As a lifelong student of social assistance caseloads in Canada, I looked forward to The Rise and Fall of Social Assistance Use in Canada, 1969-2012 by Ron Kneebone and Katherine White. My interest became even more avid when I read that the authors had cited some my data to come to their conclusions.
The report is reasonably fair in its approach even if it does not mention or analyse the most important reasons why welfare caseloads have risen and fallen in Canada.
But that was before I read the news release supporting the report which comes to remarkably different conclusions than the report itself. Its chiding tone and speculative welfare baiting made me wonder if the real news release supporting the report was somehow mislaid or ‘separated at birth’.
I wondered if the drafters of the news release rolled the dice and bet that the media would cover the release and not the report itself. If they did, they guessed right.
The release insinuates that Ontario’s programs are more generous than other provinces especially in comparison to those in Quebec and speculates that policy missteps played a role in encouraging more people to go on welfare in Ontario. It goes on to highlight that Ontario’s caseloads are among the highest in the country.
So let’s start with the first question: are Ontario’s caseloads actually higher than in every other province? With almost 40% of Canada’s population, of course they are. Ontario is by far Canada’s largest province. Ontario also has the most children, the most seniors, the most cars, the most houses, malls and mailboxes. So what?
Simple arithmetic from the report takes us straight to the answer if we are prepared to compare apples to apples. We just have to keep in mind that Ontario’s population is 66% higher than Quebec’s. Ontario has 13.6 million residents. Quebec has 8.15 million.
Ontario’s social assistance caseload, (according to Table 2 of the report) shows that Ontario has exactly 66% more welfare recipients than Quebec (550,441 vs. 330,707). This means, on the face of things that Ontario’s rate of social assistance recipiency is the same as Quebec’s, not higher.
But that’s not the whole story. We need to remember that Employment Insurance is a large social insurance program that keeps those who have lost their jobs from going on welfare. EI rules in Quebec are less stringent than in Ontario.For example, Ontario has almost exactly the same number of EI recipients (152,000 in Ontario vs. 150,000 in Quebec). On a per capita basis, Quebec has more than a 60% higher rate of reliance on EI.
What this means is that Quebec’s overall rate of reliance on basic income security programs for the jobless is actually higher than in Ontario. So much for Ontario’s supposed plight in comparison to Quebec.
Looking further eastward, the news release reserves special congratulation for the Atlantic Provinces where it notes: “…social assistance usage is only half what it was just 15 years ago and currently sits below any level observed in those provinces since 1970. Kneebone and Wright are quoted as saying “Remarkably, the rate of social assistance use in Nova Scotia, New Brunswick and PEI is currently below that in Ontario”.
This is the point where I start to ask the question: What planet are we on? Is it not extremely well known that EI is a completely different program in Atlantic Canada and that Ontario is saddled with the toughest EI rules (both entry and duration in benefits) in Canada?
Hold on to your hats! The (per capita) percentage amounts by which EI active claims exceed Ontario’s in each of the four Atlantic Provinces are as follows: Newfoundland and Labrador: 447%; PEI: 348%; New Brunswick: 281%; and Nova Scotia: 166%.
I can only agree with Kneebone and Wright that it is remarkable that the rate of social assistance use is higher in Ontario than the Atlantic Provinces. Ontario would look like 1970 too if its residents had access to Atlantic EI benefits.
And that’s a cautionary tale respecting further cuts to EI in the provinces that have the more generous EI rules. Make Atlantic Canada live on a diet of Ontario’s EI rules and watch what happens. It won’t be pretty.
But there are other interesting things going on. It’s not just about ‘denominator neglect’ and different EI rules.
Children receiving social assistance are also an important part of this story. Delving deeper into the numbers, I became puzzled by the number of children in families that receive social assistance, especially in Ontario and Quebec.
Heading to government websites, I discovered that in December 2012, Quebec reported 103,000 children in families receiving social assistance. Interestingly Ontario reported 250,000 children in social assistance families. This (almost) 150% difference is way out of whack with the population differences between the two provinces.
On the face of it, Ontario’s number of children per social assistance recipient is 0.45 children per case and Quebec’s number is 0.31. Only two answers can account for the data discrepancy: either Ontario’s social assistance recipients have 46% more children than Quebec’s or Quebec has removed many more children from its statistics through its separate child benefit program. Maybe the difference is a result of universal child care. May be it’s Quebec’s low birth rate
Who knows? The one thing that we do know is that Quebec does not have far fewer children in receipt of social assistance due to policy missteps or greater generosity in Ontario.
