The Commons: A difference of realities - Macleans.ca
 

The Commons: A difference of realities

The government has either frozen EI premiums or plans to drastically increase them


 

Ignatieff1The Scene. Michael Ignatieff stood and, perhaps feeling a bit parched, took a sip of water. Putting down his glass, he proceeded with his supposition.

The Prime Minister, the Liberal leader said, was planning to increase employment insurance premiums. This, he said, will deter employers from hiring. And this, he explained, would add to the tax burden. Across the way, Conservative MP Dean Del Mastro was loudly displeased.

“Will the Prime Minister admit,” Mr. Ignatieff finished, “that he is raising taxes and that tax increases will kill jobs?”

Shaking his head and shrugging, the Prime Minister stood with his version of events.

“Mr. Speaker, on the contrary,” he said, “this government has frozen premiums for employment insurance for this year and next. In the long term, these rates are determined by an independent commission.”

Mr. Ignatieff listened to this response, then stood with a conclusion.

“Mr. Speaker,” he explained, “this means that ‘Yes, we’ll raise taxes.'”

The Liberal leader had not arrived at this finding without evidence. “A year ago the Prime Minister promised we would never run a deficit. Now we are in the largest one in history and it began before the recession even began,” he continued. “Yesterday, Dale Orr said that the Conservative increase in EI premiums, a whopping $15.5 billion, is a tax on workers and employers. Will the Prime Minister admit that his way out of his own deficit is to raise taxes and do so in such a way that it kills jobs?”

The Prime Minister appreciated the question. “Mr. Speaker, I want to thank the leader of the opposition for the question in the sense that it gives me the opportunity to recognize the Minister of Finance in front of his colleagues. He just received an award yesterday,” he reported. “During this very difficult past year, he has been recognized for running one of the largest economic stimulus programs in the world with one of the smallest deficits, a program that has been both effective and leaves us in a strong, long-term fiscal position. I know we all want to congratulate the Minister of Finance.”

“Aye!” the Conservatives sang, leaping to their feet to applaud Mr. Harper’s effective use of the tangential.

Ah, but Mr. Ignatieff had carefully laid a trap for Mr. Harper. With the next question, it was revealed.

“Mr. Speaker, the same economist says, and I quote, ‘An increase in EI premiums is not only one of the most harmful taxes, it is also one of the most perverse.’ This will kill jobs and we still don’t see any way out of this deficit,” the Liberal leader posited. “If the Prime Minister is so sure that he is right and most all economists are wrong, will he at least allow the Parliamentary Budget Officer to get to the bottom of this question and find out where our public finances are and whether this plan will help or hurt the unemployment situation?”

Indeed. Let us forward this dispute to an independent arbiter charged with assessing the situation unemotionally and quantitatively. Let us have some answers, some clarity. Who could possibly quibble with such a proposal?

In fact, no one could. Or, rather, no one would. At least not here. Instead the Prime Minister, rising with the makings of a smirk, would ignore the suggestion entirely.

“Mr. Speaker, last week the leader of the opposition was, and has been for some time, calling upon this government to engage in employment insurance reforms which would permanently add $4 billion to the bottom line of that program. This week he claims to be concerned about how EI premiums could increase in the future,” he reported.

The Liberals howled. The $4-billion figure was, of course, the Conservatives’ own. The Parliamentary Budget Officer’s analysis of the Liberal proposal had put the price tag closer to $1.2 billion.

“That is why when we undertake decisions on employment insurance,” the Prime Minister continued, “we make sure they are short term, we make sure they are affordable in the long term, we make sure we have a plan. I would urge the leader of the opposition, rather than to keep jumping back and forth, to have a plan and give us— ”

The Prime Minister’s final words were cut off, his time expired. In his seat across the way, Mr. Ignatieff appeared altogether unimpressed.

The Stats. Taxation, seven questions. Afghanistan and crime, five questions each. Fisheries, four questions. Suaad Hagi Mohamud, democratic reform, H1N1, the environment and pensions, two questions each. Honduras, farmers, aboriginals, immigration and police, one question each.

