Hope other developed nations aren't as usefully idiotic

[FrankGSterleJr]

Canadians pay hefty $684B bill in business subsidies over 30 years, study shows

OTTAWA — Doling out hundreds of billions of taxpayers’ money to help protect and nurture the private sector has been a costly practice — some would call it fiscal folly — for Canadian governments.
Over a period of nearly 30 years, federal, provincial and local authorities together spent almost $684-billion on subsidies.
Even though some of that relief was passed onto consumers in the form of reduced rates for electricity and heating bills, the impact was marginal at best.
In a study released Tuesday, the Fraser Institute found that federal subsidies totaled $342.6-billion between 1981 and 2009.
The tally for provincial governments came in at $287-billion, while local officials authorized $54.2-billion in spending.
Annual subsidies overall topped out at $34.8-billion in 1984. The total declined to $11.6-billion in 1998, and finished at $24.4-billion in 2009, the study found.
Despite the high cost of subsidies, many politicians see them as urgent and necessary transfusions for anemic industries suffering from regional shifts in the economy and competitive threats from beyond our borders. For others, as crystalized by David Lewis in the NDP’s 1972 election slogan, subsidies pander to “corporate welfare bums” who could do just as well without any handouts.



IMF Pegs Canada's Fossil Fuel Subsidies at $34 Billion
In such giveaways we're a world leader, a fact rarely noted when federal budgets are debated

There's a reason Canada enjoys some of the cheapest gas in the developed world. Nozzle photo via Shutterstock.
While Canada slashes budgets for research, education and public broadcasting, there is one part of our economy that enjoys remarkable support from the Canadian taxpayer: the energy sector.
The International Monetary Fund estimates that energy subsidies in Canada top an incredible $34 billion each year in direct support to producers and uncollected tax on externalized costs.
These figures are found in the appendix of a major report released last year estimating global energy subsidies at almost $2 trillion. The report estimated that eliminating the subsidies would reduce global carbon emissions by 13 per cent. The stunning statistics specific to this country remain almost completely unreported in Canadian media.
Contacted by The Tyee, researchers from the IMF helpfully provided a detailed breakdown of Canadian subsidies provided to petroleum, natural gas and coal consumption. The lion's share of the $34 billion are uncollected taxes on the externalized costs of burning transportation fuels like gasoline and diesel -- about $19.4 billion in 2011. These externalized costs include impacts like traffic accidents, carbon emissions, air pollution and road congestion.
The report also referenced figures sourced from the OECD showing an additional $840 million in producer support to oil companies through a constellation of provincial and federal incentives to encourage fossil fuel extraction. This brought total petroleum subsidies in Canada in 2011 to $20.23 billion -- more than 20 times the annual budget of Environment Canada.
In comparison to other countries, Canada provides more subsidies to petroleum as a proportion of government revenue than any developed nation on Earth besides the United States and Luxembourg.
Natural gas consumption also enjoys billions in subsidies in Canada. The IMF estimates that un-priced carbon emissions from burning natural gas added up to $7.3 billion per year. There's another $440 million in producer support and $360 million in other un-taxed externalities, all of which tops $8.1 billion. This tax giveaway on natural gas alone is 44 per cent more than Canada provides in international aid every year.
What about coal? Canada consumes over 30 million tonnes per year. While we currently export over half our domestic production, the IMF study only considered externalized costs within our own country. They found that the coal industry receives $4.5 billion in annual subsides -- almost all of this is un-priced carbon and sulfur dioxide emissions. This generous largesse towards the dirtiest of fuels is about four times what the CBC receives in public support every year.
Or we could spend that on ...
