Indebted to nanny state for life

You may have noticed that your CPP contributions went up this year.  If you’re one of the fortunate ones making over $55,000 a year, you just got a boost to your retirement fund. That “boost” will continue to grow next year, and the next, and the next until 2023.  

Of course you’ll have less to live on today. That’s kind of the way savings work. You have to put off today for what you want tomorrow – even if there’s a small possibility you might be dead.  

Not to be overly morbid, but if you fail to live into your 60s, you’re not going to see that CPP money and neither will your children (only your spouse/partner is eligible, up to a maximum).  

Now if the fear of early death is the reason you choose not to save for retirement, you must be incredibly short-sighted or engage in high-risk behaviour like skydiving to work every day. 

In all likelihood, you’ll need even more than the CPP and Old Age Security you’ll be getting from government. You’ll need some of your own savings. That’s the hard part, where self-discipline comes into play. 

We can complain all we want about the government making decisions for us when it comes to retirement, but the fact is, most of us need a little help in our finances. 

I still can’t quite get my head around this, but Canadian households owe $1.78 for every dollar earned as income. That’s comparable to American debt before the Great Recession. Total principal and interest payments now amount to 15% of Canadians’ disposable income. That’s the same percentage we’re advised to set aside for retirement.  

I can understand that housing prices play a role in this. And interest rates are also historically low, making borrowing less costly. But this is still a heck of a lot of debt. And when you consider a good portion is credit card debt, I start to feel a tightening fist form deep in my chest. 

Trying to save the recommended 15% of your salary for retirement is a monumental task, but it's even harder when you’re paying off loans. I get it when Millennials complain about falling behind. Now to be sure, everyone at that age feels like they’re behind. There’s a natural progression as you get older to become better off. But what if you don’t get the secure job that results in pay increases every few years? What if you don’t have a work pension plan? What if you develop a health issue? 

These are common scenarios, and they make the CPP increases all the more relevant. As humans, we need a little nudge from our government, that supportive parental push to get us to do the right thing. 

Call it the nanny state if you want, but nannies take a load off families. Not only do we not have to worry about what kind of investment to choose and what kind of risks to take – we can rest assured that we’ll have at least something government guaranteed. The CPP now aims to cover a third of your retirement income. 

 But how much more you’ll need is a matter of debate. Investment gurus suggest you’ll spend 70% of your current annual income in retirement, but some say this is likely too high. As we age, after all, we tend to buy and do less. By the time you’re 85, for example, you'll likely be driving the same Mustang you bought at 65 (although working the clutch starts to get tricky).  

Is this a reason to sit back and spend like there’s no tomorrow?  

All I can say is, it’s your life. And yes, even the ultra-rich enjoy working into their 80s. 

But at least they have a choice.

The left has heft; this and other post-election analysis

The election results are in, and I can’t resist a little post-election analysis. So here it goes... 

It might as well be a majority. The Liberals don’t have to change their policies drastically for the NDP to prop up their minority government. The NDP is broke and can’t possibly want to fight another expensive election soon. This is the first time the NDP has held the balance of power since the 1970s, and Jagmeet Singh may have more influence than he'll ever get with 24 seats. If Justin Trudeau wants it, this government could last a full four years. 

Trudeau likes our electoral system for a reason. He won 36 more seats with fewer votes than Andrew Scheer’s Conservatives. Just as the U.S. Electoral College benefited Republicans in 2016 (Trump also lost the popular vote), the first-past-the-post system in Canada benefited the Liberals. If it keeps going like this, the Conservatives may want to join up with the Greens to advocate for electoral reform. 

The left has heft. Even though the Liberals won a dismal 33% of the popular vote, the progressive parties together won 55% of the vote (over 60% if you include the Bloc Québécois). These voters are quite fluid, moving from one party to another depending on the leader. It’s hard to believe, but only eight years ago the majority of Quebecers were voting NDP. 

The West may want out. Expect a lot of resentment coming from Alberta and Saskatchewan, where only one non-Conservative MP was elected. Alberta Premier Jason Kenney, if he wasn’t already, will become Trudeau’s unofficial opposition. Don’t expect Trudeau to make any friends in Alberta unless a pipeline gets built. 

Quebec wants in. They want more generous social spending, they want more autonomy, and they want action on climate change. The Bloc crushed the NDP and ruined the Liberals’ chance of a majority because the Bloc's leader most aptly defended those interests. Don’t expect Trudeau to make any friends in Quebec if a pipeline gets built. 

