Category Archives: politics

The Cost of University Tuition in Ontario 2015

03/25/2015 Update: Corrected calculations appear at the end.

Today we look at how much it costs to go to university in Ontario. This topic is frequently in the news and student organizations are always trying to bring attention to the topic. Typically we hear about how much it has gone up since some period in the past or how it ranks compared to other provinces. Today we try to answer a seemingly straightforward question. How much is tuition in Ontario? We are not talking about housing, food, books or booze budgets; we are simply looking at fees paid to the school. This is a numbers post.  There will be no exploration of the value of school or fairness of tuition levels.

I will use one of my old stomping grounds as a starting point, the University of Western Ontario. Undergraduate tuition + fees for a science degree totals $7,296.93 a year for a Canadian citizen.

Of this, $5,975 is actually tuition. The rest is for student organizations, building endowment, etc.

Over four years this means the total amount paid is: $29,188. $23,900 is actually tuition.

Undergraduates in Ontario get a yearly refund from the government equal to 30% of their tuition. This does not include the fees. This refund is therefore $1,792 a year or $7,170 over 4 years.

With this 30% grant the total paid, including fees, over 4 years is $22,018 or $5,504 a year.

Now we can deal with the tax credits which are where there are some options. When you are going to school you can deduct $65 a month for books and $400 a month for living expenses for a maximum of 8 months a year. That is $3,720 a year or $14,880 over 4 years. You can also deduct your tuition, excluding fees.

This means that a university graduate can store up $38,780 in tax deductions over their four years.

Assume the student decides to pay their student loan off over 7 years at 5%. The interest on the loan is also tax deductible. We’ll only take first 5 years of interest deductions in to account here so the real world benefit would actually be a bit higher.

You pay a total of $4,026 in interest on the initial loan. So our total deduction over the 5 years following graduation is (education deductions + interest deductions):


You can use all of these credits while you are in school or you can carry them over until you graduate. The smart student holds them all until they graduate and they are making more money and therefore have a higher marginal tax rate. The benefits to holding these credits depend on how much you make in the 5 years after you graduate. The average university graduate starting wage in Canada is around $50k. Assume the graduate uses equal parts of their deductions each year. They could probably benefit more if they waited until the later years when they were making the most but we will keep it easy. Let’s look a few different scenarios.


Now if you were to save up before hand and pay the tuition as it came up you would no longer have the student loan. This means no interest to pay or deduct.


We have done some quick calculations that show what a person ends up paying to a school for their education.  So now if you want to have a conversation about the fairness of tuition levels you have some numbers to work it.


As pointed out in the comments the minimum tax rate is used to calculate refunds rather than the marginal rate.  The provincial book and educations amounts are also slightly different at $156 and $520.

This gives us $43,650 total provincial deductions at 5.05% refund and $36,898 total federal deductions at 15% for a total of $7,739 in refunds if you take no loans.

Interest is $4,123 for $22,018 at 5% for 7 years. So with loans we have $47,676 total provincial deductions at 5.05% refund and $40,924 total federal deductions at 15% for a total of $8,566 in refunds.

So total per year is:

$3569 without loans

$4394 with loans


2014 in Review and a Look Ahead to 2015

Once again I am writing my final post of the year at the last minute so please forgive the inevitable grammar and punctuation mistakes. I am just typing it and posting it.

Last year’s predictions ended up being almost entirely wrong.  I had underestimated the ability of the American government to delay things so the Keystone XL pipeline was neither approved or denied.  It is still in limbo. So no predictions there this year other than I think they have to come to a decision.

The overnight rate of the Bank of Canada remained at 1% for the entire year so that prediction held up. We are now looking at 2.1% core inflation which is slightly above the 2% target.  This by itself does not mean that the overnight rate is going to be raised but there are a few other things the BoC will be keeping an eye on.

Oil prices are extremely low as you have probably noticed as you purchased gas 40% cheaper than you did last year.  This will drag the Canadian dollar down with it.  A weaker Canadian dollar means that all of our exports become cheaper to other countries.   Canada does sell a lot of oil but it only accounts for about 3% (in 2009) of our GDP.   Overall, then, we should see a good growth rate for the economy.  This means that companies will start to spend the billions in cash they have been sitting on for the last few years, traditionally this would lead to inflation.   With the inflation rate already over target I expect we will see an overnight rate increase this year.  Poloz (BoC Governor) has made some comments about the strength of the Canadian dollar but that is just central banker talk. It is not the policy of the BoC to try to defend the price of the Canadian dollar so they could not mention that as a factor in the raising of rates. Raising interest rates makes your local currency stronger, but since you are a reader of this blog, you knew that.

