Austerity isn’t for everyone

Posted on February 22, 2012 in Governance Debates

Source: — Authors: – business
February 17, 2012.    By Susan Riley, The Ottawa Citizen

Is anyone else getting tired of being lectured about austerity by wealthy consultants in expensive suits who charge $1,500 a day for their advice and have comfortable government pensions, besides?

And do we really need another warning about saving for old age — instead of frittering away money on escalating tuition for our children; or scrambling to compensate for unexpected job loss, or medical expenses — from disapproving cabinet ministers with fat salaries and fatter pensions?

Notice how these apostles of austerity rarely want to impose sacrifices on their fellow HNW (high-net-worth) individuals in the drive to restore fiscal sanity. They talk about fairness, but there is always an excuse for not halting corporate tax cuts, for not eliminating costly, quirky tax credits for people who don’t need them. And their zeal for slashing redundant public service jobs and frivolous spending always seems to exclude their pet projects. (The Office for Religious Freedom, anyone? Those problematic F-35s?)

This week there was an all-party, subterranean revolt led by Conservative MPs against Prime Minister Stephen Harper’s plan to cut their office and travel budgets by 10 per cent. Fifty-two free flights a year, instead of 64? Ouch. No more business class? Unthinkable. Trim office budgets? Impossible.

Protests aside, there is talk of a continued freeze on MP salaries at $157,731 and renewed foreboding about those gold-plated pensions. We share their pain. Old Age Security is suddenly vulnerable, private pension plans are shrinking, RRSPs are earning nothing, and now this: MPs may be forced to pay more than $1 for every $23 taxpayer contribution to their plan as happens now. Heartless.

Yet all MPs will probably be shamed, or forced, into taking some kind of haircut in the upcoming federal budget. But before we organize a fundraiser, remember they tend to treat themselves gently — a little trim here, a slight adjustment there. Unlike low-net-worth individuals, also known as the poor, they’ll hardly feel a thing.

In any case, it isn’t politicians but school librarians who are dragging the country — well, Ontario — down the debt hole. That, apparently, is why Don Drummond, the former bank economist and federal finance department bigwig, proposed this week that the Liberal government start trimming the number of non-teaching staff at Ontario schools, including ever-disposable librarians.

It was one of 362 recommendations — the premier can’t say he didn’t get his money’s worth — aimed at saving the struggling province from ruin. Drummond also called for the elimination of all-day kindergarten, for ending a 30-per-cent tuition rebate and for cutting school supplies by 25 per cent.

To be fair, he had good (if not novel) ideas, too: more home-based care to keep the elderly out of hospital, more reliance on nurse practitioners, shutting down duelling casinos, freezing doctor salaries, and linking drug costs to income, rather than age. His laudable goal: to force efficiency on a recalcitrant health system.

But he dismissed eliminating a promised drop in Ontario business taxes, even though the province is, apparently, on the edge of the abyss. Such talk “misses the point,” Drummond said. It would reduce Ontario’s expected $30-billion deficit in 2017-’18 by “only” $800 million. Trifling.

Oddly, the federal government takes the opposite approach when it comes to Old Age Security: no saving is too small. It will soon propose moving the eligibility age from 65 to 67, phased in over time. Aside from hurting the most vulnerable seniors, experts say eventual savings, as a percentage of GDP, will be slight.

Maybe they should call their bill Restoring Senior Poverty.

Meanwhile, there is no talk of trimming other pension plans — especially the RRSP, but also the tax-free savings account — that benefit those with ample money to save. Fewer than one-third of Canadians contribute to RRSPs, and a tiny number make the maximum contribution of $22,000 a year. But, by some estimates, RRSP breaks for the richest Canadians cost the treasury $12 billion in 2010.

The issues differ for different levels of government and different parties hold power across the country. But the austerity refrain is the same: protect the rich, hit the middle class and leave the poor for later.

This is not an argument against frugality, or in defence of sacred cows. The sacred cows are able to defend themselves. But it is an illustration of what can happen when political leaders, and their advisers, live in a sheltered world where seniors golf in Florida all winter, families waste money on snowmobiles instead of saving for their golden years, and people are eager to work past 67 because they have absorbing, well-paid jobs.

They forget — or don’t care — that most Canadians don’t live there.

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