Friday, April 27, 2012

Temporary Poverty isn't Poverty

A big class divide these days is between those who had family members who could help them and those who didn't. Lots of people who didn't get a lot of financial help from their families - they didn't, for example, borrow $20K from them - are unaware that the fact that family help was potentially available, whether or not they used much of it, always provided a little insurance policy for them, a little backstop. And of course it's the case that, generally, such families did help. A hundred bucks here, a car insurance payment there, an overnight loan covering the tuition, etc. Even if it doesn't add up to much overall it's the difference between treading water and drowning, between having to quit school and not.
This is me.  I paid for University on my own and voluntarily lived on my own while doing it.  But I did get a little help a couple times when my bank account was running low and never had to deal with a crisis point like choosing between food and rent, or tuition and rent, plus I had the luxury of a part time job that was quite flexible about time off to study, so I never had to work a shift the night before an exam or when a big assignment was due just to keep employed.

For awhile in my 20s I was very proud of this and looked down on college types who protested tuition hikes and complained about student debt upon graduation, but I'm sure I had it easier than many even if I wasn't living high on the hog and had to be pretty careful with money.  Knowing the Banks of Mom and Dad were available was a major psychological comfort. 

Also having to eat canned ravoli or mac & cheese on a tight budget for a couple years in university isn't the same as being poor:  You expect the poverty will end.   It might be considerably more bleak now but when I was in University (c2001) you had a pretty reasonable expecation of graduating to a decent job in short order.  The inconveniences and sacrifices were always temporary.  Also, there's usually no stigma in being short on funds while in college, everyone expects it and generally treats you according to the norms of the social class you're going to join when you graduate, rather than the one your current income might otherwise suggest.  I will always remember that I was turned down for a credit card while working full time at minimum wage for a year after I graduated high school (to save up for University).  Then, when in University and making significantly less, they were suddenly eager to give me one.

Thursday, April 26, 2012

How was Ayn Rand ever an acceptable figure to cite?

Republican House Budget Committee Chair Paul Ryan disavowing Ayn Rand strikes me as a very positive sign that the ideological ground has shifted.  Or maybe not, his quote is a bit hard to parse:
“I reject her philosophy,” Ryan says firmly. “It’s an atheist philosophy. It reduces human interactions down to mere contracts and it is antithetical to my worldview.
Now it could be that it is Rand's atheism that is causing Ryan to flee her, though the second part of that statement is a more general rejection of her worldview.  Further, Ryan's move seems likely to be in reaction to this letter signed by over 90 members of Georgetown University faculty criticising Ryan's budget from Catholic grounds (which isn't even the first time someone has embarassed Ryan with the discordance between Jesus' teachings and Rand's).  That letter does not mention Rand's atheism, though there is a reference to her "antagonism" to religion.  It makes sense for Ryan to cite the atheism angle first, since that evades the discussion about Rand's vision of economics.  But it's not like her atheism is news to anyone, it has always been something conservatives just conveniently ignored (which I don't actually mind, because it's frankly irrelevant to the content of her world view - plenty of "prosperity Gospel" Christians embrace an economic system that isn't so different from Objectivism and plenty of atheists reject Social Darwinism).  Her atheism is an awfully convenient excuse to forswear her though.

Really though, either way is progress.  The question of whether it is Rand's atheism or her philosophy of socipathy that is most responsible for her now becoming radioactive on the right is an important one, the deeper question is how she was ever an acceptable figure for elected politicians to cite approvingly?  It's not like Ryan is an aberration, the list of prominent Republicans in high office who have praised Rand is pretty long.  Never mind merely praising her or just having read her books, let's not forget former Federal Reserve Chair Alan Greenspan, who was actually part of Rand's little cult-of-personality of acolytes.  How did that ever happen?