Mortgage rates are always a topic of concern in Canada.  People have been talking about the real estate bubble in Vancouver for 10 years. Mortgage rates normally follow long term bond rates rather than the overnight rate but you can expect a rise from the BoC to have a knock on effect on all Canadian lending markets if it done early in the year.

Last year I predicted that Russia would crack down severely on terrorists and that maybe this would lead to some countries boycotting the Olympics.  None of that happened. Instead, Russia annexed/invaded parts of the Ukraine and is still currently involved in fighting there.   NATO has done nothing militarily but did apply sanctions on Russia.  When oil prices dropped so did the Russian currency, by 40% or more.   Their central bank decided the best way to defend the value of the rubble was with their control of the interest rate.  The first move was to 10% and then to 17%, a massive, massive increase.  The currency seems to have stabilized for the moment.  All the Russian companies that are holding debt in Euro and Dollars are going to have a really rough time this year. Expect to hear of at least some defaults.   As a reference, the last time the interest rates in Russia were this high was in 1998, right before the government defaulted on all its debt.

For our neighbours to the south this should be an interesting year.   Democratic Obama now has to deal with both the Congress and the Senate run by the Republicans.  I think we have already got a little glimpse of this plan for the next two years.  If he was smart he would continue to push these huge issues to the Congress and Senate for the next two years.  Education reform , military spending, entitlements.  Huge issues that have been completely deadlocked.  If the Republicans try to block everything he does then they will easily lose the next election.  They will be forced to concede on at least a few issues.  Not only that, the Republicans will have so little time to properly build their feigned outraged narrative and catch phrases for each individual move they will probably have to drop back to some nonsense about King Obama and the only people believing that will always vote Republican anyway.  I really hope they do something positive down there. Their political system has looked pretty ridiculous for a number of years now.  It is time for them to gain some self awareness and fix some of their issues.

Wow, this is getting to be a long post.  Ah well.

There will be a federal election in Canada this year.  Low oil prices will drop a few billion off the revenue side of our balance sheet this year.  The Conservative government has pulled a pretty smart move with their recent income splitting changes.  This will reduce the amount of surplus, if there is even going to be one this year.  This is smart because in an election campaign there is nothing that opposition parties like to do more than to tell everyone how they will spend the extra money that is sitting in government coffers.  Low oil prices and income splitting should eliminate any extra money so any promises made during the election will have to be offset with a cut to another program.  Not that this will stop anyone from making vague statements like “this will be paid for by savings generated by making X process more efficient” but there is not much we can do about that.

That is it for me this year.  Thanks for reading for another 365 days.  Until we meet again in 2015, have a happy new year.

What Happens if the US Hits the Debt Ceiling?

The shutdown continues in the US and now we must consider the possibility that the US government will not only fail to pass a new budget but will also fail to raise their debt ceiling before October 17th.  This is the estimated day that the US will run out of cash to pay for existing programs and debt interest. If congress does not raise the debt ceiling, which is an artificial limit imposed on the maximum amount of total debt the US holds, government spending will need to be cut by about 20% instantly. This is because the US borrows about 20 cents of every dollar it spends.

In Canada when the government passes a budget and spending plan it is automatically authorized to spend that money.  In the US it is a two step process. The government passes a budget in a vote and then must vote to authorize the borrowing that goes along with that spending.

Many people are reporting that if the debt limit is not raised that the US will default on its debts, something that has never happened.  This is not entirely accurate. I do not know the exact number but approximately 7% of US government spending is debt repayment, the rest is spending on government programs.  The government could try to prioritize the debt payments to keep them from defaulting while cutting the 20% elsewhere. The main problem is that the US is a big place and their national accounting is supremely complex. This is the reason why they say that October 17th is most likely the day they run out of funds, the flows of money to and from the government are not constant and are difficult to pinpoint.

