Alberta versus the CPP

This is Joseph.

Alberta is a province in Canada. It has about 10% of the population and about 15% of the GDP, driven by rich resources (Oil) and a fairly entrepreneurial culture for Canada. It's a cold prairie province so one might expect Canadians to retire to warmer parts of the country, but the vibrant economy makes it a net importer of young people. They are also gifted with a very right wing premier in power. 

Canada has a pension plan. Nine provinces contribute and the tenth province has their own plan, with an agreement to handle people who contribute to both and harmonized benefits. There are a limited number of reasons one might want to break out of the pack and have their own pension plan. One possibility is that they want to reduce risk by investing in non-Oil assets in case changing energy markets hurts the Alberta economy. But current plans are doing the opposite. 

The real reason is a report that suggests that Alberta could leave with 53% of the assets (on 10% of the population and 15% of the GDP). That is not a typo. The calculation, based on a "one neat trick reading of the legislation" is clearly absurd. A quick calculation showed:

For example, in Tombe’s analysis, a hypothetical situation in which Ontario, British Columbia and Alberta all withdrew from the CPP — three provinces! — would drain the plan of 128 per cent of its assets. And that doesn’t seem to add up.

Since money can't be invented from nowhere and, if the fund is really underfunded like that then all beneficiaries should share the cost of the underfunding , it is unclear what the point is. Is it to make it appear that the federal government is refusing to give Alberta its fair share of assets? All populist rhetoric, in other words. 

Or do they really think other provinces will be okay with raising taxes to replace the huge chunk of assets removed from the plan? The CPP brings in $34 billion per year. The difference between 15% of the CPP ($86 billion) and 53% is $248 billion, which is a large multiple of the income for every year. 

So this is simply absurd. But whether it has a chance of actually gaining a life of its own is another matter in these crazy times. 

P.S. And just in case you thought any of this was serious:

One wonders if perhaps Canada is meant to view this as a bargain, given that the report notes $334 billion is Alberta’s minimum entitlement; it could be $637 billion, eclipsing the entire fund!