The carbon tax is here to stay. For any party to make political inroads in the future, they need an effective climate change plan, particularly to win in B.C., Ontario and Quebec. Saskatchewan and Alberta may even come on board someday, especially if a pipeline gets built (am I over-emphasizing the importance of a pipeline?) 

Andrew Scheer may last a year. If he’s lucky. His campaign baffled me, running on Stephen Harper’s policies and the hope that the Liberals would implode. The Liberals nearly did implode, but Scheer had to fill that vacuum of disillusionment with a bold vision of his own. He had one novel idea: to cut personal income taxes (by the way, the Liberals had the same idea). This wasn’t enough to defeat an incumbent.

The Greens may eventually overtake the NDP. Depending on who they select as their next leader, should Elizabeth May retire, the Greens have the most credibility on climate change – an issue that will continue to grow over the next decade. The NDP, traditionally the pro-environment party, could be squeezed out if a stronger Green leader arises. I’ve always liked May for her authenticity, but I believe she has an electoral ceiling, and this election she may have hit it. 

As Jerry Seinfeld so wisely recommended, always leave on a high note.

My election prediction (with qualifiers)

There’s a reason why respected writers don’t predict election results. If they’re wrong, their credibility takes a hit. 

Fortunately, I have very little credibility. As we all know, Thomas Mulcair is not our prime minister and Hillary Clinton is not the president of the United States (if you needed a reminder). So here it goes... 

I’ll base my federal election prediction not on polling or gut instincts, but on some key factors that have been identified in predicting presidential elections in the United States. I believe most of them also apply to Canada. 

Allan Lichtman, an American historian, has developed a seemingly fail-safe method to determine who will win the White House since the 1990s. He accurately predicted the loss of Al Gore to George W. Bush in 2000 and the victory of Donald Trump in 2016.  

Lichtman bases his predictions on 13 factors, of which I’ll focus on a few to predict what will happen tomorrow.

First, there’s incumbency. Justin Trudeau is the incumbent and typically, after four years, the electorate is not ready to boot out the party in power. Particularly at the federal level, this is rare. One has to look back to the 1930s when the Conservatives under R.B. Bennett lasted only one term (thanks to the Depression) and in 1979, when the Conservatives under Joe Clark lasted less than a year (an anomaly in an election where Clark failed to win the popular vote). But as for the Liberal Party, a one-term government occurred only once in the 1870s. Advantage, Trudeau. 

Lichtman also takes into account the charisma of the incumbent versus the challenger - in this case, Andrew Scheer. Now as much as we hate him dressing up in costumes, on the charisma trait, I'd have to say that Trudeau defeats Scheer in a landslide. Scheer is more, shall we say, measured.

Next, the economy. While the economy is largely out of the control of any government, it plays a big role in whether a leader retains power. The Canadian economy, for the most part, is still moving forward in 2019, with the most jobs created in a nine-month period since 2002. This also favours Trudeau. 

Another factor, which I found interesting, is whether the incumbent has affected major changes in national policy. If he or she hasn’t, it’s a strike against them. In the case of Trudeau, major policy changes include the legalization of marijuana, the introduction of the carbon tax, and a change in refugee policy. Whether you agree with them or not, based on Lichtman’s model, they benefit Trudeau. 

Social unrest and foreign/military failures are additional factors. While there have been spats with foreign countries (the U.S. and Saudi Arabia, for instance), I would argue they've been relatively minor and don’t hurt Trudeau’s re-election prospects. 

Finally, there’s the scandal factor. This is a big one, the one factor that hurts Trudeau’s chances. It’s the same factor, says Lichtman, that could tip the scales against Trump in 2020. In Trudeau’s case, the SNC-Lavalin affair qualifies as a scandal. And as we’ve seen in the polling, it damaged his brand.

But this alone has not ended his chances of winning re-election. Lichtman says an incumbent must fail on at least six of the thirteen factors. As honestly as I can evaluate, Trudeau fails on only one. 

Hence my prediction (drum roll, please): Trudeau wins re-election. (I know, I'm really sticking my neck out here.)

This isn’t a commentary on whether Trudeau has been good or bad for the country, it’s simply an attempt to use a proven model. What it can’t take into account, however, is the Canadian Parliamentary system that has third, fourth, fifth and sixth(!) parties, and the potential for minority governments.  

Current polling suggests Trudeau may win a minority government. Polls also suggested Hillary Clinton would be the next president of the United States (if you needed a reminder).

My credibility may take another hit....