All in all, Kneebone and White’s paper is still a useful addition to the literature on current and historical social assistance caseloads. It begins a new discussion that I have tried to start a hundred times.
But whoever wrote the news release appears to have little interest in this discussion or the facts. Their purpose is to peddle shopworn bromides about Ontario’s welfare program while using Kneebone and Wright as a foil.
I can’t say that it won’t work as welfare bashing is a potent force in this country and doesn’t like being confused by facts, analysis or arithmetic.
Still, we can hope that we are better than this.
February 22, 2014
(To be sung to the tune: City of New Orleans)
Riding on the ‘District of Scarborough’
Union Station, Monday morning rail
Thirteen cars, two thousand restless riders
Two Conductors; we don’t carry mail
All along the southbound odyssey – the train pulls out of Kennedy
Rolls past malls and condos made of steel
Tanker cars that have no name, freight yards back to work again
And megalots of high-end automobiles
Good morning, Toronto, how are you?
Say, don’t you know me? I’m your native son
I’m the train they call the ‘District of Scarborough’
I’ll be done 10 circuit trips when the day is done
Dealing transit plans with Toronto City Council
None agree – ain’t no one keeping score
As the paper war that freezes movin’ forward
Feels the wheels grinding ‘neath the floor
And daughters of long-time residents, sons of the ‘newly here’
Ride our fathers’ carpets made of steel
And mothers with their babes asleep rocking to the gentle beat
And the rhythm of the rails is all they feel
Good morning, Ontario, how are you?
Say, don’t you know me? I’m your native son
I’m the train they call the ‘District of Scarborough’
I’ll be done 10 circuit trips when the day is done
Sunset on the ‘District of Scarborough’
Changing trains again at Kennedy
Almost home – repeat again tomorrow
Through Rouge Hill’s darkness, there’s no guarantee
As Guildwood station closure seems – to fade into a bad dream
And Government still ain’t heard the news
Birchmount bike lanes gone again – the voters will please refrain
This borough’s got the ‘growing poverty blues’
Good night, Canada, how are you?
Say, don’t you know me? I’m your native son
I’m the train they call the ‘District of Scarborough’
I’ll be done 10 circuit trips when the day is done
With apologies to Steve Goodman, composer of the ‘City of New Orleans’ whose song is, as John Prine once noted – and I paraphrase here -the “best damned railroad song I ever heard”.
Perhaps the best version of the song was performed by Arlo Guthrie, son of Woody Guthrie.
One of the most instructive exercises we do with group members at Voices From the Street is to ask what would have helped them avoid the life path they’ve been on, lives mostly filled with pain and challenges and want, decades spent on the streets, in shelters or housing that is barely safer than a park bench.
This is after we’ve stressed the importance of each person taking responsibility for bad decisions, and/or bad actions; without that acknowledgement it’s difficult to move forward constructively, it’s part of being an adult to own up to mistakes.
Sometime later, we pose the important question of what society’s responsibility is: those teachers, ministers, police, parents, and agencies that are supposed to protect the innocent and vulnerable, where were they, what were they doing, at the critical time when lives were being broken, twisted, and stunted. We ask this not to excuse the individual, but to show that we are part of a system that has failed too many, and needs, though it doesn’t want, our direct input to do right.
The answers come with tears, rarely anger, mourning a life that could have been, should have been easier, rescues that might have happened, if our social services, our education system, our children’s aid offices were functioning as funders and the general public expect them to.
It is heartbreaking, children left to fathers, ‘uncles’ or step-fathers who beat or sexually abused them, going to schools where these earliest experiences leave them vulnerable to bullying by their peers and to predatory behavior from those who thrive on breaking trust, who pick up the scent of hurt and damage and salivate as if they were sitting down to a feast, a feast provided by those who turned away, who blamed the victim, who failed their duty to protect and defend the defenceless.
Gay children, children of color, poor children, children in the first throws of mental illness, doomed by prejudice, laziness, massive systems failure, those children blame themselves, of course they do, how could they not, when everyone they looked to, before giving up entirely, seems to blame them. They must be bad, deserving of each beating or failure or loss.
These are not the people profiled on agency or government websites, to show how well programs are doing. It would be instructive if they were. “Here is Jane Doe, who we might have helped if we’d been more responsive, more timely, more dedicated to our profession, she wouldn’t have been abandoned to bad men, addiction, prostitution, mental illness or prison. We failed Jane Doe, and we own that failure, and will ensure we correct our mistakes through revised policies, placing people with lived experience on our boards and staff, and most importantly through removing front line workers and executive directors who’ve grown too jaded or self-important to do their jobs. Honoring Jane Doe, all the Jane and John Doe’s, means accepting that they deserve better from us.”