Think of the reverse:  Try to find an elected or office holding Democrat who would even credit say, Chomsky or Marx as being influential on their thinking, never mind bragging that they made their staffs read their works.  Unlike Rand, Marx of course is a colossal figure in the intellectual history of the world, and anyone of any ideological persuasion is wise to at least be familiar with his ideas.  I won't even get into the ridiculous demonization of Saul Alinsky (and back to Greenspan, let's just ponder what would happen if Obama appointed a member of Alinsky's inner circle to some prominent post). 

If Rand really is being driven to the ash heap of bad ideas, it is none too soon, and while I'd prefer it be over the awful content and consequences of her ideas, I'll settle for it being over her atheism if it means Objectivism and everything it represents becomes an electoral millstone.  I'm sure it doesn't represent the actual death of her ideas among conservatives, but even having them feel uncomfortable using her name is progress.  At last we have a right edge to the bounds of acceptable thought among the powerful.   Rand is one hell of a far right edge, but before this it really wasn't clear there was a limit at all. 

Sunday, April 1, 2012

CPP is Completely Sustainable Too

While the cuts to OAS and GIS are my biggest objection to the budget, I want to take a moment to rebut the common belief among Canadians of my age group and younger that CPP "won't be there" for them when they retire.  That belief is a self-fullfilling prophecy because disingenuous neoliberal (try here for a half decent description if you're not sure about the term) politicians, mainly in the Conservative party (though lamentably some Liberals too) will use that to cut, privatize or otherwise end the program.  After all, their ideology doesn't like the idea of the government ensuring a basic floor for citizens anyway, and if we all believe the program is unsustainable, we won't raise a fuss for ending it.  Hell, if the belief really gets lodged deeply enough, we may thank them for "acting responsibly" by taking away our retirement security before it causing the impending doom we baselessly believe it will cause.

Here's what you need to know:  Every 3 years, the Chief Actuary of Canada publishes an Actuarial Report on the financial health of the CPP fund.  These reports follow the same sorts of actuarial methodologies that for-profit life insurance companies employ to confirm that they are charging appropriate rates for their life insurance customers.  Of course such reports require dealing with many unknowns about the future, but short of inventing a flux capacitor and pumping 1.21 gigawatts through it, this is the best anyone can do.

What The Report Says:

The latest report (the 25th) is from December 31, 2009, (well into the Great Recession/New Depression) and can be found here (sorry, PDF).  You're encouraged to read it, but let me jump to the conclusion, from page 12:
Thus, despite the projected substantial increase in benefits paid as a result of an aging population, the Plan is expected to be able to meet its obligations throughout the projection period and to remain financially sustainable over the long term.
(Emphasis added because this statement needs to be said over and over until people get it).   The "projection period" by the way is 75 years (p10), which means that by the best professional projection techniques available, CPP is believed to be healthy until 2084.  I'm 36, and I fully expect CPP to be there for me when I retire sometime between maybe 2036 and 2046.  Babies born today can rely on CPP being there.

Note as well the line about the increase in benefits paid due to the aging population.  I included that because things like the aging boomers, the rise in retirees to workers expected, or smaller family sizes are frequently cited by ordinary people in explaining why they "know" CPP won't survive.  The people running CPP know about these things too, and adjustments have been made over the years to guarantee the health of the program in the face of changing demographics.  Note above this is the 25th actuarial report, CPP's non-partisan officials have been checking into this for quite some time. 

How Credible is the Report?

I'm not an actuary so of course I won't offer a personal opinion on the techniques employed in writing these things.  Luckily, the authors take steps to get second opinions.  Here's what they did to assess the competency of the 25th report:
A panel of three independent Canadian actuaries, selected by the United Kingdom Government Actuary’s Department (GAD) through an arm’s length process, reviewed the Twenty-fifth Actuarial Report on the Canada Pension Plan. The external panel’s findings confirm that the work performed by the Office of the Chief Actuary (OCA) on the Report meets all professional standards of practice and statutory requirements, and states that the assumptions and methods used are appropriate and reasonable. 
I suppose if you're the kind of person who believes that 97%+ of the world's Climate Scientists are arrayed in a massive conspiracy to rig the science to keep their government research grant gravy river flowing, you might believe that Canada's actuaries are conspiring to hide evidence of CPP's imminent downfall from us, but really aside from rampant reality rejection, I don't see how you can do much better than this.