Stephen Harper, seven answers. Gail Shea and Jim Flaherty, four answers each. Peter MacKay, Rob Nicholson and Peter Van Loan, three answers each. Diane Finley, Steven Fletcher, Jean-Pierre Blackburn, Jim Prentice and Leona Aglukkaq, two answers each. Lawrence Cannon, Gerry Ritz, Chuck Strahl and Jason Kenney, one answer each.


 

The Commons: A difference of realities

  1. The PM has a point. In one breath Iggy is talking about increasing EI benefits, in the next he is claiming it is the Cons who will increase EI premiums. This is very similar to when the opposition tried to bring down the government for lack of spending and then compained later that there was a deficit.

    • I don't think they're complaining about the existence of a deficit as much as how it continues to seemingly spiral out of control. While Ignatieff didn't ask about increasing EI benefits in this exchange, the budgeted increase payroll taxes of $15.5 billion far outweights the temporary plan costed at $1.2 billion.

      • The 1.2 billion costing assumes that the additonal benefits will not increase the number of unemployed, which of course it will, it was shown to do exactly that in the 70s. The Conservative estimate was actually more realistic.

        http://www.ctv.ca/servlet/ArticleNews/story/CTVNe

        Then they say it won't happen again because it's temporary – which is a lie (see my comment below). even if it were temporary, for the labour market to remain unaffected by the policy, it would mean the changes would have to be in effect for only 8 weeks. Any longer than that and you have phenomenon of people taking advantage of the system.

        • Yeah right. The Tory estimate was more realistic than that of the PBO, who has been the most accurate of anyone (banks, economists, finance dept, etc) when it comes to crunching the numbers?

          Give me a break.


      • "What happened in '71 to my mind was a policy catastrophe," says University of Ottawa economist David Gray.

        To repeat it today "would just be catastrophic for the Canadian economy."

        Back in 1971, the reforms introduced by then-labour minister Bryce Mackasey were blamed for actually increasing the unemployment rate by one to two percentage points. The ranks of seasonal workers swelled as employees, aided and abetted by employers who adjusted their contracts, worked the minimum eight-week qualifying period and went on the dole.

        "It opened the floodgates," says Catherine Swift, president of the Canadian Federation of Independent Business.

        "The number (of seasonal fishermen) doubled overnight, literally, because suddenly the dole was available."

        People are not as stupid as you think.

        • Dang nabbit, introducing actual historical facts.

          Well done!

        • Returning to this century…

          The Government's total cost estimate, including static and dynamic costs, presented to the EIWG on August 14 of $2.425 billion overstates the cost of the proposed 360-hour national standard of EI eligibility as:

          • PBO believes that the Government's dynamic cost estimate is flawed; and,
          • More important, PBO also believes that only the static cost should be considered in costing the proposal, given the structure of the program and since the proposed change to the EI system is in effect for one year only.

          […]

          The Government's total cost estimate in excess of $4 billion (presented on August 6) is not consistent with the proposed 360-hour national standard as it includes unemployed individuals not covered by the proposal (i.e., special beneficiaries, new entrants and re-entrants to the labour force).

          • The PBO is wrong, just like the Libs, and the reasons I've already outlined above.

            More important, PBO also believes that only the static cost should be considered in costing the proposal, given the structure of the program and since the proposed change to the EI system is in effect for one year only.

            I've debunked this ridiculously flawed assumption. It's a completely ridiculous assumption based on no evidence nor logic. "Believes" is the key word. He's wrong, and it was proven in the 70s that he's wrong. And no, that was not a century ago. If we were in the year 2000, would you be calling 1999 the previous century? Didn't your history teacher ever tell you there's a reason we study history?

          • Not only is he wrong, he lied. Iggy and the Libs never proposed the changes for one year only, the PBO introduced this assumption himself. Iggy proposed the changes "until the economy rebounds", which is a vague statement that could mean anything, and not only that, I fail to believe the Libs intend to reduce benefits at any point in the future.

          • The ranks of seasonal workers swelled as employees, aided and abetted by employers who adjusted their contracts, worked the minimum eight-week qualifying period and went on the dole.

            My understanding is that seasonal workers would not qualify (special beneficiaries). How could history repeat itself in this instance?

            In stating "this century," I was referring to the fact your quoted text makes reference to events in the 19th century. I didn't intend to belittle your quote and see now how it could be interpreted as such. I'm sorry for any slight or confusion.

