“While they publicly denounce increased government expenditure, particularly in the form of social welfare, these champions of free enterprise actively lobby the government for incentive grants, research grants and tax concessions, and all manner of assistance at the individual taxpayer’s expense.”
Then federal NDP leader David Lewis, in his 1972 book, Louder Voices: The Corporate Welfare Bums
Over the last three years, federal Conservatives have run up $102-billion in new debt, with the forecast for the next four years at another $59-billion. In total, that’s $161-billion in new red ink over seven years.
Given the rancor likely to occur over various attempts to balance the books with a Tory majority government and an NDP opposition in parliament, here’s a modest proposal they should jointly act on: end corporate welfare.
By corporate welfare, think of direct cash payments to business – not for goods or services, but simply because a government wishes to retain or attract a particular business or industry. Sometimes the money is a grant, or a “repayable” loan (often never repaid), but it’s the same strategy: governments pick winners and losers in the marketplace. Grants and loans to the aerospace and automotive sector are prime examples.
High cost for taxpayers
There are plenty of reasons to stop the practice, starting with the cost to taxpayers. Between 1994 and 2007, Ottawa, the provinces, and municipalities spent $203-billion on corporate welfare, or $15,216 over that 13-year period for every tax filer who paid tax. (At just the federal level alone, Ottawa doled out $67-billion during that time.)
Beyond the cost, consider other reasons. Corporate welfare creates an uneven playing field between businesses and industries that do not receive taxpayer support, and those that do. The result is an artificial, politically-created advantage. When Chrysler and GM received a bailout in 2009, it came at the expense of additional sales that would have gone to a more prudent and better-run Ford or Toyota. Money is thus taxed away from all of us and given to a specific company – and diverted from more productive uses.
Problematically, as governments grant such subsidies, more government “clients” are created at the expense of a more efficient tax system with fewer subsidies and lower overall tax rates.
It’s akin to throwing money from the top of the CN Tower to a crowd below: There will be beneficiaries, money spent, jobs “created,” and tax revenues eventually due to the free cash, but not on a net basis. After all, that money had to come from somewhere.
The NDP may not like lower corporate tax rates, but they’re here to stay under a majority Conservative government. So they might as well imitate a past NDP leader on the matter of business subsidies and oppose them. It was, after all, former federal NDP leader David Lewis, who popularized the term “corporate welfare bums” in his 1972 book.
To wit: Even if they agree on nothing else in the next four years, the Prime Minister and Jack Layton should ban business subsidies.
Mark Milke is the Alberta director of the Fraser Institute and author of its studies on corporate welfare. Mark.milke@fraserinstitute.org.