We only catch a glimpse of culpability when the victim dies and an inquest results, nothing requires us to respond to the barely living. Our system routinely fails those most in need, and blames the failure on those they neglected.
Governments, unions, accrediting bodies, those who work in the systems that are so dysfunctional, all conspire to maintain the illusion that we have a strong social safety net, none of these sectors want tackle the bloated, inefficient, ineffective systems that serve only themselves, and those who are least damaged. No wonder ‘the poor will always be with us.’
Take a long look at the political structure of Toronto.
The reality is that the framework of the city where the mayor gets one vote of 44 will continue to spawn and nurture the Rob Fords of the world.
Ford wasn’t the first – Mayor Mel who brought in the army for the snow and welcomed the Hell’s Angels to the city was the first - and Ford won’t be the last.
Mayor Miller in his second term was a very angry man. Remember his one penny campaign to get a slice of the GST – the fist pounding and the explosive exhortations?
The problem is that the only type of candidate who appears able to get in now is someone who purports not to go to work for City Hall but to clean it up. I hope I am wrong
Under the structure of the City as set out in Provincial law, voting factions are hard to form and political parties are not allowed. Therefore, the nation’s largest city is constantly in a clinch where not much of anything important seems to get done. Transit, roads, the waterfront, the Island and its airport- you name it – simply flounder in a stew of profound directionlessness. While other cities get on with the job, digging traffic tunnels and cleaning their lakefronts, proposals and plans in Toronto seem forever to sit atop an ever changing House of Cards floating on a porridge of quicksand.
The angry crusader who states the obvious to cranky voters gets much publicity but with many entrants and splintered factions, the angriest of the lot obtains the needed notice to get elected as did Ford, Miller and Mayor Mel Lastman, the latter whose private sector nom de plume continues to be the “Bad Boy”.
(Now that ought to tell you something.)
On the other side of the equation, the angry crusader mentality in human form – the guy or gal who is going to mop things up or stop gravy trains – has to have absolute zero skills in getting along with fellow councillors – all with their own single vote – and need not have any idea as to how to form or maintain alliances. Negotiation skills, the people skills or any of the other soft skills you’d like to see in a mayor are neither required nor considered desirable.
With one vote out of 44, the public expectations of the position are then way out of line with the reality of what he or she can actually accomplish. That sends the crusader off on a course where he goes back to what he does best – ranting disruptively with the explosive and angry tirades that he feels got him to be mayor in the first place. After all, isn’t that what catapulted Ford into power in the first instance? The answer is yes.
Until the ‘powers that be’ can figure this out, I am afraid we are going to have many more angry, utterly independent and crusading outsiders winning the largest directly elected seat of government in Canada.
The Harris government put this structure in place in the late 1990’s and it was christened the ‘megacity’ which at the time, we all pronounced as one would pronounce the word ‘mendacity’.
It has not worked from the beginning and it won’t work in the future. So we all need to get used to it.
As I said, I hope I am wrong.
But just in case, reserve a slot on US late night TV for whomever gets the mayor’s chair in this city – Ford could just be the beginning!
I wrote the following short essay in October 2012 during one of the many media dustups concerning Conrad Black and his Order of Canada. Now he is out. This was the wrong thing to do. In October 2012, I thought the main problem was that other more sympathetic Order holders would get booted out. The main problem now is that many who should be invested in the Order will not be. Only time will prove me right or wrong but I really worry that the disinvestiture of Lord Black will be the bellwether that changes the criteria for the Order and for all the wrong reasons. I realize that this post will not win me many friends…. but read on and see what you think:
After following the debate closely, I do not believe that Conrad Black should be divested of the Order of Canada.
The temptation to remove from him from the Order is palpable. He is a convicted felon in the US. He renounced his Canadian citizenship. And now, he has written yet another tome where his self-serving weaknesses are bared for all to inspect. (This refers to his book: A matter of principle)
He is not a very likeable fellow when viewed from afar. His personal history reads like the prayer book in the church of bombast. His language is circumlocutory and tortuous. While the rest of us move from the dining room to the parlour, Mr. Black “repairs”. He is not the same as you and I.
Worse, he appears to think that he is better than us. This is clearly no plan to win a test of popularity.
Barry Switzer famously noted that “some people are born on third base and go through life thinking they hit a triple”. Lord Black was born on home plate and can show you a trophy room that celebrates his home runs.