What could Canada do with an extra $34 billion a year? Both Vancouver and Toronto are struggling with how to fund long overdue upgrades to public transportation. Subway construction comes in at about $250 million per kilometre, meaning we could build about 140 kilometres of badly-needed urban subway lines every year. Light rail transport (LRT) is about one-quarter of the cost of subways, meaning for the same money we could build about 560 kilometres of at-grade transit infrastructure.
This foregone revenue in less than two years could fully fund the Big Move transit plan for southern Ontario, providing affordable access for 80 per cent of people living from Hamilton to Oshawa. Toronto's transit system has languished for decades. This sorely needed infrastructure would save the average household thousands in wasted time sitting in traffic, and Canada's economy billions in reduced congestion costs.
The proposed Vancouver subway line to the University of British Columbia could be built using less than two months of the subsidies provided every day to the energy sector. Forty kilometres of rapid transit in Surrey could be had for about the same amount.
What about green energy infrastructure? Adding solar and wind capacity provides some of the best job-generation per dollar of any option available -- more than seven times the employment from an equivalent investment in oil and gas extraction. Extrapolating the findings from a 2012 report on green jobs, $34 billion could create 500,000 person years of employment and install more than 150,000 megawatts of clean generating capacity. Canada currently ranks 12th in the G20 on green energy investment and has been steadily falling behind our competitors.
Canada's infrastructure deficit of crumbling roads and outdated water and sewage treatment is pegged at $171 billion. This backlog could be wiped out in five years with the revenue we are subsidizing to the energy sector.
Of course, not all things of value can be measured by bricks and mortar. Thirty-four billion dollars each year could provide $10-a-day childcare for 5.5 million children ages 0 to 5. Canada's child care costs are currently the highest in the OECD.
No free lunch in energy costs
For all the complaining Canadians do about fuel prices, it's ironic to note the IMF essentially says we are undervaluing the true cost of gasoline by about $0.30 per litre. Compared to other nations, Canada enjoys some of the cheapest gas in the developed world. Fuel in Italy and Germany is almost double our price at the pump. Ever think it's odd that bottled water at the gas station costs more than the fuel you just put in your tank?
Consider for a moment all the costs of finding and extracting crude oil, shipping it across the globe, refining it into gasoline and trucking it to your neighbourhood. Not to mention the billions spent by some countries projecting military power into volatile oil-producing parts of the world and the very human price of those interventions. Additional un-priced costs after petroleum is burned, such as climate change, traffic congestion, road accidents and air pollution make gasoline perhaps the most subsidized substance on Earth.
Every decision based on artificially low energy prices can have years of unintended consequences. If gas is cheap, people will choose to buy cars rather than take transit, clogging both our roads and emergency rooms. Transportation accidents alone cost Canada $3.7 billion each year. Every vehicle bought based on low fuel prices will produce years of carbon emissions, and every owner over the life of that vehicle will have an interest in voting for cheaper gas.
The opposite, of course, is also true. Less than half of Vancouverites in their early twenties today have chosen to get a driver's license, down from 60 per cent 10 years ago. Better public transit and more expensive car ownership seem to be the main factors driving this remarkable demographic shift.
The IMF can hardly be accused of being a left-leaning, alarmist organization. Through this valuable research, they make the case that there is no free lunch in energy costs, and we exclude these externalized costs at our peril.
A country can be judged on what it chooses to tax and what it chooses to subsidize. And by that yardstick, this nation currently seems to care more about cheap energy than almost anything else.