A default on debt repayment would cause a financial freeze far worse than what we saw in 2008-2009. During that crisis when things were going bad everyone rushed to US treasury bills. The interest rates on these bills are super low because they are considered safe.  That is, the possibility of the US government not paying their debts is almost zero. If default starts to look like a possibility then interest rates on those treasury bills starts to climb.  This causes all interest rates to climb as people start getting worried about risk throughout the market. This means higher mortgage rates, higher personal and commercial credit rates, higher rates all around. This also means that when the US tries to roll over old, expiring bonds into new bonds (this occurs once a month normally) bond holders will either just cash out or they will want higher interest rates.  So the government would be paying higher interest on their current debts which means more government cuts because the ceiling would still be in place to limit borrowing.

So, is it possible that a few Republican crazies will cause the US to hit the debt limit? Yes.  Will it cause a financial apocalypse? Possibly. Even if the government can arrange to prioritize debt payments with their remaining money they will be making massive, instant cuts to government programs. This means tens (or hundreds) of thousand of laid off workers, decreased income tax revenue and an increase the need for social benefits. It would be an economic tranquilizer.

This situation is going to reveal just how much the Tea Party is willing to damage the US in order to push their agenda.  Normally, does not make dire predictions but if they refuse to raise the debt ceiling for any significant period then both the US and Canada will drop into recession. If the ceiling remains in place long term then the US is headed for a depression and Canada will not be far behind.

Countdown to Idiocracy: Pending U.S. Government Shutdown

Unless politicians in the U.S. can come to an agreement before midnight tonight, 800,000 government workers will find themselves locked out of work tomorrow. The original plan was to write a long detailed post about what departments were going to be affected but The Washington Post has compiled all the information you need right here.

The Republicans are insisting that Obamacare be essentially killed in any deal they will accept. Obama has said that he will veto any bill that tries to kill the new healthcare.  So now it is a waiting game.  If everything gets resolved by midnight then everything goes back to its normal broken state. If not, then those 800,000 workers will not be getting paid starting tomorrow.  It is probably worth mentioning that politicians are not among the 800,000, they still get paid. The people that are causing the shutdown will still get paid.  So tomorrow we could have 800,000 unpaid, angry Americans watching on TV as politicians that make $175,000 year talk about how it is a tough situation all around.

800,000 unpaid workers means 800,000 less consumers.  This would have a massive knock-on effect.  It has been mentioned many times on this site but I will mention it again; the U.S. buys 75% of our exports.  If the US economy stalls because of this then Canada’s will not be far behind.

If the shutdown happens then the next big date is October 17th.  This is the day the government will run out of money.  If nothing gets resolved tonight then I will post about the possible consequences of the US defaulting on debt payments.

Prorogue: What Does It Mean and Why Did Harper Do It? (This Time)

On Monday Stephen Harper announced that he will ask the Governor General to prorogue parliament.  This means the House and the Senate will remain suspended instead of resuming in September as expected.  Although Stephen Harper has used this technique in the past to avoid things like confidence votes this time it is seemingly less devious as he has just shuffled his cabinet.  The idea is that he is trying to give his new cabinet ministers time to get to know their new roles.  Some will argue that he is simply proroguing to avoid questions about the Senate finance scandal. In the past, Harper has made a point of avoiding questions both in the media and in the House whenever something tough is asked of him.  He will simply shrug Senate spending questions off, avoid them, or answer with some sarcastic comment.  What we want to look at in this post are any other incentives Harper might have for proroguing that Canadian parliament.

First, and most obviously, parliament is suspended.  There has been no set date for them to return.  The Conservative party convention is sometime around Halloween so it is possible that we will not see parliament back in session until November.

The second effect is more important.  All bills before the house that have not received Royal assent will “cease to exist”.  According to the government there are currently 447 bills before the House, the Senate or in committee. All of those will be cancelled. Below you will find a breakdown of all the open bills by political party.

So these bills will all die in their current state.  But we see that,

“In order for government bills to be proceeded with in a new session, they must be reintroduced as new bills or they may be reinstated, if the House agrees to this.”

Here is the main problem. Does the House need to agree on each of the bills individually or is it an all or nothing deal? The “detailed” version of the Parliamentary Cycle website regarding prorogation is not clear. Since it is the government, I will assume the worst.

So if the House, where the Conservatives have the majority, agrees to let those 223 NDP bills be reinstated then there will not be much effort lost by starting a new parliamentary session.  I suspect however that the NDP will be forced to reintroduce every single one of them.

To be fair, only 72 of those 447 bills have made it to first reading. The rest are still waiting for that privilege, I assume.  The government website is not entirely clear on why the numbers are so different.