But for all his many faults, his fall from grace and troubled past, should the Governor General be seduced into following the opinion of the moment and remove his signature award? The answer is no.
Unlike David Ahenekew who made grotesque and impossibly misguided comments concerning Jewish people, Mr. Black’s only remaining criminal convictions concern obstruction of justice for carrying boxes out of his own office and a single conviction for fraud. While we snicker and all believe that he was up to something far more nefarious, we must depend on the public record for the facts on which he must ultimately be judged. Mr. Ahenekew’s transgressions were far more hurtful and embarrassing and his Order of Canada was only lost when he refused to recant his absurd accusations.
We are then faced with the foibles of Allan Eagleson who relentlessly raided the savings and pensions of the hockey players whose retirement protection he championed. Like Black, he revelled in the spotlight while allegedly fleecing those who held his trust. The comparisons are difficult to differentiate. If Eagleson lost his membership in the Order, then why should not Mr. Black?
The answer is that Mr. Eagleson was convicted of relentlessly and knowingly fleecing those who trusted him and Mr. Black was not.
But perhaps more importantly, Mr. Black continues to do good things. Since 2000, he has written three books (now four) and a number of thoughtful articles on the failures of the American and Canadian prison system. His arguments are persuasive and are a breath of fresh air from a man with his credentials.
He wrote one book and several articles following his convictions, some of which were written while behind bars. And more to the point, many of his accomplishments, unlike Ahenekew’s and Eagleson’s, were not summarily unwound by the transgressions that now form the case for his removal.
But with all that said, not one of these reasons number among the most compelling reasons why he should not be removed from the Order.
The most important reason is that Mr. Black’s removal would set an unacceptably low bar for dispensing others from the highest honour Canada can bestow.
Can we imagine far off convictions of Canadian heroes protesting human rights violations being reason enough to remove them from Canada’s highest honour? What if they had immigrated to another country after attaining the honour?
Many émigrés “renounce” their Canadian citizenship and Conrad Black only did so because of an antiquated 1919 request by the Borden government to the British government to refrain from giving awards to Canadian citizens – in other words, a technicality.
Should then other members whose only sins were to leave Canada and be judged guilty of a crime be automatic candidates for expulsion from the Order?
We can only hope not.
If contested criminal convictions and leaving Canada for another country are used as the deal breakers to remove Black’s award, there may be well regarded members who would be reviewed for a similar fate waiting in the wings both now and in the future.
The simple reality is that most of us are calling for Black’s removal not on the grounds that he is a convict and someone who has supposedly turned his back on Canada. Instead we want him out because we don’t like his persona, his aloofness, his litigious nature, his seeming arrogance and the un-Canadian sense we get that he believes that he is better than the rest of us.
This is not good enough reason to cashier him or anyone else from the Order of Canada.
October 29, 2012
A woman I am helping by the name of Linda Chamberlain will be turning 65 in July 2014. I am helping her fill out her Old Age Security (OAS), Canada Pension Plan (CPP) and Guaranteed Income Supplement (GIS) applications. She has given me permission to talk about her situation.
Her income will go from about $700 a month from the Ontario Disability Support Program (ODSP) to about $1,400 a month from OAS, GIS and a little known program called the Guaranteed Annual Income System for the Aged (GAINS-A). That’s the good news.
Linda is eligible for $100 a month in CPP Retirement benefits but we did not apply for her CPP. Many community members have asked why we refrained from applying. My answer is that her CPP would be clawed back on a dollar for dollar basis and no one forces anyone to apply for CPP. She can wait until she is 70 if she wants.
Not many people realize that seniors with extremely low income have their CPP benefits clawed back at 100% if their CPP is less than $168 a month. The table that reveals this policy can be found on an obscure website provided by the Ontario Ministry of Finance. The table shows that the GAINS-A clawback is 50 cents on the dollar. It also shows that the GIS clawback is 50 cents on the dollar.
Fifty plus fifty equals one hundred. If Linda applies for CPP, her net income will go up by exactly zero – so there is no reason to apply. However, if Linda waits until she is 70, her CPP entitlement would go up by 42% because you get more if you wait to apply. Sadly, unless Linda works, she will still lose every cent of her CPP to clawbacks because her entitlement at age 70 of $142 a month would still not reach the $168 threshold where the 100% clawback changes to 50 cents.
But this is a wakeup call to very low income seniors and their advisors who routinely apply for CPP at 65. Persons with CPP entitlements equal to the $168 threshold (for a single person) would be much better off to wait until they turn 70 because their CPP entitlement would rise to $239 a month and the extra $71 would be clawed back at 50% instead of 100%.
