EP 26 ARMINE

The podcast discusses the recent news that the Premier of Alberta, Danielle Smith, is considering opting out of the Canada Pension Plan. The decision has caused a swift reaction from the federal government. The host interviews economist Armine Yelvitsian, who believes that the move may be politically motivated and a way for Alberta to score points against the federal government. The main argument for opting out is that Albertans are paying too much into the plan and could pay less if they leave. However, the numbers and feasibility of this claim are questionable. The process of opting out would be lengthy and require the agreement of seven out of ten provinces. The host and guest also discuss the political implications of this move and the potential allies Alberta may have. Overall, the decision to opt out of the Canada Pension Plan is seen as a political game that may deepen the divide between liberals and conservatives. welcome to the bill kelly podcast critical discussions in critical times here's your host bill kelly and this is the bill kelly podcast critical discussions for critical times i'm your host bill kelly good to have you with us here today who would have thought that when danielle smith became the premier of alberta that she and and the federal government might start butting heads on issues I mean there was even a a photograph of them shaking hands my dear the daggers in their eyes I think probably told the story that was precursor to what we're going through right now well the bombshell out of alberta these days of course is the fact that the premier smith is talking about opting out of the canada pension plan which is as you might have expected has created a swift reaction from the federal government she says she's got a business case for it as a matter of fact she's got what they call an independent group that are actually having town hall meetings about this we're going to talk about that in just a second and a lot more about this whole issue with our guest Armine Yelvitsian well Canadian economist has been on the radio show many times CBC describes her as one of Canada's leading progressive economists senior economist with the Progressive Canada Center for Policy Alternatives you may remember the first time I saw Armine was when she was guesting on the Lang and O'Leary exchange back in the old CBC days what happened to those guys I don't know but anyway it's a pleasure to have her back on our podcast here today Armine thank you so much for the time today my great pleasure to be with you Bill you're always a great yak well it's a lot of fun talking about something like this this is a serious issue not to be dismissed easily I guess we sort of saw this coming and I'm referencing the op-ed piece that you had in the Toronto Star just a couple of days ago this is not a new idea from Albertans as you mentioned in the piece Jason Kennedy and other people have been talking about this for quite some time but we're surprised that they've decided to kind of fast track this now I think that's a great question and I have to ask myself why they're doing what they're doing when they're doing it and I think it must have something to do with scoring political points on other issues like the carbon tax like just going after the feds is a great national sport or provincial sport in Alberta and has been since the 1930s and there is a genuine hate on for liberals in Alberta that you know goes back a few generations but we really hadn't seen the urgency to cleave Alberta out of the CPP because in the last week of the provincial campaign Danielle Smith said nobody was going to touch public pensions in Alberta even though she had just been elected leader five months before a bit more than five months before in October so this was at the end of May she said this and in October she had been elected leader at the same AGM of the United Conservative Party that endorsed the policy to move away from the CPP so the timing is seems to be more political than anything else given that she could have chosen to stick to her guns at the end of the election campaign I never believe anybody in the last week of an election campaign will say and do anything I guess to get try to get over that hump I guess and she certainly has done that the main thrust of her argument seems to be about the cost and the return on the investment as we pay into the plan and as you mentioned given the political climate in Alberta especially their views on not just any federal government but a Trudeau federal government all you have to say is they're screwing us they're taking more money from us than they should and boy that just that sets off the bomb doesn't it? A hundred percent and that is the main claim you are paying too much and should we you know leave the CPP you will pay less which has got an eerie echo to it in my ears it kind of rings like Brexit 2.0 which was literally what people were told for years of disinformation and this will go on for years you pointed out that they have an engagement process that's in place right now with Jim Denning who used to be a past finance minister there leading this supposed engagement process they had their first meeting yesterday it will go on for years the referendum legislation is about to be passed there is no fixed date in it but we are looking at years and years of this process because even once the referendum is held should they should Albertans be convinced like the people in Brexit were convinced to vote leave despite for years leaning in the side of remain should that happen that isn't the end of the story then seven out of ten provinces representing seventy percent of the population of Canada also have to agree