Posted by Tim Stobbs on November 13, 2013
So the Saskatchewan Provincial government has realized something important…it is addicted to non-renewable resources revenue. How addicted? Well in the last provincial budget a whopping 30% of the money used to keep the government running came from non-renewable sources. So needless to say there is a huge risk for anyone basing almost a third of their spending on commodity prices like oil and gas or potash.
I give the government credit for at least realizing they have a spending problem. So they are rolling around the idea of creating a sovereign wealth fund where money will go in, but they won’t take the principle back out …ever. Similar to what Norway has done to build their 760 billion dollar fund. Of course Saskatchewan does plan to spend the interest income which is typical. The only problem is they don’t appear to be considering taking any big steps towards solving the issue…at least based on their consultant’s report which merely recommends capping their current spending of resource revenue to…wait for it…26% of their annual spending. Then splitting that mere 4% between paying down debt and saving it. Ugh, it’s like rewarding yourself and having a press conference for deciding to not spend a coffee today…it’s a drop in the bucket.
Then it occurs to me that perhaps our government officials aren’t familiar with how to save. After all taking on debt is much more their style. So perhaps they need a little motivation…so might I offer the following goal: a zero tax provincial government…no income tax, no business tax and certainly no sales tax. None, nil, nothing for tax.
How the hell is that possible? Well you just use the same math on how a person can save for financial independence. You see if you saving 5% of your income (all income here, not just resource based) and get a nice 5% return (after inflation) which you re-invest, with compound interest in 66 years you won’t need to tax anyone ever again. Your investment portfolio will be producing enough income that you should be able to run your current budget without taxes. Oh wait it gets better, if you pull off saving 10% of the government income and reinvest the interest you can be a zero tax province in a mere 51 years. In a generation, you can alter the very way people think about government.
In effect with a bit of will power and a long term plan you can actually have a government that lives in its means and actually saves instead of taking on debt for everything. I fully understand the odds of this occurring isn’t that good, but I thought I would at least point out the option exits. After all when you spend your entire life using credit cards and having a mortgage being debt free is largely incomprehensible.
Posted by Tim Stobbs on October 25, 2013
I think I may lose it here. If I read just one more article about someone saying expanding the CPP (Canada Pension Plan) will kill jobs because it is like a tax hike…. I think I might throw up. Let’s ignore the fact, it won’t be a tax at all and really a savings plan, and go right for the heart of this insane defense: raising taxes will kill jobs.
In effect people arguing that a tax hike will reduce GDP(Gross Domestic Product) and thus reduce the number of jobs, but of course this really doesn’t hold any water. Money that goes into the federal government doesn’t just turn into mud and be utter useless. The government spends the money…shocking I know. With all the services they provide and the infrastructure they have to keep up the government really does have to spend money.
For example, the federal government pays their employees to do work and guess what those employees spend their money on housing, utilities and even beer and popcorn. Is government money magically different and doesn’t get added to the GDP? No of course not. So when the government gives a grant to build a water treatment plant, does that not help the GDP? Of course it does. Or if the government starts a new program and hires staff does that not create jobs? Of course it does.
It really doesn’t matter who spends the money: business or government. As long as it goes out the door it will help the GDP and create some jobs as well. It’s like arguing that leaving by the door on the right if different then the door on the left…both get you outside so there really isn’t any difference.
Yet, if it goes into a savings it won’t be spent, so won’t that kill jobs? Um, do you know where all that excess money that the CPP gets right now goes? Oh right, the CPPIB invests the money into businesses, which will usually take the money to grow their operations and grow the GDP…of course if the company is outside Canada it won’t directly help our GDP, but if our trading partners are doing better that also helps us.
Long story short: raising a tax won’t kill jobs…it will likely shift some around, but not remove them from the total. So don’t hide behind that as an excuse to avoid changing a program that will help the majority of people save for retirement. It’s not like the boomers did a great job saving for their retirements, so I think we have enough evidence that the current set of programs aren’t working well for the majority of people.
So what are you thoughts on PEI’s proposal to expand the CPP?
Posted by Tim Stobbs on September 5, 2013
I recently spent $50 to enter the 3 Day Novel writing contest, which is basically a self inflicted version of metal torture to write as much as you can on a novel in three days over the September long weekend. I will not lie to anyone because the experience sucks while you are doing it. This year was particularly bad since I got sick about halfway through the weekend which added a version of physical pain to the entire process. So why did I pay $50 to go through this level of pain?
To be honest, it is all about the results. I have had an idea for a fiction book in my head for at least a year and I never devoted much time to developing it. So now in three days I have a complete first draft that is 92 pages long. Not a full novel, but a bloody good start on the project. In a nut shell I used an Ulysses contract on myself, which is where you bind your future self to a particular action.
In my case, I told some co-workers, family members and paid money to do this so it gave me a lot of motivation to ensure I went through with my plan to devote three days to just writing (with the notable exception of going out for my anniversary supper with my wife…I was getting out of that only if I was dead). The idea works very well for all sorts of goals regardless of they are personal, physical or even savings goals.
So this where I think a lot of people enjoy writing a personal finance blog. You get input from people on your ideas and also often state certain public goals (either short or long term). In effect, you are doing Ulysses contracts by publicly stating your goals and then having to explain why you completed them or not. It’s easy to ignore a goal when no knows about it, it a lot harder when just about everyone you know is aware of it and asking about it. Yet to really add a level of commitment to a goal you should also consider adding a monetary element. For example, if you don’t make your goal you will pay someone $100 dollars.
While I haven’t done this yet on this blog I am now considering the idea for future goals as that would add an extra level of motivation to not lose that money. So would you or have you ever use a Ulysses contract on yourself where you paid someone if you failed? Or do you think that would add too much pressure to achieve the goal?