What clever bastards these Ontario Liberals are:
But the premise, that by forcibly merging everyone’s savings into one big, government-sponsored fund, such waste can be avoided, does not necessarily follow. I’ve had a look at several years’ worth of annual reports from the Canada Pension Plan Investment Board (CPPIB), on which the ORPP is to be based (indeed, the government cites the plan as a fallback from its preferred position, of simply expanding the CPP). It was hard slogging: the figures on costs are buried in acres of print near the back. But the picture that emerges is unmistakable, and gives the lie to any claims of savings.
Andrew Coyne then spends the next few hundred words explaining that governments do not run things very efficiently. Perhaps he was under the impression that if this was explained one more time it would be grasped by the reader and the Wynne Government. Or perhaps he's just a glutton for mathematically induced punishment.
As Ayn Rand once observed: But there’s always a purpose in nonsense. Don’t bother to examine a folly--ask yourself only what it accomplishes.
Taking that advice to heart let's see what this bit of nonsense accomplishes.
I doubt even Kathleen Wynne is quite so deluded as to believe that an Ontario Pension Plan is going to be any more efficiently run than the federal version which hits its 50th anniversary next year. Or that either will run as efficiently as the private sector. As someone who has worked in financial services for more years than I care to remember, I can attest that it's hardly a bastion of competence and efficiency. It's a minor miracle that anything gets done on a daily basis.
In High School I had an older teacher who joked that when the market is up even pigs can fly. That's how it works on Bay Street and Wall Street. There are a lot of overpaid idiots and deadwood time servers who survive simply because they keep collecting their 50 basis points. Investors don't notice their being fleeced when they're making money, only when they're losing it. Again I say this from personal experience.
I am not, whatever my critics may insist, a cheerleader for the private sector. There's plenty of stupidity among the private profit seekers, even among those are aren't professional rent seekers. It's that government stupidity is almost always far greater than private stupidity. Large FP 500 companies waste untold billions on office politics and simple incompetence every year. This is why I loath the public sector. If the pin stripped pinheads on Bay Street can't get it right what makes you think the Wynnesters up the road at Queen's Park can?
If the private sector wastes a billion you can be sure the state will waste twice that on a good day.
This is a nonsense so obvious that even Liberals can understand it. So what does this nonsense accomplish? Or at least hope to accomplish? Private actors are utility maximiser. They want whatever combination of stuff and leisure meets their personal preferences. Politicians are power maximizer. The bid to establish a provincial pension plan is a bit for power. It's has an electoral aspect and coalition building aspect.
The electoral aspect is fairly straight forward. Large swathes of the electorate, believing that government would guarantee a comfortable retirement, failed to save properly. These aren't the wretched of the earth, they're typically middle class families who just had to have the bigger home and the three cars. The family that orders take out every other night. The type of people my mother used to shake her head at. One day, she would say, these people will not be able to buy themselves a slice of bread!
My mother never went to university and so never learned about the wonders of socialism. Unfortunately many middle class people did go to university, where instead of learning something useful or important, they learned that the world owes them a living. They have been packed into the cubicles of our fair dominion for the better part of two generations. Now they expect a government bail out. That's what the Ontario Pension Plan would amount to. Suckers like me bailing out spendthrift boomers.
Everybody loves free stuff! Except the people paying for it!
I have been under working assumption since I was teenager that the government was going to give me nothing, probably a bit less than nothing, when I reached the Golden Years. Assuming that retirement was even an option. But then again I was raised by paranoid peasants so this type of thinking comes naturally. Everybody is out to get you. That's paranoia in a free country. In a mixed economy heading toward a pension cliff it should be baseline thinking. Government is out to get you, that is if you bother working for a living.
So if the financial math is a bit off, the electoral math is about perfect. There are more Baby Boomers than Baby Busters, and the former vote far more than the latter, so you pander as appropriate. Yes you are screwing over the younger generation, but that's kind of been the Leftist Boomer motto since about 1963.
Now the Wynnesters are smarter and more evil than they seem. In addition to buying vote they're also buying the support of the unions. That might seem like a bit of a leap so I'll have to ask you to follow the bouncing ball on this one: The money confiscated into the Ontario Pension will be used to subsidize provincial government operations directly and indirectly.
No the sensible thing, as Andrew Coyne indicated in his piece, is to put everything into an ETF or index fund. But what fun would that be? No the story is likely to unfold along these lines:
Wynne and her minions will announce that the new pension plan will deliver higher than average returns. After all don't you deserve better than average? Doesn't everybody? So no boring old index funds for us! But while money is important, it isn't the only thing. No sir, it's important to be socially responsible. To invest in the community in a sustainable way. You wouldn't want your retirement money financing tobacco companies or gun makers would you? No you'd want your money building something! Building Ontario! But more than this, there's always more with the Liberal Party, you want to be safe with your investments!
So that's the pitch my fellow Ontarians! Higher than average returns placed in very safe and socially sustainable investments. It's Win-Win! Or more accurately a Wynne-Wynne!
A large portion of this Ontario Pension Plan will likely be invested in, wait for it, Ontario government bonds. The Grits are secretly terrified that the bond market vigilantes are, once interest rates start to raise, going to smash the province's credit rating to bits. Since the printing presses are not an option for a provincial government, trust me Bill Aberhart tried and failed on that one, the Wynnesters will instead use the force savings from the pension plan to finance their deficits cheaply.
Now the whole plan can't be placed in Ontario bonds, that would be too suspicious even for the dullards who vote in provincial elections. Instead some of it will be thrown, they'll use an environmentally friendly dart board, at the equity markets. Much of the rest, chasing higher than average returns, will be invested in the public-private sector partnerships. Building roads, power plants and whatever vaguely important thing crosses the power craven minds of our elected elites. Those partnerships will, of course, require union labour! Both private and public sector just to keep everybody happy. And so through means fair but mostly foul the Liberals will finance themselves another decade of power.
It's been said that the lottery is a tax on the stupid. Think of the proposed Ontario Pension Plan as a tax on those stupid enough to vote Liberal earlier this money. Unfortunately all of us will have to pay it.
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