Bombardier and Canada's Corporate Welfare Trap

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.
Bombardier Inc., which recently announced it would lay off 1,700 people, has been one chronic seeker and a regular recipient of such taxpayer assistance. The Montreal-based aerospace company is thus a useful example of corporate welfare in action, the tax dollars at stake, and the regular, inflated claims about the beneficial effects of such subsidies.
Bombardier's corporate welfare began, at least federally, in 1966 when it received its first disbursement of $35 million from the federal department, Industry Canada. In the decades since, various Bombardier iterations received over $1.1 billion (all figures adjusted for inflation) in 48 separate disbursements from just Industry Canada. That includes two 2009 cheques worth $233 million.
Most of the money, excepting $55-million in grants, came in the form of "conditionally repayable contributions" -- conditional loans where repayment depends on the performance of a particular project.
That $1.1 billion does not include tax dollars received from any other federal department or other governments, including in Ontario, Quebec and even Great Britain ($298 million in the latter case). But if taxpayers wish to know how much money has been repaid out of just the amounts above, they're mostly out of luck.
Publicly, Bombardier claims it has repaid $275 million on two government loans originally worth $187 million. That ignores the dozens of other disbursements and much larger amounts loaned to the company.
Some other scraps of information are available though. In 2008, Industry Canada's department performance report noted a $108.4 million loan guarantee write-off. The department did not specify which company benefitted when taxpayers covered the loan, but media reports noted it was for government guarantees connected to Bombardier's turboprop aircraft.
Beyond such glimpses, my Access to Information requests to Industry Canada are regularly returned with the repayment records of most companies (not just Bombardier) blacked out. Under the federal Access to Information Act, the department must, legally, withhold such information if a company might suffer financial loss or have its competitive position undermined. In addition, Bombardier has also filed in Federal Court to prevent access to such numbers.
There are even larger corporate welfare recipients than Bombardier -- for example, Pratt & Whitney has garnered $3.3 billion from Industry Canada since 1970. But if subsidies are so commercially sensitive, it should be obvious that governments potentially harm competitors when they interfere in an open market and at taxpayers' expense. Then there is the fact that the money governments hand over is first taken from someone else, either a private citizen or another Canadian business. Corporate welfare is not a costless activity.
More generally, despite the multiple claims for subsidizing businesses with tax dollars -- higher economic growth, more jobs and extra tax revenues -- the justifications wilt when examined closely.
For instance, one of the world's foremost experts on business subsidies, Professor Terry Buss, has noted how the various claims often result from correlation-causation errors. (That the rooster crows and the sun rises, does not mean the former caused the latter.)
Also, the government and industry studies that promulgate such myths fail to account for how "gains" to one region are necessarily offset by losses elsewhere.
The simplest example of this substitution effect occurred back in 1986 when Industry Canada helped pay for the construction of a new fish processing facility in Quebec at a cost of $2.2 million. The justification was that an additional 250 jobs would be created when the new plant opened its doors. However, as the Auditor General noted in 1995, the nearby existing fish-processing facility (which also received federal subsidies) soon closed with job losses equivalent to those created by the new market entrant. Net employment gains were zero because jobs were transferred -- not created -- at the cost of taxpayer subsidies.
Corporate welfare is not inevitable as policy. Back in the 1990s in Alberta, after a plethora of loans and loan guarantees signed during the Peter Lougheed years went south, leaving taxpayers with a $2.2 billion loss, the then government of Ralph Klein decided it was out of the business of being in business. It was a pledge and a legislature-approved policy to which the Klein government mostly stuck.
There is nothing contradictory about wanting Bombardier, Pratt & Whitney, or other businesses to thrive and yet opposing taxpayer subsidies based on the empirical evidence. Corporate welfare is costly and taxpayers don't need to be continually dragged into corporate battles for market share.



BusinessView: The Fraser Institute: Canadian Governments Dole Out Billions in Taxpayer-Funded Subsidies to Businesses and Beyond

From 1980 to 2009, federal, provincial and local governments in Canada doled out $683.9 billion in subsidies, finds a new study released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
The study, Government Subsidies in Canada: A $684 Billion Price Tag, measures the scope of government subsidies to private businesses, government business enterprises such as Crown corporations, and consumers.
"From Parliament Hill to city hall, governments across Canada continue to dispense taxpayer-funded subsides to a wide range of special interests. It's one thing to subsidize the heating bills of low-income Canadians, but subsidies to big corporations, for example, are something else entirely," said Mark Milke, study author and senior fellow at the Fraser Institute.
The $684 billion subsidy bill included $342.6 billion from the federal government, $287 billion from provincial governments, and $54.2 billion from local governments. When broken down into years, total subsidies peaked in 1984 at $34.8 billion, dropped to a low of $11.6 billion in 1998, then rose to $24.4 billion in 2009.
On a per-taxpayer basis, the cost for subsidies in 2009 was equivalent to $1,507, nearly double the 1998 per-taxpayer rate of $797.
"Politicians and policy makers create and maintain these subsidies but ultimately, taxpayers pay the freight," Milke said.
Among the provinces, Quebec spent the most on government subsidies ($115.5 billion) followed by Alberta ($49.9 billion) and Ontario ($46.7 billion), while Prince Edward Island ($1.5 billion) spent the least.
Unlike Alberta and Ontario, where government-mandated reductions in power bills for consumers account for a significant portion of subsidy spending, Quebec mainly subsidizes businesses. In 2009 (the last year data was available), Quebec subsidy spending hit a record high of $7.2 billion.
"In Quebec, subsidies increased almost every year, and the bulk of the subsidies went to private businesses and government businesses-not ordinary consumers. The Quebec government leads the country in corporate welfare spending," Milke said.
Speaking of corporate welfare, Canadian taxpayers spent billions subsidizing private businesses over the decades. For example, between 1961 and 2013, Industry Canada, a federal government department, gave $22.4 billion to private businesses.
"Subsidy proponents argue that taxpayer assistance is required to correct market failure and infuse fledgling businesses with start-up cash, but many businesses that receive corporate welfare are already established, and in many cases, possess more cash-on-hand than the amount received from government," Milke said.
Finally, the study raises questions about fairness and transparency, and the politicization of subsidy spending.
For example, VIA Rail, a Crown corporation, received $4.5 billion in subsidies from the federal government between 1996 and 2012. Pratt & Whitney Canada, a private business, has received $3.3 billion in subsidies since 1970.
"Taxpayers subsidize both VIA Rail and Pratt Whitney, disadvantaging other aerospace manufacturers and bus and airline companies that compete in the marketplace without government assistance," Milke said.
"Subsidies often cater to special interest groups that may support or oppose politicians with an eye on government handouts. At the very least, governments should lift the veil of secrecy that often shrouds repayment records and other aspects of subsidy spending," Milke said.



