Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Monday, April 13, 2015

The GM bailout — and the fracture in Harper’s fiscal facade

In the 1990s, Prime Minister Jean Chretien balanced Canada’s books on the backs of the provinces. With the IMF breathing hot and heavy down the nation’s neck, Ottawa turned off the taps in 1995, cutting provincial transfers by 21 per cent over two years.

The budget soon returned to balance, the Liberals took the credit for slaying the deficit and taxpayers grumbled as provincial governments scaled back spending and/or ramped up taxes to cover the gap in their revenues.

Today, Prime Minister Stephen Harper is cutting out the provincial middleman — and balancing the books on the backs of taxpayers themselves. Faced with falling oil prices, the Conservative government is selling off Ottawa’s remaining stake in General Motors, some 72 million common shares, valued at between $2.3 and $3.2 billion. This will allow his government to deliver a balanced budget on April 21 — something the Tories will be beating their chests about throughout the coming election campaign.

Oddly enough, $3.2 billion is also roughly the sum Harper needs to pay for the expanded Child Benefit and the income-splitting tax measure the Tories announced back in October 2014, before oil prices took a nosedive and threw revenue and budget projections out of whack.

So are taxpayers getting a tax break, or merely breaking even? Neither, actually. Despite the latest sale, they’re still on the hook for $3.5 billion in “investment” the government failed to recoup from the GM bailout. Back in 2009, the Canadian and Ontario governments rescued the near-bankrupt GM with $13.7 billion of public money. But they’ve only recovered $10.2 billion of that total. So we’re still out $3.5 billion.

But hey, the budget is balanced and thousands of auto manufacturing jobs are secure, right? Maybe not. Jerry Dias, president of UNIFOR — which represents 21,000 Canadian autoworkers — argues that it was a mistake for Ottawa to liquidate its stake in GM in such a hurry, since by doing so the federal government has abandoned its leverage against possible plant closures in 2016.

“It is remarkably short-sighted of the federal government to sell off its shares in GM at a time when there has been widespread agreement that securing GM’s future in Canada is critical,” he said.

I’d go further — I’d say it was short-sighted for the government to spend this money in the first place. GM’s jobs may now be the costliest in the country. The company now employs 6,300 people here; divide the $3.5 billion loss on the bailout by that figure and it works out to roughly $550,000 in public funds spent to “save” each job. Even if each of these jobs produces nine spinoff jobs, as the Canadian Automobile Manufacturer’s council claims, that’s a whopping $61,728 per job.

And those jobs are paid for in part by people earning far less than the people they’re subsidizing. According to a study by the Institute for Research on Public Policy, quoted by Carol Goar of the Toronto Star, the average assembly line worker in Ontario makes $66,000. The average Canadian worker earns about $48,880.

The bottom line is that corporate welfare doesn’t work — not in the auto industry, not in any industry. It subsidizes jobs that are otherwise unsustainable. It represents a regressive redistribution of income from lower- to higher-income workers. It allows companies to forego boosting efficiency while remaining in business. Which, over the long term, makes them even less competitive. Which gets them into the kind of competition trouble which demands … more bailouts. Vicious cycle.

One might have expected a ‘Conservative’ government to know better than to keep feeding this beast. Instead, the Harper government is using the GM deal to balance the books in the interest of political optics, so it can offer families tax relief paid for with their own money while claiming to have ‘saved’ an industry.

That’s not ‘sound fiscal management’. Sadly, in Canada it’s business as usual.

Original Article
Source: ipolitics.ca/
Author: Tasha Kheiriddin

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