to whatever term that the divorce takes place in and we've never seen this happen before that's a higher constitution that's a higher bar than changing the Canadian constitution actually yeah you gotta figure if they were to go that far that's a big if it's a stage as you mentioned in the piece who would the allies be you would think Scott Moe because he's got a a real problem with the federal government with Trudeau now and they've tried to push that Doug Ford of course tried to take the federal government to court well he did and he lost so I don't know that they have the numbers for it which is as you say probably not even consequential to them right now because they know this is going to take a long time but I found it interesting I was reading the reporting on the meeting from last night and Denning of course is the chair of this committee and I think it was a CBC report that basically said of all the people that called in if you agreed with it they kinda said yeah okay thanks for your call I mean okay if you disagreed with it they debated the caller yeah so this is not an independent inquiry they're not just there to listen they're trying to sell this aren't they oh 100 percent I mean I was trying to figure out how much do the people that are in charge of this process make in terms of public pension I found out everything I want to know about federal public servants and elected officials and what their pensions could be which as you can imagine are pretty rich in Ontario in 1996 Mike Harris ended public pensions for elected officials and the story is as clear as mud in Alberta about whether they get a pension or not but I can tell you that in 2020 sorry in 2021-22 fiscal year the last year for which we have a report for Alberta Jim Denning got over $142,000 as a former MLA so is he getting a pension isn't he getting a pension unclear to me what that amount of money is for it isn't described as a pension but it is a payment to a former MLA and just to put that in context the maximum you can get from CPP wherever you live in Canada except for Quebec that's a slightly different story the maximum you can get is just over $1,300 if you retire at the age of 65 and that's not even $16,000 over the course of an entire year but the average person only collects $777 a month which is less than $10,000 so here are these people that really don't need CPP to work deciding how CPP is going to work and it's problematic because in Alberta so many people commute to Alberta to do the job and Alberta employers especially for the oil and gas sector really need these people to commute from outside the province they don't have enough workers and so those commuters it's unclear when you come in you pay in but when you leave do you get out we don't know what the terms of portability are we don't know what they're going to be proposing it's actually one of the most opaque processes it really is just a political game now that I think is about like the official opposition is the provincial premiers the ones that you mentioned Scott Moe Doug Ford at some level sometimes the Quebec premier Legault is part of the resistance as it was called by McLean's a few years ago sometimes it's not doesn't include Legault but certainly the western provinces that are that are outside of BC that are conservative are really have deep antipathy to the federal government in all forms and I think this is a ploy to score political points to really kind of deepen the divide between liberals and conservatives at the federal level in particular just showing how this government is not a government for conservative leaning electors and maybe strengthen the hand of polio to get elected yeah I want to talk about that in a second but there's a piece here that I found fascinating in your in your op-ed about how they crafted this whole idea and I guess basically I sat around the table I said okay what what what can we say to to get people's attention when you well that's you're going to pay less and you're going to get more out of it I mean that's that's the easiest sell job around but as you mentioned they seem to say okay that's what we want now let's craft some numbers to make that look feasible and and as as you point out the numbers just don't jive here yeah they're they're demanding 53 percent of the assets of the CPP they're saying they're they're projected assets in 2027 because they recognize it's going to take years to get there but they're projecting that that will be 334 billion dollars that the rest of Canada that pays into the pension fund will say sure we'll give you over half of our assets and the only actuarial logic that underlies that you are paying too much is that the Alberta workforce is much younger than any place else in the country it is the youngest population of any place other than the territories in Canada but you know population aging doesn't skip over geography it isn't like some it isn't the Alberta advantage it's just partly a factor of all these commuters coming into Alberta but also that the population does tend to have had a higher birth rate for a while so what we are looking at and is definitely something about if they pay less now or if actually their argument isn't so much that you are paying too much it's that you're getting too little out of it which is a function of demographics of course you're going to be paying more than drawing it out when you were younger that is the nature of contributing to a pension plan but uh you know the the chickens will come home to roost demographics doesn't skip over geography so we are looking at if they get away with all of this and who knows if they will or not if they do and they can't pay less now they are