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Corporate welfare teaches companies and regions that what's important is about getting your "fair cut" of "free" money. And when your cut isn't perceived as fair, it can turn a wasteful policy into a corrosive, emotional weapon to be used by those with regional grievances.
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As debate about federal support for the biggest player in Canada's aerospace industry, Bombardier, has heated up over the last few months, critics have come forward to say that investing in Bombardier would be a mistake, and that the company should be left to sink or swim on its own. They couldn't be more wrong.
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Progressive economist Jim Stanford invites us to reimagine Bombardier's demand for another taxpayer handout as an exciting opportunity for an "equity investment." In his view, focusing on the usual metrics for businesses -- such as "does the company make money?" or "can it actually sell the products it makes?" -- is evidence of a dangerous affliction he refers to as "market fundamentalism."
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All told, the B.C. government cut cheques for $1.5 billion in film subsidies over the past five years. That's more than taxpayers spent on the ministries of aboriginal relations, agriculture and environment -- combined. As if that wasn't enough, the federal government jumped in with $1.73 billion more nation-wide. With the low Canadian dollar attracting more filming here, these subsidies are going to soar even higher in 2016-17, as there are no caps on these payouts.
Quebec Economy Minister Jacques Daoust announced that the Quebec government would be "investing" $1.3 billion in taxpayer money in Bombardier's beleaguered CSeries aircraft line, and promptly turned around to prod the new Trudeau government in Ottawa to pony up a similar contribution.
Over the last 50 years, Bombardier has received $2.2 billion in federal government assistance -- of which Industry Canada advises only $543 million has been repaid. In short, if history is any guide, Bombardier is far more likely to be calling on taxpayers again shortly with its hands outstretched, than to actually mature into a bonafide competitive business.
Too many use Orwellian language to propose something contrary to the public good. But, considering the reality of power, the term "taxpayer" helps people focus on the real cost of political decisions that favour a narrow interest, ones which can injure the good life for everyone else.
Why did one federal department, Industry, disburse almost $8.5 billion to 10 corporations who don't need the money? The answer, from a corporate perspective: Why not? Even if a company is flush with cash, why not buff up the bottom line if some politician is willing to use the public treasury to support your company?
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Ever wonder how Canada's net federal debt reached $671 billion by 2013? Or how net provincial debt among the provinces ended up at $509 billion that same year? Wonder no more.
Corporate welfare is the ultimate evasion of responsibility. It helps companies avoid the consequences that consumers would otherwise assign to them, the evasion demonstrated rather clearly by Chrysler's two government bailouts in a generation.
The government's "Venture Capital Action Plan" ignores Canadian evidence that shows government-sponsored venture capital is ineffective. More fundamentally though, it represents a further blurring of the lines between pro-market and pro-business government policy.
In the land of government plenty -- that vast landscape populated with the tax dollars of Canadians -- there is no shortage of politicians willing to hand out and defend subsidies to business and no dearth of corporations willing to take the cash.
My colleague Kenneth Green and I wrote about how by approving fracking for oil and gas, some provinces might generate extra dollars for their provincial coffers. And the response from someone at the Halifax chapter of the Sierra Club? That fracking has caused "a 62 per cent increase in sexually transmitted infections."
Can a company truly be considered a good corporate citizen while taking money from taxpayers through corporate welfare? Corporate welfare happens when a government makes a political decision to use tax dollars to favour one company over another. While all of us understand we need to pay taxes to fund societal benefits like hospitals, schools and infrastructure, most feel government should not use our money to pick winners and losers in business by handing out grants to specific companies.
Half-a-million taxpayer dollars will be forked over to Maple Leaf Sports and Entertainment Group, one of the largest companies in sports, in order to host the 2016 NBA All-Star game. The company doesn't need this grant, but our government simply cannot resist handing money out left, right and centre.
Bombardier is a fine Canadian-based company and one hopes it prospers in the years ahead and employs even more people -- but without taxpayer assistance. Governments should not pick winners and losers with taxpayer money or prop up industries with funds from other sectors, companies and individuals.
Recently, I asked Industry Canada for information on disbursements to businesses since the early 1960s. The result of that request revealed the hollowness of one claim often advanced in support of subsidies to business: that "acorns" will grow to "oak trees." Instead, what is evident from the data is that many "oak trees" never stop asking for handouts.
Canadians who don't regularly track how governments spend money might be surprised to find how myths crop up about government expenditures. Exhibit A is a new report that claims Canada needs even more "industrial policy," more colloquially known as corporate welfare. Governments are less eager to be frank about the cost of corporate welfare, including chronic government failure on collecting on past loans.
It's bad enough that many municipalities are hiking property taxes this year, but the provincial government's decision to kill a light industry tax credit is piling on B.C.'s job creators -- and highlighting why such tax credits are bad policy in the first place.
Back in June 2009, the federal and Ontario governments decided to use massive amounts of taxpayer cash to rescue General Motors and Chrysler, two corporations deemed too big to fail. The cost to Canadians was US$13.7 billion: $10.8 billion to GM and $2.9 billion to Chrysler.
If business leaders ever wonder why a chunk of the public disdains business and calls for higher corporate taxes or sector-specific increases (e.g. higher royalty rates for energy and mining, higher stumpage fees in forestry) or just increased business taxation in general, here's a clue: too many companies are addicted to corporate welfare, a.k.a: crony capitalism.
There is apparently no shortage of politicians with a not-so-secret Hollywood love affair: they love to throw tax sweeteners and direct subsidies at the film industry, this in an effort to lure film production to their province or state. In British Columbia, the existing film tax credit hit the provincial treasury for $331 million in the last year alone.
If there was a theme in the recent federal budget, it was how chock full it was with new corporate welfare. The underlying refrain was how big government will help big business with your tax dollars....
In just the first two weeks of January, the prime minister announced another $250 million for the Automotive Innovation Fund -- a federal subsidy program that provides the auto sector with taxpayer cash for research and development. I say let companies duke it out without taxpayers being forced into the ring.
Vancouver's Bixi public bike-share program may sound like good public policy but in the end, it will be taxpayers who will get taken for a ride. Why are they paying for bikes when the car shares have proven transportation co-ops and businesses can be sustained without taxpayer dollars?
For those who might have missed what's happening in the city where Wayne Gretzky first made his mark in professional hockey, another round of taxpayer subsidies might soon be delivered to for-profit p...
With the recent first anniversary of Occupy Wall Street, consider one beef from protesters that was legitimate: crony capitalism. But insofar as any protester was annoyed with politicians who like to subsidize specific businesses -- corporate welfare in other words -- why do the media so rarely report on it?
Corporate welfare is a losing proposition. Peer-reviewed research on business subsidies does not support (political and recipient) claims that corporate welfare is responsible for economic growth or job creation, two of the most oft-heard claims. At best, a generous interpretation of the literature suggests that subsidies may, in very specific locations, produce some effect on local economic behaviour.
Around Labour Day, a plethora of news stories focus on the state of unions, and often, their interaction with business. Given the name of the holiday, the attention is understandable. However, the focus on unions and corporations, especially where governments are involved to set policy and create legislation, often misses two other critical groups: consumers and taxpayers.
The B.C. government's Pacific Carbon Trust has become frighteningly adept at taking taxpayers' money--$14 million last year--and transferring it to big businesses. It's time for the provincial government to scrap the Trust, and end corporate welfare disguised as environmentalism. The numbers prove that transferring tax dollars to companies through the illusion of carbon neutrality is a massive failure.