Quebecor president Pierre Karl Peladeau announces the creation of the Sun News Network at a
CBC lashes out at Quebecor's $500-million in public subsidies

The CBC is fighting back against Quebecor’s attacks on its $1-billion in annual federal funding, accusing the private broadcaster of receiving $500-million in public subsidies over the last three years without being accountable to taxpayers.
Having been accused for months of being a “money drain,” the CBC is going further than ever in a bid to defend itself, accusing Quebecor Media Inc. of using public subsidies to “make record profits.”
The CBC added that Quebecor president Pierre-Karl Péladeau has “sent over a dozen letters to the Prime Minister and others in government to complain that Radio-Canada does not spend enough money advertising in his newspapers.”
CBC officials refused to release their copies of the letters, adding their goal was simply to correct the impression that Quebecor gets nothing from the public while the CBC receives $1-billion a year in federal funding.
Quebecor publishes newspapers across Canada, runs the dominant TVA network in Quebec and has recently launched the all-news Sun TV, which is in competition with the CBC News Network.
The firm’s media outlets have regularly portrayed the CBC as a wasteful corporation, attacking the public broadcaster in both official languages in its pan-Canadian media outlets, in part with documents obtained under Access to Information.
Quebecor rejected the CBC’s $500-million figure as a lie, adding it had referred the matter to its lawyers.
In a statement, the company complained that the CBC released its statement one day ahead of a planned appearance by Mr. Péladeau before a parliamentary committee studying the corporation’s refusal to release some financial information through the Access to Information Act.
Quebecor said that TVA did receive $21-million from a federal television fund in 2010, but that another of its entities, cable provider Videotron, contributed slightly more to the pot.
The firm also blasted the CBC’s advertising “boycott” of its various media operations.
“Quebecor Media made it known that it was unacceptable for a Crown corporation to deliberately ignore the most important media in Canada .... because it doesn’t appreciate the editorial views of its publications,” the company said in a statement.
In recent years, Quebecor researchers have submitted hundreds of access-to-information requests to the CBC, leading to a court battle in which the Crown corporation is fighting to keep records involving its creative, journalistic and programming activities completely exempt from public view.
CBC President Hubert Lacroix has accused Quebecor of using his Sun newspapers to smear the public broadcaster.
“For more than three years, Quebecor has been using its newspapers, and more recently, its Sun News Network TV license to pursue a campaign against CBC/Radio-Canada,” the CBC said in the statement issued on Wednesday.
“Quebecor has received more than half a billion dollars in direct and indirect subsidies and benefits from Canadian taxpayers over the past three years, yet it is not accountable to them,” the CBC said.
The CBC explained its $500-million figure by pointing to $200-million in federal and provincial funding and tax credits related to Quebecor’s television programming, as well as $13-million from the Canada Periodical Fund for its magazine. Finally, CBC argued that Quebecor saved $333-million in wireless spectrum costs by receiving a set-aside portion in an auction at a below-market rate.
The fight between Radio-Canada and Quebecor has been waged on a number of fronts. Mr. Péladeau sued a senior official at Radio-Canada, Sylvain Lafrance, who had called him a “voyou” (loosely translated as a “thug” or a “bum”) in 2007. The matter was dropped earlier this year.

[miloson24]

“The effective way to regulate them would be for the province to do something that would allow municipalities to either ban them, or the province should really step in to set up parameters for how they operate so people aren’t at risk,” he said. “We would support that.”