Globe editorial: Danielle Smith’s bad math, and even worse politics

Globe editorial: Danielle Smith’s bad math, and even worse politics

Bonds of affection are sometimes severed, but more often they simply fray, eroded by misunderstandings that grow into petty disputes and, finally, into irreconcilable differences.

That sad prospect, not dubious arithmetic, is the fundamental problem with the Alberta government’s proposal to walk away with the majority of the hundreds of billions of dollars in assets held by the Canada Pension Plan.

There is scant public support for such a move in Alberta, with barely a fifth of voters backing the idea. More than half of those surveyed, 54 per cent, did not want to abandon the CPP. It’s just one opinion poll, but the numbers are heartening: Most Albertans believe in a common national good.

It’s that belief that Premier Danielle Smith needs to erode, and not just if her push for a provincial pension plan is to have any hope of success. Ms. Smith needs to fray those bonds of affection if she has any chance of bringing around Albertans to her misguided view that Canada is simply a collection of provinces.

“It’s not like Ottawa is a national government,” Ms. Smith said during the debate over her government’s Sovereignty Act last December. “The way our country works is that we are a federation of sovereign, independent jurisdictions. They are one of those signatories to the Constitution and the rest of us, as signatories to the Constitution, have a right to exercise our sovereign powers in our own areas of jurisdiction.”

Ms. Smith does have a point that the provinces have their own jurisdictions. Indeed, huge swaths of Canadian jurisprudence deal with adjudicating jurisdictional boundaries. But Ms. Smith is wrong to assert that Canada is just a collection of provinces and territories. We are a country.

That is the context for the absurd assertion at the heart of last week’s report on how Alberta could exit the CPP and set up its own plan. The authors contend that the province would be due $334-billion, or 53 per cent of the CPP’s assets, assuming an Alberta pension plan began in 2027. Under this overly rosy scenario, benefits could rise, and contributions could be trimmed, providing a big boost to the provincial economy.

There are mathematical and conceptual problems with that calculation. To arrive at that figure, the reports’ authors have made what they call a “reasonable interpretation” of the wording of the Canada Pension Plan Act that creates a hypothetical scenario in which an Alberta pension fund was set up in the 1960s and enjoyed the same returns as the actual performance of the CPP.

That hypothetical fund would have grown faster than the actual CPP, because Albertans have historically been younger than the national average (meaning lower retirement benefit payments) and had higher incomes than the national average (leading to higher contributions).

Unsurprisingly, the Canada Pension Plan Investment Board did not endorse what it called “an invented formula.” It noted that Albertans account for 16 per cent of historical contributions, implying a much lower payout of $100-billion.

University of Calgary economist Trevor Tombe points out a more basic problem. If Ontario and British Columbia also adopted Alberta’s formula and exited the CPP, Ottawa would need to pay out 128 per cent of the pension funds’ assets. He instead estimates that a calculation based on the actual value of the CPP’s current portfolio would give Alberta between 20 per cent and 25 per cent of assets – which would reduce the benefits being touted by Ms. Smith’s government.

Clearly, no federal government would accept the formula that Alberta proposes; it would destroy the CPP. Ms. Smith’s government surely knows this, and surely knows that its plan for a referendum sets the table for a divisive debate.

There is one key fact that does not appear in the charts and graphs of Alberta’s pension report. Canadians from all provinces played a part in building up the surplus that Ms. Smith’s government so greedily eyes.

The Newfoundlanders who worked for weeks on end in Fort McMurray away from their families contributed. So did the uncounted thousands of Canadians who made their home in Alberta for a few years before moving on. All of those people helped to build not just a pension surplus, but a province and a country.

Ms. Smith, unable to peer beyond her province’s boundaries, cannot recognize this fact. Thankfully, Albertans are more far-sighted.


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