My musings on the economy, life, technology, business and things I find interesting.

Saturday, May 24, 2008

You Make the Bed You Lie In

Who's the Fairest of Them All

Back in 1962 we made a constitutional amendment to extend government powers. Canada, it seems, is no exception to the West's faith in a benevolent master. We felt at the time, perhaps appropriately, that those retiring should be given more from the government then Old Age Security. Or perhaps it was that Canaidans weren't preparing themselves sufficiently beyond what old Age was providing, the difference though is not just semantics as we will soon see.

Either way the law laid the groundwork for the Canada Pension Plan and of course a separate yet strikingly similar plan for the Quebecois (Quebec, surprisingly, the only province to opt for their own plan).

Quebec likes to be different, which is all very well and good, but they don't like to do it on their own dime. I chalk it up to patriotic nepotism, Quebec having deposited a disproportionate number of prime ministers into Sussex Drive over the years; it seems the rest of the provinces are simply the red headed step children to the true heir.

This reminds me of the parable of the prodigal son, where the eldest, having tired of simple rural farm life, seeks a successful cosmopolitan existence in lands afar. He believes he can do better elsewhere, he believes that what has worked for centuries at home with caring family is not nearly as compelling as what might exist beyond.

This brings me back to Quebec, because Quebec, you see, is looking at a shortfall in it's pension plan, perhaps its the french distaste of immigrants, its birth rate or maybe a streak of Societe Generale in their investment prowess. There are always excuses when things go bad, but Quebec made a choice to go it alone and now it turns out they didn't do a bang up job. At the end of the day they either aren't putting enough money in and/or they're not earning the kind of returns they need to on the money already in there.

Now dear reader, I'll give you one guess who the heir apparent will come to with outstretched hands. Ah yes, who else but the Canadian tax payer, and not just tax payers from Quebec, but from every province, we must all kick-in for the underprivileged, and why shouldn't we? What if Quebec decided to take on the risk themselves because they thought they could do better, why should they carry the responsibility for their actions?

Bailouts Bailouts and More Bailouts

Everyone at some point has met a parent who can't control their child, for good or for worse they pander and bend to the whims of their little one. Sometimes its providing whatever is demanded, other times its simply an act of omission, omission of rules, love, education or other necessary stimuli. Often to disastrous results, have you spoken to a teacher recently? If you haven't please do so; and speak to one who's done it for 30 or 40 years so you can understand the transition. The playgrounds have long since been torn down, replaced by their sterile polycarbonate counterparts from China. Students no longer fail, they move along with their peers being told they're just the same as everyone else. Male teachers have fled the scene leaving the male role model in primary schools to be fulfilled by the sanitation engineers. Free speech suppressed by political correctness has left halls of open debate and creativity sadly silent. Finally entitlement has fooled us into believing that not working hard is a viable avenue in life for the masses.

What Bratty Kids Have to Do with Bailouts

The bratty kids don't have to be kids at all, they can be unprofitable auto manufacturers looking for bailouts from the tax payer because they didn't realize that gas guzzling trucks don't make sense. Or perhaps the home owners who bought houses they couldn't afford and Escalades with spinners because they thought their home line of equity could keep getting topped up with a booming real estate market. Or perhaps the banks that sold them the mortgages who now don't want to be responsible for the upside down mortgages.

Bailouts are Unfair except the Ones Given to Me

What I really want you to remember is that private corporations and individuals don't usually bail out other corporations and individuals directly, it's the taxpayer that does. Therein lies the secret of the bailout: give the money to an intermediary first. If you had to give your money directly to the other provinces, or the auto manufacturer, or to any special interest group you never would, you'd say either get your act together or go bankrupt and do things less foolishly next time. Most of us aren't horrible people, we would gladly give to a general fund for hospitals, roads, schools, libraries, telephone lines, sufficient military at home, legal system, regulatory system, police, parks, etc. Surprisingly even if you worked at GM the last thing you'd do is hand them back money, for Pete's sake that would be a pay cut! Ah but you'd gladly give $10 of your taxes to GM if every other Canadian did, especially if it meant you'd keep your job. Does that seem fair? An intermediary is a beautiful thing, it divides us, creates jobs for lobbyists and starts a pissing match between those who can best strum our guilt, political correctness or concept of fairness.

A Destruction of Greatness

A moral hazard exists when people feel their will be no consequence to their action. If you've ever had tenants you know that certain tenants learn very quickly that the housing tribunal stacks the rules against the landlord, the moral hazard for a deadbeat tenant is almost non-existent, hence there is no incentive for them to stop being a dead beat tenant. Hard work, honesty, creativity, problem solving, partnership, genuine (reading non-forced) charity are beautiful things, if you experience them with others you'll realize that they are good. Bailouts rob us of these worthwhile pursuits and actions.

Bailouts be Damned

If you put 10 people on a desert island and 9 of them vote to have the remaining person do all the work that person will simply move to a new area by themselves or with the 2 next hardest working people. Those that remain may feel very upset and entitled to the fruits of those who have left, sadly though their anger, disappointment and jealousy won't keep them fed. That is how this world works and that is the bed we are laying for ourselves in the west. If we desire to take too much, the wealth, the jobs and the talent will simply get up and move to environments that allow them the freedom to work hard for their and their families success and happiness. You should ask yourself why prices are going up, jobs are going down and the easy money seems to be disappearing. You should wonder how all those municipalities in California and Florida are going to meet budgets with all the houses in foreclosure.

Exporting Wealth

Every time we rob people of their ability to work hard and plan for their families success we export wealth to better environments. Furthermore every time we choose to squander our time and our money we export wealth to those who are more diligent. Whether you like it or not the wealthy are the ones who pay a disproportionate amount of taxes and if the tax base isn't healthy, or the Government is a bad steward or the rich move their money to greener pastures you'll wake up one day and the bed you thought the Government lay for you will end up being a dirty old mud pit and that will be the bed you laid for your selves via your benevolent master.

Laying Your Own Bed

Take some time to lay a good bed for yourself, don't trust your employer, or your government to do it for you, do it with your family, the family unit and your friends are your first line of defence, because in hard times people with names and faces who care make a big difference, pandering or insolvent governments don't.

Happy Memorial Weekend USA

1 comment:

EStar said...

This is my favorite post so far. My favorite paragraph is the one about 'bailouts are unfair'. I like the example you gave - I never thought of of this way before. Keep the thought flowin.