The Right Kind Of Socialism

trudeau.jpg.size.xxlarge.letterbox

In our first TAO management meeting following the October 19th election, we were discussing the potential impact of the Liberal majority upon our business. One of my colleagues observed that, with the expectation of closer co-operation between the Liberals in Ottawa and Toronto, we were at least likely to be spared the payroll administration inefficiency of the recently announced Ontario Retirement Pension Plan operating independent of the existing Canada Pension Plan infrastructure. Fair enough; but before saluting this apparent “Win-Wynne”, it merits a moment to consider more thoughtfully the wisdom of this proposed expansion of our social safety net.

Government taking a leadership role in the socialization of risk among it citizenry is a laudable and appropriate exercise of legislative discretion. Notwithstanding all of its shortcomings and challenges, the universality of Canadian healthcare is a public policy distinction from the US that all Canadians should be thankful for and proud of. However, it remains equally axiomatic that public policy should never infantilize its constituents by doing for them that which they have the ability to do as well or better for themselves. Health challenges are cruelly random in the timing and severity of their impact upon individuals and families; collectivization of this risk is both prudent and moral. The timing and certainty of the need for retirement savings, on the other hand, are largely predictable, and accordingly merit a very different public policy prescription.

In times and jurisdictions in which the expectation of intergenerational transfers of wealth and care were the primary if not sole means of managing this risk, it is true that individual citizens assumed unacceptable levels of risk with respect to their lifestyle in retirement. However, the availability of products and tools for financial planning has radically transformed the management of this risk. Deferring consumption to accumulate appropriate savings is an individual responsibility that can be managed in a wide variety of ways. Some may defer the creation and funding of formal retirement savings to direct more available cash into increasing equity in appreciating residential real estate, others into businesses, still others in continuing advanced and/or specialized education. All of these represent reasonable approaches to wealth accumulation that may or may not be the optimal strategy in the circumstances of the particular individual, but it is in any event their choice to make.

No one can deny that a portion of the challenge to retirement planning for lower income Canadians is their inability to defer any portion of their earnings away from current spending needs for the necessities of life. Unfortunately, the proposed ORPP does not purport to redistribute funds among taxpayers to augment retirement savings, but merely redirect amounts from employers and employees that we can and should assume would otherwise have been paid as current period wages. Policy solutions to raise the level of earnings paid to Canadians to meet not only current needs but also permit a modest amount of wealth accumulation are urgently needed, but that is not the ORPP. Similarly, lower income-earning Canadians may be handicapped by the unavailability of the low cost, highly skilled discretionary fund managers that can be accessed by high net worth investors. The opportunity for Canadians to voluntarily direct a portion of their earnings into the CPP (even by source deduction) would seem an appropriate public policy response to this inequity, but, once again, that is not the ORPP.

The progress of modern capitalist democracies has been marked by a relentless and in most cases prudent expansion of the social safety net. We have not yet run out of devastating and random risks borne by our fellow citizens that can be socialized. Perhaps an ambitious national Pharmacare program is a more worthy complement to the success of our healthcare system than an expanded Government-mandated retirement savings program.

Contact Us

Visit us

11 King Street West, Suite 1600
Toronto, Ontario M5H 4C7

Get in touch

call +1 (416) 309-7557
email info@taoasset.ca

Follow us

Our Location