You might say: “All that for an extra $35.50 a month when you turn 70?” My answer is that $35.50 for the rest of your life is a whole lot better that zero extra for the rest of your life.
This got me thinking of what would happen to Linda if she did go back into the paid workforce on turning 65. I often see elderly looking women working in fast food places especially when I travel outside of Toronto. Are they as badly off as Linda with her 100% clawback on income?
It turns out that they are not quite as badly off as Linda but their effective rate of taxation on earnings above $3,500 a year is still the highest of anyone working in Canada. And it just grows as they work more hours and start to get near full time work. Now who knew that?
A woman I know – let’s call her Doris – works at a fast food chain. She gets 32 hours a week at minimum wage. After 12weeks of work – around the second week of March– Doris has grossed $3,500.
At this income threshold, two things happen. The first is that Doris starts to pay into CPP at a rate of 4.95%. This new policy started on January 1, 2012. Before that, seniors taking on part time work after retirement did not have to pay into CPP. (Doris did not know that she could elect to stop paying into CPP by filling out a form: See: http://www.cra-arc.gc.ca/E/pbg/tf/cpt30/cpt30-13e.pdf)
The second is that her GIS starts to be clawed back at 50 cents on the dollar. The government of Canada website on this matter shows that the government has a sense of humour with the following headline:
“Government of Canada helping low-income seniors”
We are now at an effective tax rate of 54.95%. Now let’s add in Employment Insurance premiums for a type of insurance that she will likely never qualify. This amount is 1.88% and when added to 54.95%, the new effective tax rate is 56.83%. But Doris gets to deduct her CPP contribution of $671. and her EI contribution of $321. This brings her marginal effective tax rate down to 53.42%.
Doris also gets the Working Income Tax Benefit (WITB) but the amount she receives is just $115.25 for the whole year and Doris is in the phase out zone of the WITB which is 15%. This brings her marginal effective tax rate to 68.42%
But we are not done yet. Doris lives in rent geared to income housing. When her income goes up, her rent goes up. Although her rent goes up by 30 cents on each dollar earned, her clawbacks are such that the net effect is a 15% hike bringing Doris’s effective tax rate to 83.42%. Doris takes home 16 cents on the dollar on her income after about $13,000. After transit and other work expenses, Doris has a real net take home pay of about $4,500 a year (her first $3,500 + $1,000 or so after work expenses).
And let’s remember that the highest marginal effective tax rate for the well to do and millionaires in Canada is 46%. I wonder if they understand that when they order their coffee from Doris that her effective tax rate is over 37 percentage points higher than theirs.
The two people that work beside Doris in the fast food outlet with her same hours of work have an effective tax rate of 27% because at 32 hours a week at minimum wage, they pay income tax. Doris does not -but her clawbacks come from other places.
So there you have the answer to a question many Canadians ask:
‘Mirror mirror on the wall: who is the highest taxed of all?
Bet you didn’t know it was our poorest seniors.
js/January 21, 2014 – revised January 25, 2014 and February 2 and 4, 2014
When governments reflate an economy after a financial crisis, a market crash and a recession, we are supposed to get higher inflation and the values of reflated currencies are supposed to go down. Interest rates are supposed to go up. This is what many economists continue to tell us.
But none of this is happening – we are into the fifth year and still waiting. What’s happening?
I am going to try to provide a different answer to this question since economists don’t seem to be doing too good a job. They don’t seem to want to talk about money getting killed even though it is the missing piece of the puzzle. I don’t know why economists won’t talk about it but since I am not an economist, I am free to tell the story of how the murder of money got us to where we are today.
This is largely an American story. But it is in part a Canadian story because of the size and proximity of Canada to the US, the fact that the US is our closest trading partner and the fact that the US currency is the world’s reserve currency.
The story starts in the first years of the new millennium. Three gangs who were trying to make money in new ways rode into the economy and murdered a lot of money. They took an unbelievably large bag of money out behind the barn – amount unknown – shot it, set it ablaze and left it for dead. Five years later, it turns out that these gangs were not just too big to fail, they were also too big to jail. There seems to be no law protecting an economy from ‘moneycide’.
The way they did this is a matter of public record. The first gang sold mortgages to people they knew would not be able to pay them. The second created their own securities bundling these bad mortgages into something called collateralized debt obligations (CDO’s or funny money) and sold them for real money. A third gang insured this money through something called credit default swaps and tried to set fire to the CDO’s since that’s the only way they could collect on their insurance.