On the other hand, the 144 bills that have been introduced by Conservative members will face the same House decision and will likely be reinstated.  This seems like a very easy way to get a majority government’s bills bumped to the front of the line.

Dalton McGuinty Resigns After Digging a Huge Hole

Today, Dalton McGuinty, leader of the Ontario Liberal Party and Premier of Ontario, announced that after nine years he would be stepping down. At this point you may be cheering or crying or not caring at all, but I assure you that in the next little while we are going to hear about all the good and bad things that the Liberal party has done during their time in power. I am not going to write about every decision during that period that I agree or disagree with but I thought that now would be a good time for a quick mention of one project that does not get enough time in the press.

The Niagara Tunnel Project.  Started in 2005, this is the project that dug a 10km long, 14m in diameter tunnel under the city of Niagara Falls. The tunnel will be used to bring more water to the existing Sir Adam Beck power generation station at the base of the falls. The tunnel itself is complete and they expect the power generation to start in 2013.   Total output should be about 1.6 billion kilowatt-hours per year which is, in the more popular measure, enough to power 160,000 homes.  This is a project that both the Conservatives and the Liberals supported, something you do not get that very often.  Yes, it was five years late and yes it cost $1.6 billion instead of $935 million but I still think this is something that people should be hearing about more frequently.  The problem is that most of the time you get reports that are very similar to what I have just written, full of boring numbers. Instead we need more pictures and videos – this tunnel is an extraordinary engineering achievement. So here you are. That is a link to a history of the tunnel with pictures and a couple of videos.

So whenever you start to think that the government is incapable of getting anything right just remember this amazing project and maybe it will help restore a bit of confidence.  This tunnel is designed to provide power for a hundred years. I doubt the citizens of Ontario in 2113 will be thinking The clean, easy power is nice but do you remember the Liberal eHealth boondoggle of 2009?  

Want to read more about the tunnel?  Here is the official site.


CNOOC-Nexen. Just the Beginning.

Currently the Canadian government is trying to decide whether or not they should allow the Chinese National Offshore Oil Corporation (CNOOC) to purchase 100% of Nexen, a Canadian oil company that operates in the Alberta oil sands.  This is going to come down to our old friend “net benefit”.  I must always be sure to include the quotation marks because its definition has never been clear. Some time ago I wrote about the how the Canadian government had blocked the sale of Potash Corporation to BHP, an Australian company. I ended that post hoping that the government would eventually explain the exact reasons for blocking the sale but they never did. The consensus in the media seems to be that there was no way we could sell the Potash Corporation because it is unique and it controls a huge amount of the world’s potash supply.  Nexen on the other hand only controls about 5% of the Alberta oil sands and so everyone seems to think this deal will be allowed — under certain conditions.  Conditions like keeping the Nexen head office in Canada with at least 50% of the board being Canadian, keeping 80-100% of the current workforce levels and maintaining the company’s commitments for capital investments for a certain number of years as well as posting the company’s stocks on the TSX.

This is where you say Hey that does not sound very much like a free market to me! You are correct.  In the Potash post I mentioned that at the meeting of the G20 countries the Canadian government said they would refrain from adding any new trade barriers and then went ahead blocked that purchase anyway.  Maybe now they will say that by allowing this new deal they are honouring the commitment? There needs to be some consistency.

The current government hates getting involved with running companies.  Remember the Canadian Wheat Board?  I wrote about it a few posts back.  That was an evil State Trading Enterprise (STE) that sucked profits from hardworking Canadian farmers.  We had to get rid of it because a government had no place in markets.  You may have already guessed where I am going with this. A quick look at any reliable source of information will tell you that CNOOC is a Chinese STE. That is correct, it is owned by the Chinese government. So while our government tells us how terrible it is for an STE like the Canadian Wheat Board to exist here in Canada it is likely to approve the entrance of a Chinese STE into our market.

On the positive side Harper has claimed that they will push the final decision back 30 days (into November).  The government is going to take the extra time to create a framework for this type of foreign takeover. This is long overdue; it will finally get rid of the “net benefit” stipulation which is the political equivalent of “if we feel like it”.  My hope is that they do it properly and completely.  Right now people are saying that 5% is okay to sell, but we need to set specific guidelines.  Can one foreign entity own 5 companies in Canada that each account for 5% of oil sand operations?  10 companies?  Do we limit companies by their country of origin?  Does it matter if they are state owned or not?  Will the limits be firm or will they be altered in each trade deal we negotiate?  There are a hundred more questions we need to answer.

