What to expect in the next provincial election - response to editorial

Vincent J. Curtis

 

31 Dec 2013

 

 

Sirs;

 

A well thought-through editorial.  It was objective.

 

In it you hit upon something interesting, namely that Kathleen Wynne will promise to create some sort of provincial pension plan, since those miserly, tight-fisted conservatives refuse to blow a hole in the federal budget to help Lynne get re-elected in Ontario.

 

Where is she going to get the money to start this plan?  She hasn’t got it to build transportation infrastructure.  For that she has floated all sorts of trial balloons for new taxes, tolls, levies and bonds, and they all have been shot down.

 

If an Ontario Pension Plan is in the works, for those who are in need now or will be in the near future there will be no money unless the Ontario government makes a large capital investment in it at the start.  Otherwise, an OPP would work like an RRSP: you put in a little every year for thirty or forty years and then you collapse it gradually over one’s retirement years.  She gets no political credit now for a plan that wouldn’t start to pay off until thirty years hence.  So how is she going to fund it at the start?

 

She could try and run an OPP like a Ponzi scheme, the same as the CPP began.  The CPP benefited at the start because of the large baby-boomer cohort that was coming thirty years behind it, and it is only now that the baby-boomers are starting to retire that we discover the actuarial trick behind the start-up of the CPP.  The population did not continue to grow geometrically, and Mike Pearson is long gone from the scene.

 

Well, there is no large cohort just starting their working careers as there were in 1966.  But that doesn’t matter.  All Lynne needs to do is get herself elected this year and again in another four years and she is done.  The consequences of an unsound actuarial start-up to an OPP will be suffered by her successors.

 

This is what to look for in an OPP scheme.  She imposes a new payroll tax on Ontario workers that is large enough to fund both a modest benefit to current retirees and her transportation infrastructure (however she disguises the flow of money).

 

It will be well after Lynne leaves office that the unsoundness of this Ponzi-style financing scheme will be found out.

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