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Aerospace joins Big Auto on the dole

By Kevin Gaudet
web posted April 6, 2009
   
Despite polls repeatedly showing a strong majority of Canadians do not support taxpayer money being used to bail out Big Auto, the federal and Ontario government are doing it anyway.  Yet, the corporate welfare sinkhole doesn’t stop there.  Not only did cash start flowing with a payment of $250-million of the $4-billion already promised to GM and Chrysler, but on the last day of the fiscal year, $250-million was also given to CAE of Montreal to subsidize its flight simulators business. 

This type of corporate welfare does not create long-term sustainable jobs; it simply drives up government debt.  Research into repayment rates of these so-called ‘loans’ reveals mere pennies on the dollar are ever repaid.  As a result, the Harper government should resist seductive demands for bailouts. 

The Liberal leader, Mr. Ignatief, is little better on this issue.  In one breath he asks for taxpayers to be protected, yet requests that government do more to bail-out industry, without specifying how.  One is left to wonder if he would increase or decrease corporate welfare spending if he had hold of the purse strings.

Industry Canada's latest corporate welfare program is now taking off.  Two years after former Industry Minister Bernier announced the new Strategic Aerospace and Defence Initiative (SADI), there have been seven announcements.  On the last day of the fiscal year and hours before April Fools Day, Minister Clement announced a $250-million ‘repayable loan’ for Montreal’s CAE to build flight simulators.

It is taking some time for Industry Canada to wind-down its flagship program, Technology Partnerships Canada (TPC).  The department hasn't updated its Repayment Status Report since July 10, 2008, and several companies still don't want taxpayers to know how much, if anything, they've repaid.  However, taxpayers should know that CAE had repaid only about $32-million of the $300-million received from TPC.  As well, total repayments for the program at $381.7-million amount to just 10.8 percent of the $3.5-billion approved between April 1, 1996 and March 31, 2006.

According to the Repayment Status Report, in fiscal year 2006-2007 – incidentally the eleventh year of a ten-year program – repayments to TPC totaled only $65.7-million.  Yet, during the same year, the department paid out another $300-million.  Now with the new Strategic Aerospace and Defence Initiative (SADI) expected to spend nearly $900-million over the next five years, the prospect of repayment is about as likely as the Maple Leafs winning the cup next year.

Unlike the money for Big Auto, there are no published details regarding efforts to protect taxpayers with conditions and covenants.  At least with the auto ‘loans’ the government published some terms and conditions.  This was done in an apparent effort to reassure taxpayers that their money is being forked over with care.  Regrettably, no matter what the government sets as conditions, the money is not safe and will quite likely be lost. 

If GM and/or Chrysler seek bankruptcy protection in Canada the government can’t protect taxpayer money.  Getting preferred creditor status, if successful, at best puts taxpayers close to the top of the list for getting a share back of whatever a bankruptcy trustee decides will be issued.  However, it is seldom the case than any creditor, preferred or not, will get 100 percent of their money back or anything even close to it.

If banks and private equity interests don’t believe these types of investments are worth the risk and won’t generate a return on investment why should taxpayers have their hard earned tax dollars invested instead?  Our money is no less precious than theirs. Governments should guard it more jealously and stop giving it away to industry.  Instead, government should take this money to reduce business taxes or to reduce payroll taxes so all businesses benefit equally.  After all, this is a fairer and more successful approach. ESR

© 2009, Kevin Gaudet

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