To make a long story short, when the whole thing blew up in 2008-09 causing what I call the ‘Great Vaporization’, there was a whole lot less money around. Why? Because no one would any longer use real money to buy funny money once they realized it was funny money, insurance policies wouldn’t pay off when arson was suspected and you can’t use a house as collateral to pay off a debt if the house is worth less than the money owed on it.
With that, there was no longer enough real money in town to run the economy. So the usual things happened: liquidity dried up, unemployment shot up, markets crashed, and GDP plummeted.
The US Federal Reserve reacted by doing the usual things one step at a time. First they moved interest rates to near zero but this time that was not enough. Too much money had been murdered (vaporized, set ablaze, or shot).
It was at this point that Federal Reserve detective Ben Bernanke rode into town and quickly discovered that a lot of money had been murdered. His biggest problem was that no one had done any accounting and he did not know how much had been killed off.
He reasoned that since hardly anyone had run away with the money (however much it was) and the economy and the nation was still working, he wondered if maybe he could settle things by replacing some of the murdered money with replacement money. What would be the problem with that?
Mr. Bernanke probably realized that it would create chaos if he simply printed money and rode it out into the streets in big wheelbarrows giving it out to people that happened to pass by. It was also politically difficult to simply send people checks (although the US did try that for a time).
So the US Federal Reserve made a decision to do something different and started to buy two trillion dollars in securities and paid for them
“…by crediting the bank accounts of the people who sold them to us (the fed). And those accounts at the banks showed up as reserves that the banks would hold with the Fed”
This reflation of the US economy is known as Quantitative Easing and has come in tranches popularly known as QE1, QE2 and slowing it down has come to be known as tapering or ‘the taper’.
With all this new money, liquidity problems were solved, money started to flow and everything started to get back on track.
Yet two problems still dogged detective Bernanke. He still didn’t know how much murdered money he had to replace. Two trillion was a lot but still he hadn’t replaced it all. He knew that because there was no inflation to speak of and the US dollar had not gone down. If he had replaced too much, inflation would have gone up and the value of the dollar would have deteriorated.
‘Wow’ he must have thought…. Two trillion and we still haven’t replaced it all.
Then another thing didn’t go quite as planned. With the replacement money in place, what was supposed to happen in theory was that governments and businesses would spend and consumers would save to pay off their mortgage and other debts.
Trouble was, the exact opposite began to happen. Governments cut back and businesses started to treat the new money in the same way as the money that got murdered.
In Canada, Governor of the Bank of Canada for a time and also our chief money detective, Mark Carney, called the money that got offered to businesses ‘dead money’ once he realized that businesses were not investing. What he meant was that even though it was real money, it might as well be dead.
From the point of view of the businesses that got offered the money, they reasoned that if money could get murdered before and the murderers got away with it, then it could happen again. Maybe it would happen in Europe or somewhere else. From Mr. Carney’s point of view, he gave governments and businesses low interest rates making it cheap to borrow and put cash on their balance sheets. Their job was to spend and invest it.
But business couldn’t see anything worth buying so they started to buy themselves up (through share repurchases of their own publicly traded stocks). They reasoned that the purpose of any publicly traded business is to ‘increase shareholder value’ so if you buy your own shares, there are fewer of them, they become scarcer and the price of the shares go up. When this happens a lot, you get a stock market rally. But the big problem with buying back one’s own shares as the best possible place to invest is that the practice is the equivalent of putting money under the company mattress. It’s not very productive and eventually not a good way to save.
All of this also has the added effect of creating huge pay packets for the people that run the companies creating enormous inequality which in turn causes Tea Parties and Occupy movements.
Governments also hunkered down and stopped spending. They reasoned that they are like ordinary families that have to balance their books. But families don’t create their own money nor do they issue bonds and if they tighten their belts, they don’t necessarily put a member of their family out of work.
But none of this mattered and the age of real austerity got going in earnest. The law of the instrument says that if a five year old boy is given a hammer, then everything he sees is a nail. Give some politicians and finance bureaucracies a pairs of scissors and everything they see is a cut.
But as luck would have it, just when the economy was set to back into recession again, the consumer came along and said “I’ll take that offer. I’ll borrow that money you’re offering and I will go out and spend it creating higher GDP and lower unemployment. And so they did and continue to do so. And housing prices came back (and went up) easing the pressure on mortgages and insurance.
