Canada’s Corporate Welfare Bill: $30,252 per Family: The justifications for corporate welfare fail again

Commentary, Taxation, Frontier Centre


The English poet Philip James Bailey once wrote that we live “in feelings, not in figures on a dial.” It was  an allusion to the notion that numbers and statistics rarely make anyone’s pulse start to race. But there are exceptions: think back one year to the plummeting value of your RRSP. Or consider this—over 13 years, our collective Canadian governments spent $203 billion to bail out all sorts of businesses. That equates to $15,126 for every Canadian who filed and paid taxes between 1994 and 2007.
For those who are dual-income families, ask yourself what you might have done with $30,252. Instead of letting individuals pay down a mortgage, save, or pay for their children’s tuition, or even buy a nice car, governments decided to make such choices for us. Canadian governments bailed out car companies after most of us ignored their showrooms; they tossed taxpayer cash at the aerospace sector on the faint hope that it might stick to some magical job creation wall and create employment.
The folly of all this just became clear again courtesy of Bombardier, the Montreal-based aerospace company. (It was one of the largest corporate welfare queens until General Motors and Chrysler blew past it this year.) Just the other day, Bombardier announced 715 people would get pink slips before Christmas. That’s in addition to Bombardier’s previously-announced 1,710 layoffs in the Montreal area.
There are plenty of justifications for corporate welfare, none of which make it through the empirical, peer-reviewed gauntlet, or even the smell test of common sense. Here’s one example: anyone who thinks a single job is saved or created because a government shifts auto sector jobs from Toyota to General Motors (by rescuing the latter) or to Brazil from Canada (as the Brazilians do when they subsidize their aerospace industry) is deluding themselves. They have fallen for the corporate welfare sales pitch which plays every city, province and country and their taxpayers for suckers.       
Here’s how the 13-year, $203-billion business subsidy bill breaks down. Between 1994 and 2007, the biggest spenders were the provinces (at $110.3 billion); the federal government ($66.6 billion); and then those which so often claim they are broke and thus justify tax increases—municipalities. Cities and hamlets across Canada tossed $25.8 billion at business in that 13-year period, likely in the vain effort to get corporations to locate or stay in their locale, unaware most other cities played the same subsidy game. 
It’s worth noting that before the recent recession, the then newly elected Conservatives in Ottawa paid out $5.5 billion in corporate welfare to the usual suspects in their first full fiscal year in office (the April 1, 2006-March 31, 2007 budget year ). That was a minor reduction from the previous year in which the Liberals spent $5.8 billion on that priority. If there was a hidden Conservative agenda to cut corporate welfare, it apparently topped out at a $300-million cut.
Canadians shouldn’t expect further, tiny reductions in the business subsidy bill. Instead, the welfare tab will grow in subsequent years by the time Finance and Statistics Canada can collect and report all the data . The material detailed here ends  in March 2007. Since then, there have been two more budget years. As far as I can glean from public announcements and the federal Finance department, this year’s automotive bailout cost $15.3 billion in authorizations between April and June. So add that to the $203 billion corporate welfare bill, and whatever else shows up in the 2008 and 2009 budget years.
Here’s one last number with which I will try and defy the Bailey aphorism on figures. While every government is responsible for corporate welfare, consider this easy-to-understand comparison: federal red ink. The 13-year bill for corporate welfare is equivalent to about 40 per cent of our $500-billion federal debt. Regrettably, both corporate welfare and public debt look set to spike in the years ahead. It’s not a coincidence. Much of the latter is caused by the former.