How to make $55 billion disappear

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Taken together, a pair of stories in this morning's news demonstrate a pretty nifty piece of bookkeeping.

A story in the Toronto Star reminds us that the enhancements to the Employment Insurance program that were implemented last year will expire this Saturday. People who lose their jobs next week will no longer qualify for the extra five weeks of EI benefits that were designed to mitigate the effects of the recession. That's if they qualify for EI at all which is a controversy of long standing. The story reports that only thirty per cent of the unemployed in Ontario are even entitled to benefits.

But the story also reminds us of another long standing controversy — when Finance Minister Paul Martin tightened the eligibility rules for EI it created a significant difference between the premiums coming in and the benefits going out. This report places the accumulated surplus in the program at $57 billion, which is in line with other reports over the years. (Google "Canada employment insurance surplus" for hours of reading material.) What the Star doesn't specifically remind us is that the money wasn't placed into a fund specifically earmarked for EI benefits; it was streamed into general revenue. The Conservative government of Stephen Harper was kind enough to fix that, which brings us to the Globe and Mail's contribution to this morning's tale.

A new panel created by the Harper government will move to raise employment insurance premiums by the maximum allowed, despite calls to leave payroll taxes frozen in light of Canada's fragile jobs picture.

Canadians will start feeling the hit on their paycheques when the two-year freeze on EI premiums announced in the 2009 budget comes to an end on Jan. 1. Employers will also have to cough up more in premiums for their workers, which economists and business groups warn could hurt employment.

The recession, it seems, has taken its toll on the EI system. It's running a deficit and premiums need to be raised to top it up. But it's not because the entire eleven figure surplus was paid out in benefits during the recent economic unpleasantness. The Globe explains.

The government created a separate account for EI revenues in 2008 with a starting balance of $2-billion and created a Crown corporation called the Canada Employment Insurance Financing Board to set premiums.

The board's mandate is only to keep the EI fund balanced over time, meaning it cannot take into account the impact of its decisions on the economy. Because the fund is now several billion in deficit, officials say the board will be required to recommend a maximum increase in premiums.

The story quotes a spokesthingie for Jim Flaherty patting his boss on the back for improving the system and insuring that future program surpluses will remain in the program where they belong. But when they began the fund with that two billion in seed money, what happened to the other fifty-five billion? And why would Conservatives, responsible fiscal managers that they are who prioritize the economy above all else, think it would be good practice to place a program with the scope and importance of EI in the hands of a board which "cannot take into account the impact of its decisions on the economy?"

We've been had. In more ways than one.

Both stories quote sources who are concerned that the ongoing recovery is "fragile" and that it's a bad time both to allow the benefit enhancements to expire and to implement a large increase to premiums. I'm not sure the Harper government will get the message. You may have noticed that listening isn't one of their best things.

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2 Comments

The only question this government cares about is, "How's it going in Fort McMurray?" The rest of the country can screw off.

CRAP Creative bookkeeping = Scam. The CEIFB’s mandate is very restrictive, leaving it only to balance the books on a future-looking, pay-as-you-go basis, with no room for stabilizing rates in any way. How arms-length is this newly created crown really going to be. Remember just before they formed government, the Conservatives said ‘the slate must not be wiped clean'? And - "The Conservative Party believes that this surplus is the property of those who have made the contributions to Employment Insurance – the workers and employers of Canada.” (page. 72) http://cmte.parl.gc.ca/Content/HOC/committee/381/huma/reports/rp1624652/humarp03/humarp03-e.pdf

Of course municipalities are already overloaded with the download of social services to municipalities, thanks CRAP. What's the real plan?