But the economy is still fragile because there will come a day when the consumer is no longer able to borrow and will no longer be able to spend. This great reckoning following the Great Vaporization is near at hand ‘coming to an economy near you’ in part because Canadian consumers owe a$1.60 for every dollar they make. It will also happen soon because the US is getting to the finish line as it relates to fully replacing the money that was murdered. And of course, this explains why our dollar is going down.
To sum it all up, the story ‘reads’ like a western with a twist. Instead of robbing the bank and taking the money, the robbers shot and burned it. Like other people, economists watch westerns and expect the bank robbers to either get away with it or get caught. When neither happens – just like everyone else – they get confused. With the story of the murder and the subsequent Great Vaporization now told, we might not like it but everything starts to make sense.
JS/January 8, 2014
 Some early insurance policies were cashed in – John Paulson in the US redeemed a few.
 Ben Bernanke, (Outgoing) US Federal Reserve Chairman, The Federal Reserve and the Financial Crisis, Princeton University Press, 2013, p.105
On December 11, 2013, Canada Post announced a new ‘Five Point Plan” to return the corporation to profitability.
The goal here is clearly not to provide a good service or to move the mails. The clear goal is profitability as a means to the end of ensuring that Canada Post does not receive any tax money. That is what self-sustaining means as it applies to Canada Post.
Spokesperson for Canada Post Anick Losier noted:
“When we did our consultation, the one thing that was crystal clear is that Canadians don’t want to see a burden on their taxes.”
Well, as Aristotle once noted a couple of millennia ago (and I paraphrase): ‘What is attributable to the whole has no meaning’. No one anywhere wants a burden on their taxes and neither do I. So what?
You see, the post office, for the last 162 years has been a business that provides the public service of delivering the mail across the country for a standard rate. If it has to be a self-sustaining business in the sense that it would get no subsidy, it has to fail.
Let me repeat: it has to fail!
Private sector businesses already know this. That is why they get big government grants and tax breaks to grow and sustain their businesses. Recent examples abound: Cisco, Samsung, Caterpillar and Honda.
Why should the post office be any different?
We don’t shut down health care or pull tax grants and tax breaks from businesses because they aren’t self-sustaining. And the last time I checked, Canadians didn’t like THOSE tax burdens either.
But joking aside, the real point is that Canada Post still has a responsibility to deliver the mail, however expensive, both to and from far-flung places across the country.
What do you think tough-minded private sector CEOs would say to a responsibility like that if asked to run Canada Post at a profit? My guess is that they would quickly jettison the unprofitable routes or charge an arm and a leg for those services like the private carriers do.
But neither Canada’s government nor Canada Post is willing to dump their cross Canada delivery mandate nor let go of the myth that you can run a public service that is self-sustaining without government help.
The result is a horribly contorted mess of public responsibilities delivered under the guise of phony profitability in the service of a jaundiced interpretation of predictable consultation results.
But it was not always so. Let’s go back to the beginning of the modern postal service in Canada.
On November 24, 1852, the New York Times published an article titled “Cheap Postage in Canada”. Canada had reduced its postage rates drastically and had begun to produce its own postage stamps after the Canada Post Office had been “given up by the Imperial authorities.”
The prevailing expectation was that revenues would drop precipitously. But something strange and unanticipated began to happen:
“With all these reductions, it has been found that [the] 15,000 pounds appropriated [in the] last session of the legislature to meet the apprehended deficiency in the revenue, has more than covered it. The first quarter of the present fiscal year … exhibits still more favourable results of the cheap system. The increase of business is very marked.”
One of the longest lasting public policy innovations in Canada got off to a good beginning. The change was to allow any person in Canada to post a letter of a half-ounce or less to anyone else in Canada for a standard fee – 3 pence in 1851. The new policy replaced an almost incomprehensible system of charges that took great expertise to administer and which few understood.
Some 162 years later, a vestige of this postage policy is still in place but on life supports. Anyone living in Whitehorse can still send a standard letter to a friend in St. John’s for a low standard fee (63 cents + sales tax in 2013 – soon to move to a dollar). The same rate applies to someone mailing a letter to a friend across the street.
From many points of view, this long lasting public policy contains grave inequities. It costs much more to deliver a letter across the country than it does to mail one across the street. The subsidy to people in far-flung places is obviously higher than to those living closer to large post office hubs. Clearly, there is a case to abandon this 162 year old policy and align charges closer to real costs.
But the standard fee postal rate is a policy that helped build Canada. The Times article from 1852 tells us how:
“During the past fiscal year, 243 new Post Offices have been established. Post communication between Canada and the provinces of New Brunswick and Nova Scotia, by land route via Quebec and Temiscuator has with the cooperation of the latter provinces, been increased from twice to three times a week.”