CPP is healthy.  Don't let anyone tell you differently, and if that person is a supposed expert (like some think tank analyst or a politician involved in the pension file) and they don't deal with the Actuarial Reports, you should recognize they are liars trying to con you out of your retirement safety.  By all means, save for retirement if you have the luxury of an income that supports doing so (yes, a "luxury":  half of Canadians live on less than $29,000 a year, which doesn't usually leave much room for RRSPs and TFSAs) but remember CPP is vital to providing a dignified to many Canadians and there's no sound economic reason to take that away from them.

CBC Posts a Funny April Fool's Joke: Flat Tax

Ha ha ha, good one CBC:

5 benefits of a flat-tax system, and why it still isn't likely in Canada

Graduated income tiers a disincentive to work, economist says

 I know you're laughing already, but wait, there's more:
For Niels Veldhuis, senior economist with the Fraser Institute, the argument for changing the tax system isn't about burdens but about productivity. He says a flat tax would increase the incentive for Canadians to work, earn more money and, in turn, invest that money back into the economy.
The current system of graduated rates takes a larger percentage of a person’s income the more money they make, and this is a disincentive for hard work, he says.
“You’re sending a signal to young, aggressive Canadians who want to take risks, who want to start businesses, who want to save and invest. And what you’re telling them is the more successful you become, the more and more we’re going to penalize you,” Veldhuis says.
See, Canada is chalk full of little John Galts, sitting idly in their own private Galt Gulches just waiting to unleash their productivity if only the big mean old government would stop punishing them for success (because Taxes aren't actually how we pay for civilization, no, they are actually a criminal penalty!) 

Now some silly people on the left will tell you that eliminating progressive taxation will starve government of revenue needed to maintain vital programs and services, but no, Mr. Fraser Economist will set you straight:
Unleashing that entrepreneurial spirit, so the argument goes, will create more investment, jobs and opportunities which will, in turn, increase government tax revenues.
See, cutting taxes will raise revenues!  Just like it did...well, Mr. Fraser doesn't say anywhere this has actually worked out, but the theory was proposed by a guy named Laffer so we know it's a great idea. 

Now I know we all want to rush out and tell our MPs to implement this fantastic idea on Canada, but we really should be prudent and check some references, just to cover our bases.  Tell us, where has this fantastic idea been tried?  It must be sweeping the world, because it all sounds so great!
A number of countries, including Russia, Czech Republic and Slovakia, have instituted single-rate systems over the past decade or so. 
I also hear that Ogdenville, North Haverbrook and Brockway love their new monorails.

For some actual worthwhile discussion on the radical flat tax experiments underway in various former Communist eastern eurpoean nations, see here, and here and here.  Quote from the last one:
The positive effects of the flat tax are at least ambiguous. There are no Laffer curve signals, a correlation proved between the fiscal relaxation through the flat tax and the increase in the budgetary revenues (Keen et al, 2006). Moreover, the budgetary revenues do not automatically get increased as a result of this measure. For example, in the case of Estonia, even under the terms of a high rate of economic growth, the share of the returns
from the direct taxes got decreased from 12% (in 1994) to 7.5% in 2008.
Also, in the case of Slovakia, there have been made estimates that the revenues from the income
taxes and from the taxes on profit were up to 1% lower than under the terms of not introducing the tax reform (Odor, 2007).
You'll also learn that Flat Tax countries also find it necessary to institute hefty 20% VAT (sales taxes) and keep substantial payroll taxes to fund their minimal social safety nets.