going to have to pay more later when they you know when their population starts to age which won't take very long I mean the comparison that might kind of raise people's eyebrows is that China right now is sweating bullets about its aging population the average age of its workforce is in its early 40s if China is sweating bullets we should be just tearing our hair out here in Canada if that was the result of the one child policy in the 1980s that meant you had fewer fewer workers coming into the labor market than exiting the labor market raising the average age well here we have it's totally a function of people moving in and out of Alberta so portability is important but also how much are you paying for what at what age can you collect if Alberta goes it alone they are going to have a much much greater variability in what people are paying in and what they're going to get out and that is the opposite of what you want a pension fund to do you want stability you want to know what you can count on when you retire through a public pension plan and supplement it in whatever way you can and you talked about you know the fact that you know okay the Chinese situation and the concern that they have and of course Alberta is referencing that but didn't we as a nation go through that about 20-25 years ago I mean yeah remember the discussion was it's going to be bankrupt you know yeah and they had did a lot of work on it but it seems to be stable and it's got it's got that that consistency that we need now but but we were we thought anyway on the edge of darkness you know not too many years ago yeah it was in the 1990s and we decided that we were underfunded grossly underfunded and we would have to raise our contribution rate because we weren't getting enough young people coming into the labor market that's you know again the result of decades of falling birth rates as women got more educated and had more reproductive control so that combination really became wildly clear that we were underfunded in the early 1990s there was a big resistance to pay more premiums on an ongoing basis right we pay just under 10 10 percent of our of our wages combined employer and employee but together we put aside about 10 percent of our wages in the form of CPP which is a lot of money but then we can count on thousands and thousands of dollars sometimes for 30-35 years after we retire so you need that money to be there but I want to say that when we went through that entire how much do we pay and how much do we get out should we be extending the age of retirement to 70 I don't know if you remember that was part of the thing you know you just pay people less which has got you know this generation wondering am I going to have to work till I drop dead will it be there for me I mean we do this once it once a generation we make fear fear and confusion that the overriding dynamic of the discussion but let's just say we fixed it then and one of the ways we fixed it was by raising contribution levels but also investing differently than we were investing those assets differently did you know that last year CPP ID the Canada pension plan investment board assets had the highest returns of any public pension assets anywhere in the world 10 annualized over a 10-year period it's you know it's bigger is better Alberta is 2.2 million contributors out of almost 20 million contributors and in their own province their rate of return is around seven percent over 10 years that three and a bit percent difference will mean you pay less in and get more out so their own logic kind of defies the math kind of fantastical math and again it's very redolent of the brexit uh false promises and fake math well if you repeat it often enough people will buy it exactly but I think one of the other advantages I get that they probably perceive here is it and I've noticed this in my experience because we'll talk about pensions etc on the radio show oftentimes a lot of people just don't get it they don't understand how this system works I remember one caller in particular stood up for me was under the impression this was like a savings account yeah I pay into a pay into it and that's going to sit there at age 65 I can start to draw out I said I said I said the money that comes out of your paycheck this week is gone the next day it's gone uh and they are investing it it's it's a it's a financial process but so it's going to be easy for the government to dazzle people with numbers here because most people don't know what the numbers are in the first place oh that's so true bill I couldn't agree with you more these whenever you talk about a story like this uh you know Freeland has said she is going to refute the 50 that Alberta is owed 53 percent of the asset and the person she's going to use to do it actually graduated uh from U of Alberta he's an actual he's an actuarial genius that works in Ottawa now but is from Alberta but you know the math doesn't matter it's the feelings that they can evoke because for example in Brexit the number one lie there were so many lies but the number one lie that people remembered is we pay 350 million pounds a week to the EU wouldn't that wouldn't that amount of money be better invested in the NHS two lies there um number one they didn't pay 350 million dollars net into the EU because the EU is constantly giving regional subsidies to various places that were really struggling in terms of the economy within the United Kingdom the difference was you'll love this they underestimated I mean they overestimated how much they gave to the EU by 53 percent I'm wondering if that's where the number came from instead of 350 million dollars a week it was 188 million dollars a week and instead