          • It references the 20th century. We are in the 21st century. Anyway, I see what you mean.

            How would seasonal workers not qualify? All you have to do is work 9 weeks! If that isn't seasonal, I don't know what is. Additionally, as far as the quoted text goes, the reference to "seasonal" is irrelevant. The same argument applies to any worker. I worked in a factory once, where most workers were on contract. Most of them intentionally took off several months between contracts, not because they could not find a job or start another contract, but because they wanted to get UI and relax at home, watch soap operas and swim in the pool. They were not seasonal. With this legislation, they could shorten their contracts to 9 weeks.

          • It references the 20th century. We are in the 21st century. Anyway, I see what you mean. Regardless, your phrase insinuated that since it was in the 20th century, it is irrelevant.

            How would seasonal workers not qualify? All you have to do is work 9 weeks! If that isn't seasonal, I don't know what is.

            Additionally, as far as the quoted text goes, the reference to "seasonal" is irrelevant. The same argument applies to any worker. I worked in a factory once, where most workers were on contract. Most of them intentionally took off several months between contracts, not because they could not find a job or start another contract, but because they wanted to get UI and relax at home, watch soap operas and swim in the pool. The factory jobs were great jobs that paid very well. They were not seasonal. With this legislation, they could shorten their contracts to 9 weeks. If you pay people to sit at home and relax, they will.

          • Oops, thanks for catching that. I've been awake too long.

            I see what you're saying about workers rigging their contracts. Is it possible to do this as things stand now? My understanding was that a worker could only qualify if he lost his job through no fault of his own. Can that be circumvented using the trick you mention? Or would the employer be in on the gaming of the system as well?

          • What I described happens all the time.

            It's true that a worker cannot quit and collect EI. But it's common knowledge, especially in places of high EI usage like he maritimes, that contracts are written to take advantage of EI, employees are let go and rehired later so they can collect EI in the interim and save the employer money, employers write up contracts and employment terms to take advantage of the EI rules, and so on. For some employers, EI is considered part of their compensation. It's true for both seasonal and non-seasonal workers, and in fact, almost all jobs in PEI are seasonal because of this pratice. It's common practice today, and it always has been. Even when workers quit their jobs, if they have a good relationship with the employer, then the employer will call it a layoff. In the maritimes, even some students collect EI (they figure out a way to bend the rules and get it). And in fact, none of this is illegal. Since they know exactly what the EI rules are, it's easy to satisfy them.

    • Not the same at all. The libs proposed a temporary relaxing of EI standards. Try not to belirve everything you hear, particularly from this PM.

      • Don't lie – while Iggy claimed it was temporary, he never indicated a time period, just same vague statement of "when the economy rebounds". That could be 1 year of 10 years away. It's completely the same, and I don't believe for a second the Libs would be calling for the benefits to be reduced some random day down the road.

        Additionally, the same national standard applied to everyone was not intended to be temporaryat all. Don't live in a fantasyland.

    • I just have to say that for those of us (like myself) who know very little about the EI benefits issue, this comment thread was great: civil and informative.

  2. An increase in EI premiums is regressive, as they are only paid on the first $42,300 earned; if the EI system needs more money due to the recession, having EI premiums paid on the full amount earned is a more progressive idea, and less damaging to low and middle-income people, than raising the premium rate.

    • It's only paid on the first 42 300 because there is a ceiling on the benefits. If it is intended to be an insurance program, then there is no such thing as "progressive", which is a synonym for "redistribution".

  3. Harper, however, is correct that EI premiums are set by the EI commission and not by the government, therefore it is misleading for Ignatieff to call this a "Conservative tax increase".

    • Is that where the $15.5 billion figure comes from?

      • I'm not sure, but it isn't clear. The economist Ignatieff mentions, Dale Orr, found that the increases were implicit in the government's economic outlook report. From the CBC:

        The study, released by Dale Orr Economic Insight on Tuesday, said that if the federal government is to meet its economic targets by 2014-15, employees would have to pay an extra $632 over four years. Employers' payments would increase more than $884 per worker in the same period.

