system was adopted in 1935 when life expectancy in the US was about 61 (to take it one step further, the US system was based on the German system implemented by Otto von Bismark in 1889, which had a retirement age of 70.  Depending on how the math is done, average life expectancy was either 46 or 65).
       My point is this, at the current pace, OAS is well on its way to be unsustainable.  Countries all over the world are coming to this stark realisation, or at least are finally facing it publicly. I don’t want to take anything away from someone who has worked their whole lives, but neither do I want the government to sweep the problem under the rug.  Maybe another look south to the US could give us some help.  An incremental raise in retirement age, increases by months, over the course of years instead of one big jump. 
       I don’t know what the outcome will be, or whether Harpers Conservatives will ultimately get the job done, but I applaud Harper for having the courage to tackle a subject that is only going to cause him grief in the short term, in order do do the right thing for the country in the long term.
       Bravo, Sir.

  9. For Chris Watts and other dummies……This is the list of experts that say the Canadian Pension Plans are “Sustainable”…Kevin Page, official parliamentary watchdog….Edward Whitehouse, economist World Bank, specializing in pension issues….McMaster University, which conducted a study….Scott Clarke, former deputy minister of finance,…Peter Devries, former financial advisor to the federal government,…and Phillip Cross, economist and former head of Statistics Canada…All these experts say that there is no issue with the sustainability of the Canadian pension Plans. There is no need to increase age requirements or reduce payouts….End of story.

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