of putting 350 million dollars a week into the NHS they put in a fraction of that and when you look at their budget statements now it's on the decline so like lies lies lies but repeat them enough and you can actually wear down people's resistance because it sounds like maybe that works so it isn't about actually the math it's about who you trust presenting them and how whipped up they get you emotionally to stand with them over an issue and the foundation of course is as you say Albertans generally at least in government anyway don't trust Ottawa they don't trust Justin Trudeau they don't trust Christy Freeland uh so in other words it's it's easy for her for Smith to say that's all BS that's not the way it is these are the real numbers and Albertans are going to cling to that because going to say yeah she's on our side Ottawa look what Ottawa's done to us over the last 50 years 100 percent but that is mostly true of older Albertans so younger Albertans come from elsewhere and younger Albertans are the ones that are really scared however older Albertans are more likely to vote in a referendum so this whole thing about the intergenerational consequences of lying and who actually gets riled up to vote and how the remain side or the leave side whips up interest enough to vote I mean don't forget for years in in the UK the Brexit issue the majority of people a slim majority over half but still over half of Brits were leaning in the direction of remain and it was only at the last minute that they got enough votes to tilt it over to 51.8 percent of the vote voted to leave and now if you were to ask them today polls are saying that less than a third of Brits think it was a good idea you know there's a lot of regret that they leaned that far in the leave direction so what we are talking about is politics we are not talking about facts we are not talking about economics we are talking about raw emotion and how that gets harnessed by whom for what end is what you have to pay attention to I can remember talking to a couple of profs from from over there was the day after the referendum they announced and and he says you know the wake-up call was I think it was the very next day when they announced the results Jeremy Corbyn says I just made all those numbers up that's not really going to happen and people must have like you know this is like coming you know the hangover the next day like oh my god what have we done you'd hate to see that Albertans are going to do this but is this part of a grander plan here I mean and I'm looking at what he's doing what Scott Moe is trying to do with his legislation which is running contrary to federal policies on so many issues it's happening in New Brunswick is there a concern here on your part that that this Canada that we have with hopefully a strong central government is I think there are people at play here and Diane Smith is probably one of them that are trying to turn this into 10 different governments and then we'll just you know basically the message from all of them to the federal government is just give us the money and we'll do whatever we damn well pleased with it we don't want any regulations we don't want any partnerships we run Alberta and just make keep the keep the dollars coming in and Scott Moe seems to have the same idea Doug Ford certainly seems to have the same idea and there's rumblings in BC right now are you concerned about what could be the deterioration of what we know as Canada without question I think we are in a very dark period globally there's this weird zeitgeist that's kind of everything seems everything that we used to know seems to be institutionally under attack I don't think it's a I don't think it's a coincidence I think there is there are a lot of vested interests as the global geopolitics change and spheres of influence change to destabilize uh places like the United States and Canada's not that far removed we we we're always late to the party whatever's happening in the United States but this this whole antipathy towards the federation has existed for a very long time oh yeah and has been really uh torqued in terms of emotion by conservative governments for decades uh I mean Mulroney lost the Meech Lake Accord but we got the Meech Lake Accord through the 1995 budget cuts so you know we we have got this idea of just send us the money and no strings attached uh was something that provinces have been asking for since after the second world war where they sent the money to finance the war effort and then wanted it back and when they wanted it back they didn't want to be told how to rebuild the country uh they wanted to do it their own way there's pluses and minuses to that kind of independence but we are interdependent or we will be absorbed by the United States and then you're right you see the corporations yeah but they see that example as you mentioned because the United States is well the the un-United States I guess they're a federation of 50 different governments and we and we saw that with the federal elections you know there is no federal election for president there are 50 elections in all the states and those states control all this I I get the feeling and I don't want to be one to start conspiracy theories here I mean uh but you know there are there are well provinces like Alberta even BC certainly Quebec have been grumblings about they want out of the federation and first of all logistically uh that's almost impossible because of the buy-in that would have to happen we know that plus the fact that the government's going to play hardball with them uh are they concocting this master plan here to say all right we don't need to get out uh we just are going to believe