Just what we need: another national unity crisis

CHELSEA, QUE.—Just what we need: another national unity crisis So Alberta Premier Danielle Smith wants to exit the Canada Pension Plan and take more than half its assets with her. Away you go, Alberta—but first, there is the little matter of the greenhouse gas emissions emanating from your primary industry, and the costly damage they continue to cause every province and territory in the country. Pay that bill—maybe from your provincial oil revenues?—and then we’ll talk pensions. You might also want to return your share of CERB benefits and cover the huge loss Canadian taxpayers, at large, will absorb once the money-losing Trans Mountain Pipeline is complete. Admittedly, these are far-fetched rejoinders to Smith’s half-baked proposal. They come from the gut, not the brain. But, if the Alberta premier and her allies manifest such disregard—bordering on contempt—for the rest of the country, they should not be surprised if the rest of the country reacts emotionally rather than with an accountant’s cool dispatch. As for accountants (and economists and pension experts), nearly all disparage the Smith ploy—including Alberta-based economists. Albertans have contributed more than they receive from the CPP since it was formed in 1965 because that province has the second youngest population in the country, and fewer old people. It also has a larger proportion of high income earners, and far less unemployment thanks largely to the fossil fuels industry. Both factors affect overall pension payouts. Alberta is not being penalized, ripped off, or exploited by the slackers and seniors elsewhere in Canada. Every individual Canadian—except in Quebec, which has its own plan—pays the same premiums and is entitled to the same pension. So an Albertan does not pay more or receive less than an Ontarian in the same income and age bracket. The province, overall, gets proportionately less than it contributes because it is a younger, wealthier place—for now, at least. As to that enraging 53 per cent demand—from a province that represents about 12 per cent of the Canadian population—this calculation is based on a long-nourished sense of victimhood and a misrepresentation of how pensions work. If Ontario, for instance, applied the same formula and decided to withdraw from CPP, its claim, along with Alberta’s ($334-billion), would be more than the $575-billion fund is worth. Smith is untroubled by actuarial detail, however. She claims an Alberta Pension Plan would cost contributors less, pay higher premiums—even $5,000 or $10,000 bonuses—and, crucially for her and worryingly for Albertans, allow her appointees to direct the plan’s investments. And, any bets, it would direct them right into the province’s still-profitable oil and gas sector. How comfortable are Alberta seniors with that prospect? Is fossil fuel really the industry of the future? Not according to the International Energy Agency, which reported recently that global demand for fossil fuels will peak before the end of this decade, adding that no new coal, oil or gas projects are needed. And, even if an APP would pay richer benefits to those retiring or close to retirement over the next decade or two, what happens when the global energy sector completes the transition to green alternatives? The APP could be left with a portfolio of deteriorating assets while the rest of the world moves on. This is a future that Smith does not want to deal with—indeed, does not even publicly acknowledge. She fiercely insists that Alberta oil will continue to be a valuable asset into the distant future, and has even imposed a moratorium on the province’s burgeoning green energy sector allegedly to ensure its environmental viability, but really to slow its growth and its competitive advantage over oil. Meanwhile, by withdrawing from the CPP—even if Alberta were allotted a more reasonable 20 per cent of the assets—Smith would undermine a national program that is relatively well-managed and, as a consequence, would hurt pensioners in less wealthy provinces by forcing up their premiums and lowering their payouts. No wonder this plan will be widely seen as a slap in the face to ordinary Canadians—not just the Trudeau government, the focus of so much of Smith’s ire, but to regular pensioners in Nova Scotia, Ontario, the north and elsewhere whose contributions will increase as their benefits decline thanks to a cash grab by the premier of the country’s richest province. Not Smith’s problem, clearly, but some day, as demographics and economic fortunes change (and they do), it could be Albertans whose pensions shrink while the economies of Ontario and Quebec, strengthened by increasing investments in electric car technology and critical minerals, begin to draw younger workers and offer higher salaries. It may seem inconceivable now, but a future Alberta could need somebody to lean on. As to comparisons to Quebec, that province started its own provincial plan from scratch when the CPP launched in the mid-1960s. It didn’t demand start-up funding from other Canadians. Its provincial plan is mostly well-managed, but has a lower return (7.2 per cent) than the larger CPP (around 10 per cent), partly because larger pension funds tend to perform better. It also requires a parallel bureaucracy which Quebecers pay for though their taxes to no appreciable gain. Smith estimates her plan will cost $2-billion to implement initially and created thousands more government jobs, which isn’t exactly coherent with the conservative playbook. For these reasons and others—notably, a coolness within the province to the idea—Smith’s provincial plan may never see the light of day. It is up to the federal finance minister, for starters, to approve terms if a province wants to withdraw from the CPP. Pension experts predict years of court battles and procedural wrangling before any resolution. In the meantime, governments will change and so, too, will economic realities. Some believe the APP bid is only a negotiating tactic—another way for Smith to pressure “Ottawa” to drop the carbon tax and a proposed cap on oil sands emissions. But long-time observers of the premier know she has long yearned for a more autonomous Alberta with a provincial pension plan high on her to-do list. Rachel Notley’s provincial NDP is vigorously fighting the idea, sensing a winning issue. Smith, herself, appears to grasp how potentially unpopular it is, especially with older Albertans. In the recent election back in May, she declared “no one is touching anybody’s pension.” Not yet, she forgot to add. Of course, Smith was elected by Albertans and has every right to pursue her own platform. But the province is increasingly diverse, drawing residents from many other parts of the country and the world—in fact continuing to draw record levels of in-migration despite dire predictions for its future. These newer Albertans might have a less parochial view of their new home and less hostility towards Canada. Do they want to see their parents’ pensions in New Brunswick or Newfoundland diminished as a result of the Alberta government’s actions? What if they decide to retire to British Columbia or move back to Nova Scotia to care for aging parents? How would pension portability work, and would the CPP and QPP co-operate? Smith has appointed centrist Conservative Jim Dinning to run a public consultation, and is promising a potential referendum on the issue in there's sufficient support. This will buy her time, and undoubtedly sharpen divisions both within the province and without as the battle unfolds. Smith has made it clear that she owes her primary—if not only—allegiance to her province, and considers the federal government a nuisance, a threat, or a bit player. She will soon learn that hostility runs both ways. Susan Riley is a veteran political columnist who writes regularly for The Hill Times. The Hill Times

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Just what we need: another national unity crisis

If Alberta premier Danielle Smith manifests such disregard for the rest of the country, she shouldn't be surprised if the rest of Canada reacts emotionally rather than with an accountant’s cool dispatch.

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