The CNOOC-Nexen deal is worth about $15 billion and has taken up most of the recent headlines but it is just the appetizer for the feeding frenzy to come.  There has been almost no talk about the fact that Oil and Natural Gas Corp and Oil India Ltd, along with refiner and retailer Indian Oil Corp have put in a $5 billion bid on a share of the oil sands owned by ConocoPhillips.  All three are STEs operated by the Indian government.  The framework that is promised along with the CNOOC-Nexen decision needs to lay down exactly how Canada intends to handle these cases.  We have the third largest supply of oil in the world; if Harper wants to diversify away from U.S. exports he better make sure we are ready for it.


The First Past the Post Post

So the PQ was elected in Quebec and the federal government is returning from its summer break. This is the perfect time to talk about the Canadian voting system.  We currently use the First Past the Post voting system which means that once all the votes are counted the person with the most votes in each riding wins.  It seems like a logical setup.  The problem is that we do not have a two party system and you can get situations like this

Candidate A – 34% of the vote
Candidate B – 33% of the Vote
Candidate C – 33% of the Vote

Candidate A wins and 66% of voters are not very happy with the selection.  Or this example.

PQ – 31.96%
Liberal – 31.2%
CAQ – 27.06%
Other – 7.92%

PQ wins and then removes the Canadian flag from the Quebec Legislature.

Here is a link to the election results in Quebec. Look at each of the ridings where the winner had less than 50% of the vote.  Now imagine that instead we were voting with a two-round system. This is used in many places around the world and it is something that Canada should be using as well.  There are some slight variations that can be used but here is the system I endorse.

Two rounds of voting. In round one everyone votes for their favourite candidate, similar to the system we have now. All votes are counted. If there is a candidate with more than 50% of the votes, they win. If not, the top two names are placed on a second ballot and everyone votes again.  Winner of the second ballot is elected.

Now you might be thinking that we could get this all done in just a single round of voting if everyone just ranked the candidates on the original ballot. This leads to the problem of voters ranking the candidate least likely to beat their favourite as number two so that if there is a second round hopefully it is against an easily defeated rival. (Sorry Australia)

Two round voting would certainly be more expensive; the 2011 federal election cost $291 million so we can assume that with a two rounds the total cost should be less than double.  I would be happy if the government spent money on this change because it would likely result in a government that better represents the will of the people.


Quebec Votes.

To celebrate labour day people in Quebec will be voting in a provincial election. The election takes place on September 4th. The current government is the Quebec Liberal Party (QLP) lead by Jean Charest.  The other major parties are the Parti Quebequois (PQ) lead by Pauline Marois and Coalition Avenir Quebec (CAQ) lead by Francois Legault. In the most recent polls the PQ have a slight lead with 32% of the vote.  I thought it would be a perfect time to take a look at the things being said by the leader of the PQ just in case there are any readers from Quebec that are not aware of her positions. I will take statements from a speech made in Montreal this week.

“I need a majority mandate to make Quebec a country,”

Yes that’s right.  She will fight to give Quebec its independence. Although most polls show the support for a referendum somewhere down near 28% we need not worry about that because Ms. Marois will fight for it in any case.

“I have chosen to make the mining companies pay.”

She is planning on raising the mining royalty in Quebec from 16% to 30%.  She did not mention that this would make Quebec one of the most expensive places on earth to mine, but I am sure she is aware of that fact. In that statement she is referring to paying for a tuition freeze.  She supports the student protests and has promised to make sure that there is no increase in tuition.

Those two statements alone should make it clear that the PQ is not the party to vote for but then again, I think for most Quebec voters this election is more about NOT voting for the Liberals (who are sitting at 26%).

The CAQ is polling at 28% of the vote which places it in second. Francois Legault used to be a member of the PQ and fought for Quebec independence. He now says that if his party gets the majority that a referendum would be taken off the table for at least 10 years. His platform is based on saying that the PLQ is corrupt and the PQ is under the influence of the unions. He claims that his plan will save 2.5 billion dollars in the first year. This party is less than a year old and so has no political history. This might be to its advantage because no history is better than bad history.

This is obviously not a comprehensive examination of the parties but I felt it necessary to at least point out some of the basic facts. I will not give an official endorsement to a single party but I think the responsible decision here really is between the QLP and the CAQ.