Marni Ko
On January 10, the Canadian Taxpayers Federation released a damning report documenting the $18.4 billion Industry Canada handed out in the form of corporate welfare between April 1, 1982 and March 31, 2006. Of that, one-third of the money went to just 50 companies, $10 billion of which was a grant or a contribution, with no expectation of repayment.
What else could have been done with that money? Just one billion of the taxpayer dollars that subsidized corporations could feed and house nearly 43,000 families of four, consisting of two adults and two minor children, for one year (using Statistics Canada 2001 estimated annual food costs of $8,314 and shelter costs of $15,000). $18-billion would buy a lot of food for Canada’s more than 600 food banks.
So on one hand, we have government freeloaders. We also have a culture that encourages people to borrow money, get credit cards and loans, and refinance up to 90% of the equity out of their homes. Bottom line — Canadian families are either spending way more money than they make, or not earning enough money to keep up with inflation or accumulate good debt, as in real estate, investment property, houses, hard assets and stocks, all things that rise in value.
In 2003, the average Canadian owed more than his yearly take-home pay, and at least 74-million credit cards were in circulation, which works out to about three cards for every adult citizen in this country. Our neighbors south of the border aren’t faring any better. The working class poor in both countries are in serious trouble. The average American credit card balance in 2004 was $9300 plus, and foreclosures in the US in the first 11 months of 2006 were up 68% from same time the previous year.
Last November, Evan Steiner, a Lansing, Michigan blogger, spent an entire month feeding himself on only $1 a day, while keeping a riveting online journal of his stint into poverty. His daily blog inspired plenty of discussion of poverty, as well as plenty of advice for how to eat on the cheap. While his diet was an uninspired smorg of starch — white rice, ramen (ichiban style) noodles, bread, peanut butter, and jelly — the blog itself was useful for the attention it drew to the noose tightening around many North Americans.
Steiner was inspired by an article that ran in a local weekly on October 11. The piece, Just Hold it Together, covered 42 Michigan business owners, government employees, and not-for-profit agencies who pretended to be poor for 60 minutes, in a “poverty simulation.”
Participants were given various scenarios outlining their finances and circumstances. Angie Mitosinka, an employee of a job creation program, Michigan Works, said after the hour, “I will not be the same.” In 60 minutes, while pretending to be a low income single mother with two teenagers, she managed to lose her imaginary house to foreclosure.
Clearly, pretending to be poor for even an hour wasn’t much fun. But to Steiner, the project seemed a little too contrived. He noted the participants in the simulation “had not been poor for an hour. Rather, they sat around a big table in a nice building (with full stomachs if I had to guess), and essentially ‘ran the numbers’ on why it’s difficult to pay your rent or buy groceries with a minimum wage job.”
Steiner was motivated to find something tangible that would give a normal person some insight as to what being poor is really like. “It’s one thing to say, ‘Being poor means you can’t eat a lot of food,’ but it’s a completely different experience to actually go through.” He decided he would live poor, not just for an hour, but for a month, on a dollar-a-day food budget.
On Day 7, he described how desperation — drastically limited budget, drastically limited food choices — forced him to create a new meal. He boiled rice in more than the average amount of water, tossed in a handful of frozen vegetables, and added dry potato flakes. “What you’re left with is basically Elmer’s Paste. You could spackle a wall with it. But it’s filling. Really filling. And really, really cheap.”
Steiner found he could only afford the sort of non-perishables that impoverished food banks with inadequate storage give to the poor. He ate white spaghetti noodles with tomato sauce. Meat was not even on the menu, until he discovered some 88 cent hot dogs on sale. Eventually, he found himself feeling a little like an anorexic might. He lost 18 pounds, lost interest in food, and stopped desiring meals. Even small amounts of food made him feel sluggish and sick.
The sad thing is, a lot of Canadian families are in the same dietary straits — and not just for a week — because of constricted finances. In 2001, nearly half (a whopping 47%) of all Canadian households spent more than their pre-tax income according to Statistics Canada. Americans weren’t much better, saving -.5% of their disposable earnings in a year — meaning they too spent more money than they made.
In one month last year, more than 753,000 Canadians went to a food bank for groceries, according to Hunger Count (pdf file), a recently released report of the Canadian Association of Food Banks. 53% of users were working poor, with employment their primary source of income. More than 53% were social assistance recipients. Over 40% of clients were kids. In a single month, March 2006, that translated to more than 268,000 children.
So why are Canadians in so much debt? If you listen to the folks from the 1940s, in the days when a postage stamp cost three cents, and a loaf of bread cost 14 cents, they’ll probably say it’s because “kids these days” (as in the baby boomers and generation X) never learned to sacrifice, to distinguish between needs and wants before they take on new debt.
Now that credit is so much easier to get, and interest rates are at historic lows, a goodly portion of Canadians don’t even blink at purchasing a brand new car that costs half or more of the average Canadian family’s annual income. And it’s getting even easier to obtain credit — which really means just more debt. Last year, for example, the Canadian Mortgage and Housing Corporation started insuring interest-only mortgages. This holds huge appeal to first-time buyers, because for the first few years they have to make interest payments only. Many take the risk, hoping that by the time payments go up and they have to pay off interest and principle for the remaining mortgage term, their financial situation will have improved. The downside is zero equity for a number of years, and eventually staggering payments.
Thus the U.S.-spawned 30-year mortgage has come to Canada, a pilot-project turned permanent. At the same time, housing prices in urban centres have skyrocketed, doubling or even tripling in some cities (like Edmonton and Calgary) over what they were five years ago. Still, anyone with 5% down and decent credit can end up owning a house, and most financial experts agree that owning is way better than renting. It sounds good in theory, except buying a house during low interest rates and periods of inflated prices means big mortgages and little equity. Given that the bank owns 95% of the house, and despite the CMHC’s assurances that it is “very careful” when approving low-down mortgages (“We try and make sure we don’t get people into situations they can’t handle,” says spokesman Perre Serre), Canadians may be headed for foreclosure rates on a par with the Americans.
Next week in “Living”: What’s the tax man’s role in all this? And are there any solutions?
