The misery of corporate welfare
By Kevin Gaudet
"He who has not the spirit of this age, has all the misery of it." Voltaire may not have had wasteful federal spending in mind when he penned this aphorism, but he could have. The spirit of the age today is ‘spend, spend, spend.' Sadly, it is taxpayers of tomorrow who will suffer the misery of increasing taxes that were driven by today's outrageous spending on wasteful programs like corporate welfare.
Politicians and pundits continue to promote the myth that there is an economic crisis of epic proportion in Canada. Recently, in Lima Peru, Prime Minister Harper raised the spectre of a crisis not seen since the great depression. This alarmist language also has been used by the Finance Minister suggesting extraordinary times are upon Canada. They deliberately choose such language in an effort to justify a return to massive deficits; throwing good money after bad on a variety of programs designed more to get votes than to do good. A look at Canada's misery index reveals how there are some economic challenges today, but that challenges do not constitute a ‘crisis.'
The misery index (MI) is an economic indicator derived by adding together the unemployment rate and the inflation rate. The higher it is, the more miserable the economy. It is much lower now than it was during the challenging economic times of the 1970s, 1980s, 1990s or the depression-era 1930s. Canada's MI for January 2009 was 8.4 – unemployment of 7.2 percent and inflation of 1.2 percent. In the 70s it peaked at a little over 20. In the 80s it was even higher, up around 24 when both unemployment and inflation were near 12 percent. In the 90s, Canada's MI was in the high teens. During the great depression unemployment alone hit 27 percent. No one is suggesting that times are good, and few lack empathy for those who have lost their jobs. However, it is the job of government not to overreact but, instead, to act accordingly.
Acting accordingly does not include deficit spending for more direct corporate welfare bailouts and indirect ones through regional development programs. The most recent budget provided $4-billion alone to big auto, and more cash for mining, forestry, and aerospace jut to name a few.
These programs do not work at creating jobs, they merely waste billions of tax dollars. In reality, the ‘loans' are just grants. They don't get repaid and they don't create jobs.
Just look at the two largest corporate welfare cases in Canada. Recently, it was reported that the government paid off $108-million for a failed loan guarantee for Bombardier's C-series planes. At the same time, Pratt and Whitney announced plans to lay off 1,000 employees. In a report titled, On the Dole, the Canadian Taxpayers Federation revealed Pratt and Whitney to be the largest recipient of corporate welfare cash from the federal government, having taken over $1.5-billion between 1982 and 2005. Bombardier placed second, soaking taxpayers for $745-million.
In a case of appropriate timing, Kevin Page, the Parliamentary Budget Officer also recently reported that the auto bailout ‘loans' likely won't get repaid. Repayment records indicate that Bombardier and Pratt and Whitney have only paid back a few cents on the dollar from their massive taxpayer loans. Despite a horrid track record, the federal government clings tenaciously to such programs arguing that today's economic ‘crisis' requires such action. Of course, many auto jobs happen to be in Minister Flaherty's riding and historically, all federal governments pander to seat-rich Quebec, home of the aerospace industry.
If misery loves company, they are getting it from the opposition parties in Ottawa. Mr. Duceppe wants more money for Quebec. Mr. Layton just thinks there should be more spending on everything, period; and Mr. Ingatieff decries deficits in one breath while calling for more spending with the next.
Taxpayers need a champion in Ottawa to put an end to inflamed rhetoric and failed economic policies. Without one, this pain will go one for many budgets to come.
(c) 2009 Kevin Gaudet