        Orr, a leading Canadian economist, looked at Ottawa's revised economic outlook issued on Sept 10. While the government has promised not to raise taxes or cut payment programs to individuals and the provinces, "what the government did not mention was that this pace of deficit reduction relies heavily on large increases in Employment Insurance (EI) revenues over the 2011-2014 period," Orr said.

        Orr had harsh words for the government for not being open about its plans. "This is … buried within their document. They have not been upfront at all with their plan to collect increased EI premiums."

        He also faulted the opposition for not pointing out the lack of disclosure.

        The analysis concludes that the increases would total about $15.5 billion by the 2014-15 timetable laid out in last month's update for balancing the budget. Ottawa has acknowledged returning to surplus would likely require increases in premiums.

        Premiums must rise from the current $1.73 per $100 of earnings — which will be frozen for another year— to $2.33 over the next five years, Orr said. That would mean an accumulated extra payment of $632 for every worker earning more than the bottom threshold of $42,300.

        As well, employers will need to pay about $884 per worker during the period.

    • I don't think it matters which government entity decides how big it is – it is not voluntary and therefore it is a tax. If it is increasing, then it is a tax increase. If we get the chance to elect the EI commission, then perhaps you could shift the blame, but as long as the Conservatives are the people we are electing, they cannot pass the buck.

      There's nothing more annoying than passing the buck to an "independent body".

    • How did future EI commission recommendations make their way into the latest conservative fiscal update? (a time machine perhaps?)

  4. He should be asking why workers are paying the EI Commissioner such a HUGE bonus. Iggy has been the one screaming for the 9-week work year.

    • I heard that wasn't the case, albeit, we probably have different sources (Ryan Sparrow not being my source)

  5. I thought that EI is an INSURANCE program which is self sustaining. The fees paid are not taxes but insurance premiums. You can opt out and a large number of workers don't pay into this insurance program. That means you can't collect. The government froze increases on this fee for 2 years and now there is not enough money in the EI fund to pay all of the claimants but once the recession is under control a panel will determine what insurance rates will have to be paid to once again be self sustaining.
    It is dishonest to call this insurance fee a tax don't you think?

    • The Conservative party's own documents clearly call EI premiums a payroll tax, and go further to say that such payroll taxes are antithetical to maintaining and creating jobs.

      • The Conservative party's own documents also clearly said that Stephen Harper wouldn't run deficits, wouldn't tax income trusts, wouldn't be fiscally reckless, wouldn't appoint senators, wouldn't call early elections, wouldn't muzzle watchdogs…

    • Found the reference:

      From page 6 of the 2008 Conservative Party Policy Declaration (pdf version accessed via their web site)

      "We believe that payroll taxes should not exceed the amount necessary to properly fund Employment
      Insurance because unnecessarily high payroll taxes are a tax on job creation. Lower payroll taxes
      encourage hiring and business expansion."

    • If it is not voluntary, then it is a tax. If you cannot opt out, it's a tax. Obama is trying the same word games in the US with his health insurance mandates, trying to say the fines for opting out are not a tax.

  6. Just another example of Liberals passing a bill thru a minority parliament,
    and then accusing the government of some sort of underhandedness.

    Because Liberals passed this bill,
    no government can raise payroll taxes and then raid the surplus,
    like the Chretien/Martin government did 2001-2005, taking $54 Billion out of EI and faking surplus'.

    Payroll taxes going up or down, are out of the governments control.

    ''Bill C-50
    Budget 2008 contained the announcement that the government would establish a Crown corporation called the Canada Employment Insurance Financing Board (CEIFB).
    The CEIFB will manage a separate $2 billion EI reserve (outside the EI Account) and set EI premium rates under a modified premium rate-setting process.
    These changes are contained in Part 7 of Bill C-50, Budget Implementation Act, 2008, which received Royal Assent on 18 June 2008.(20)''

    • To say that taxes are out of the government's control is completely absurd. We are supposed to be living in a democracy. The government we elect is in charge.

      • Who do you think is going to pay for all the money spent on EI during the recession? The Libs were ruled against by the Supremes for setting EI rates in cabinet without any apparent rationale other than simply wanting to increase them. The Harper government has established an independent panel to ensure premiums are set in accordance with the need. Arguing whether its an increase in taxes is silly. Freezing the premiums for two years will help during the recession but once the recession is over we need to deal with the realities of life post recession.