the federal government drive to the point where it becomes almost irrelevant uh it's going to gather federal taxes but we're going to do we're going to run our province and scott moe's going to run his province and we're just we're just going to be partners as opposed to participants in this democracy yeah it's hard to tell what direction this is first of all I say I don't think they're that smart that they're that forward thinking but it certainly seems or that they can drive it that far yeah but what they can do is support the election of a conservative prime minister and party and I think that's partly what this play is about from Alberta and I think where the resistance from scott moe from where the resistance from conservative do you remember the resistance cover on mclean's magazine right there are several uh conservative premiers who are in fact de facto more effective as an official opposition not rhetorically pierre poirier is very effective as the as the head of the party that is waiting in the wings to form the next government uh but in terms of actually thwarting the uh federal liberals uh it's the premiers that will take their money and then refuse to do the things that that money is supposed to buy and I think right now the fight is over the carbon tax and so doing anything to weaken the authority of the federal government including this it just is a kind of pylon what's the point of being part of a federation with this guy at the helm is the storyline and I don't know what they would do if put yes came in because he has not supported thus far alberta separating from the cpp you know what that means this isn't just an alberta story whether you got the math right or wrong as soon as alberta leaves the cpp the rest of us have to pay more into contributions or get less out so to get the buy-in from the seven provinces with 70 percent of the population would require those provinces to agree yeah our voters should have to pay more and get and or get less or work longer just so that you can claim a political victory it doesn't seem like it's in the cards but it is just so in keeping with this political moment which is anything federal stinks in these provinces and so we want out and it's just a way of reinforcing that we want out narrative that we have that that is taking place with the carbon tax that is you know it's just basically I don't know how soviet was going to play it if he forms the next government if he leads the next government whenever that takes place and that's what we're talking about is that window you know there will be a federal election at least by 2025 yeah and if alberta is successful in doing this thing they say what they want to do I don't know why they want to do it but if they're successful in doing this thing they want to do then polyam would have to carry the can on that right not that the feds own the cpp it is strictly a child of the provinces like ei right actually in ei the feds contribute more and for cpp the feds contribute in the form of oas old age security and guaranteed income security because if you will remember what we said at the top the average person pulls out 777 a month from the time they are age 65 this year in 2025 that's less than 10 000 a year you can't survive on that so you need the old age supplement and you need the gif and that's where the feds come in to put a floor under people so they are not living in poverty when they are elderly but the actual cpp bundle has not got a federal fingerprint on it but the tone from the top totally matters well it's going to be fascinating even as premier smith sees the reaction from her so-called allies uh you know scott bowe and doug ford and the like are they going to be okay with something like this it's actually going to be prohibitive to their people in their province well not only that 21 percent of albertans didn't like this proposal before the election before her election as leader and it's now dropped to below 20 percent i think it's like 18.7 percent it's not like her people want it either i don't know who wants it well who wants it are the people that want to really uh you know drama on the tub that says ottawa stinks yeah well you know we saw that in ontario didn't we when doug ford first got elected here and decided to take the federal government on about about carbon taxing and cap and trade and everything else the overwhelming majority of ontarians were comfortable with it until he decided to stick his nose in and cost us 30 million dollars in legal fees to find out that he was wrong and we were right uh boy we could do this all day i just love having you on the program to discuss these things i mean the op-ed piece kind of got yeah i got to get armeen on to talk about this since it's always refreshing to to get an objective uh perspective on these things and hopefully we can pick this conversation up as this story evolves thank you so much for having me on your podcast i really appreciate your insights and your questions so thank you so much armeen yell it dizzy and uh always a welcome guest anytime you want have a great day today take care and that's it for this edition of the bill kelly podcast thanks for listening by the way thanks for subscribing too as always we welcome your comments you can reach us at this is bill kelly at gmail.com uh the good the bad or the ugly what'd you like what you didn't like uh let us know what's going on until next time i'm bill kelly take care this podcast was brought to you by rebecca wizens and her team at wizens law rebecca wizens is a 20-time winner of the hamilton readers choice awards for their exceptional client care and legal 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