The article noted that mail usage increased by more than 110% from 1851 to 1852. But the new cheaper postal rate was not implemented only in the name of simplicity:
“The Postmaster General gives it as his opinion that packet postage ought to be reduced; the pressing high rates pressing severely upon poor emigrants and others, at a time like this, when thousands of families are as it were, divided between the two continents …. in conclusion, the Postmaster General recommends a further reduction of postage and expresses his opinion that the financial condition and prospects of the Department at the close of another year, will be such as to warrant the Governor-General in recommending a penny rate.”
What is going on here? Canada implemented a simpler system that helped make the nation more productive, built our early communications network, and kept Canadians in touch with one another. It was less expensive, addressed poverty, and was more popular with the public. Was it a fluke?
The answer is no. Our system of roads, railways, airports, telecommunications, and our electrical grid had similar outcomes when they were first put in place. Things got less expensive and our living standards rose. Each of these segments of our modern infrastructure continues to distinguish modern Canada and other rich countries from developing countries that have poor utilities or lack modern infrastructure.
But it seems that we are now at the precipice of blowing it all up because of a mysterious craving for public utilities to fail in the cloak of a business model that must die from the wound from its own sword.
Only in Canada?
js/ Jan.1/2014 – Parts of this piece are excerpted from a 2011 paper found here: http://openpolicyontario.com/wordpress/wp-content/uploads/2012/02/Turn-Out-Lights-oct311.pdf
 Bret Evans, Canadian Stamp News, Home Delivery out, postal rates up at Canada Post, p1., December 31, 2013-January 13,2014
. “Cheap postage in Canada”, the New York Times, November 24, 1852
In the first decades of the twentieth century, social justice was in the air. The UK brought in Old Age Pensions in 1908. The first minimum wage laws were brought in by Massachusetts in 1912. BC and Manitoba adopted them in 1918. Ontario and three other Provinces followed suit in 1920.
Ontario is about to celebrate 100 years of workers’ compensation as it brought in the first Workers’ Compensation plan in 1914. Ontario announced its first widow’s pension in 1920
But one announcement in the USA was a real game-changer.
On January 5, 1914, Henry Ford called reporters to the Ford Plant in Dearborn Michigan to hear an important announcement.
“The Ford Motor Company, the greatest and most successful automobile manufacturing company in the world, will, on January 12, inaugurate the greatest revolution in the matter of rewards for its workers ever known in the industrial world.”
He explained the details: not only would the plant switch from two nine-hour shifts to three eight-hour ones, allowing it to run around the clock, but each man over 22 would receive the minimum wage of $5 a day, and men under 22 would qualify if they had dependants.
“The commonest labourer who sweeps the floor shall receive his $5 per day,” Ford told the reporters.
“We believe in making 20,000 men prosperous and contented rather than follow the plan of making a few slave drivers in our establishment millionaires.”
Henry Ford had, in effect, breathed life into the new social policy of the minimum wage.
Henry Ford was not, by any standard we would use today, a progressive man. He would go on to become an outspoken union buster. He was also solidly against the rights of women and an overt racist. His recruiting practices through a ‘Sociological Department’ were both patronizing and demeaning.
Yet his ground-breaking wage increase, which more than doubled the average payment of $2.34 a day, revealed a real interest in both equality and enterprise. Ford talked of topics such as social justice and fairness. He believed that “dying rich was a disgrace.” Ford also understood that paying his employees a living wage would make them more productive:
“Recognizing the human element in mass production, Ford knew that retaining more employees would lower costs, and that a happier work force would inevitably lead to greater productivity. The numbers bore him out. Between 1914 and 1916, the company’s profits doubled from $30 million to $60 million. “The payment of five dollars a day for an eight-hour day was one of the finest cost-cutting moves we ever made,” he later said.”
Ford’s 114% increase in base wages in 1914 is the rough equivalent of an increase of Ontario’s $10.25 minimum wage to $21.90 an hour.
One hundred year celebrations are usually big deals when people indulge grand dreams yet for most, a $21.90 an hour minimum wage is unthinkable.
But let’s not squelch grand dreams. Let’s remember that 100 years ago, the unthinkable was implemented.
js/29/12/2013 – mash up excerpted from Turn out the Lights:
. Byron Preiss Visual Publications, Inc. and Forbes Inc., Forbes greatest Business Stories of All Time, John Wiley & Sons, Inc., 1996 http://www.wiley.com/legacy/products/subject/business/forbes/ford.html