        • To me, two wrongs don't make a right. I see why the panel was created, but at the same time I don't like it, it doesn't solve the problem to hand over the power to a bunch of unelected individuals, it replaces the problem with another problem.

        • To me, two wrongs don't make a right. I see why the panel was created, but at the same time I don't like it, it doesn't solve the problem to hand over taxation power to a bunch of unelected individuals, it replaces the problem with another problem. We should be allowed to opt out of EI, so that premiums are not taxes.

  7. Did Harper really say "when we undertake decisions on employment insurance…we make sure they are short term, we make sure they are affordable in the long term,…"? Decisions are short term and are affordable in the long term?

  8. To tell you the truth, I don't see good things for Stephen Harper in the future. He's ridding high in the pulls now while he's giving out bags of money with thought as to how he's going to pay it back, socking in the limelight, banging off bad renditions of the Beatles. Sooner or later, Mr Harper is going to have to pay the piper, and when that day comes, it may just be a very different Beatles tune we hear him bellowing out…"Yesterday, All my troubles seemed so far away, Now it looks as though they're here to stay, Oh, I believe in yesterday."

  9. Last November all of the G20 countries committed to spending 2% of GDP for each of 2 years as economic stimulus. So, this is planned defecit spending on time limited programs. Harper paid down $40 billion of the 500 BILLION debt in the first three years while at the same time increasing transfers to provinces, speninding on neglected things like our military, etc. plus one time costs for things such as the residential school settlement, chinese head tax settlement , etc. Then we added a one time $8 billion LOAN to the auto sector. So there was and is a lot of one time spending which has an end date. That is why it is not a structural defecit. Every province has also gone into defecit to weather pretty tough times. Would you have preferred that Canada just tell the G20 that we would not do our part just so we could crow about balanced budgets while our people suffered? Sheesh – such short term and myopic thinking.

  10. Michael Ignatieff, QP today: "“Will the Prime Minister admit that he is raising taxes and that tax increases will kill jobs?”

    Canadian Press, today: Michael Ignatieff is preparing to embark on a politically risky “adult conversation” with Canadians about the painful measures necessary to eliminate the country's ballooning deficit—including the possibility of tax hikes.

  11. Daily Iffy is getting to look like one angry white dud. He needs to settle down. His polls are going south because his questions in the House are inconsequential as are the rest of the Liberal questions and with those furrowed eyebrows and sunken eyes dare I say he looks damn right creepy.

    • really? is there a direct link between QP performance and the opposition leader's place in the polls? I don't buy it. (I'm not questioning the poll results, just your claim that changes in poll results may be caused by QP) How many Canadians know or care what goes on in QP? What in the world does QP have to do with Government? Give your head a shake.

  12. Daily Iffy is getting to look like one angry white dud. He needs to settle down. His polls are going south because his questions in the House are inconsequential as are the rest of the Liberal questions and with those furrowed eyebrows and sunken eyes he looks damn right creepy.

  13. He has already flip flopped on that one. It only took him a couple of hours. He says he will not increase taxes but he is going to lecture Canadians on the need for higher taxes. Does he think we are a bunch of kids in his lecture hall? This man is out of touch with reality. We all know what it will take to cover the deficit. However, I would put my trust in Harper before a tax and spend Liberal. We did that in '93 and we got the highest personal tax rates among the G7.

    So he will run around the country preaching gloom and doom and the Conservative polling numbers will go up to 47%.

  14. He has already flip flopped on that one. It only took him a couple of hours. He says he will not increase taxes but he is going to lecture Canadians on the need for higher taxes. Does he think we are a bunch of kids in his lecture hall? This man is out of touch with reality. We all know what it will take to cover the deficit. However, I would put my trust in Harper before a tax and spend Liberal. We did that in '93 and we got the highest personal tax rates among the G7.

    So he will run around the country preaching gloom and doom and the Conservative polling numbers will go up to 47%. Lets not forget this man has no political experience. Has never served in government let alone a cabinet position and he knows all about governing? Right!

    • Neither did Mr. Harper prior to becoming PM.