I am very concerned about the amount of debt Canadians (both individuals and governments) are taking. I am equally concerned about the lack of retirement savings.  We are quickly headed to a cliff.  An average Canadian household owes $145 for every $100 it makes.  That’s insane!

This impacts local municipalities indirectly because number of seniors with inadequate savings in many municipalities is set to shoot up just as the number of people getting crushed under mounting debt is going up.  Here’s what I propose Federal government should do on the debt front:

1. Start tightening up the lending standard.  There was nothing wrong with requiring 20% down payment (or at least 10% for first-time home buyers). 
2. Actively encourage people to get fixed rate mortgages.  Fixed rates are less than 4% now and interest rates are at historic lows and can only go up.  Variable made sense a few years ago, but doesn’t any more.
3. When I was buying a house, banks approved me for an insane amount of mortgage.  I have no idea how I would afford that mortgage when rates started to rise again, but if we learned anything from the current financial markets induced recession then it’s that banks can’t always successfully regulate themselves.  I am sure a lot of people carry these mortgages and will find themselves crushed as their payments rise with interest rates.  A workaround is to approve people based on the higher of current or expected interest rates so they cannot borrow more than they can afford if rates are artificially low.

On the retirement front:

1. Set up a retirement plan parallel to CPP that doesn’t guarantee returns like the CPP does.  Require everyone to invest in it, but people are allowed to move money to their self-directed RRSP plans if they choose to do so (but the money stays locked in).  Fact is that people aren’t saving enough for their retirements.  Another fact is that as a society, we won’t let seniors starve to death because they weren’t financially prudent.  In that case people need a little nudge to save.   The goal isn’t to manage people’s investments, the goal is to say that people don’t have a choice to not save.  Either people will have to save for their old age themselves or they’ll become a burden on the society.  Except this time the society is getting overall older so it won’t be able to support all the seniors (the working people-to-seniors ratio is going up fast).  Australia has a very successful plan like this.
2. Lower marginal income tax (especially in provinces like Ontario).  I never believed the theory that high marginal taxes provide a disincentive to be more productive until I experienced it myself. 
3. Turn around society into an entrepreneurial and high-tech society . Governments, for some reason, continue to waste billions after billions of dollars to save manufacturing.  The trend will continue.  There is no reason why Apple, Google, GE, IBM and Microsoft could not have been home-grown Canadian companies.  Instead of providing subsidies to poorly run automakers of the past, why not encourage new start-ups working on electric cars? 

No one will deny the need to handle the current economic crises. However, it seems like Harper and Company are choosing to ignore the long term future of the country. Here’s an article from the Globe and Mail that shows what I’ve been saying for months has actually started happening :-

One of Canada’s top AIDS researchers is moving to the United States, taking as many as 25 scientists on his team with him.

The University of Montreal’s Rafick-Pierre Sékaly says he is leaving in part because of federal cuts in science funding and hopes his departure will be a wake-up call.

“I hope it will trigger some kind of movement that will foster a deep soul searching and investment,” he said in an interview.

He expects to more than double his $3.5-million research budget in his new position as scientific director of the Vaccine and Gene Therapy Institute in Florida, but will also keep a lab going at the University of Montreal.

The move to the U.S. was motivated in part by his concern for the talented young researchers who are part of his team. They are starting their careers and are anxious about their futures here, Dr. Sékaly says. The young scientists, he adds, will have far more opportunity in the U.S., where President Barack Obama included $10-billion for medical research in his economic stimulus package.

Prime Minister Stephen Harper’s government, on the other hand, cut funding for basic research in its stimulus budget, trimming $148-million from the three agencies that fund university-based research.

Those cuts exacerbated a funding crunch that had left many scientists scrambling to find money to keep their research programs running. Young scientists are hit particularly hard, says Dr. Sékaly.

“Right now, the funding is not there. They are going to fund you, but they are going to fund you at levels that will not allow you to be highly competitive. If you are not highly competitive, you are done,” he says.

As well, many universities have instituted hiring freezes, which makes it difficult for young scientists to get jobs. Canada risks losing almost a complete generation of fresh talent to the United States, where Mr. Obama’s commitment to science is a dream come true for researchers, Dr. Sékaly says

“This is something we would like to have our government here follow with the same vision.” ….

[Full article: here ] This is sad. The government is spending tens of billions of dollars trying to protect yesterday’s manufacturing and construction jobs. What about tomorrow’s knowledge-based jobs? But then again, what do you expect from an administration that appoints a science minister who isn’t much of a believer in science and evidence in the first place. Sad indeed.