In his 1946 essay Politics and the English Language, George Orwell argued that “political speech and writing are largely the defence of the indefensible.”
Orwell’s quip came to mind again recently in light of Bombardier’s defence of taxpayer subsidies to business in response to my recent study on the matter.
John Paul MacDonald, Bombardier’s vice-president of public affairs, made several assertions in defence of using taxpayer dollars to subsidize business: The length of time for a product to make it from conception to development to market “necessitates partnerships between the private sector and governments;” Bombardier spends a lot of money and employs many people in Canada; other countries also support “their local champions” with tax dollars; the federal government produced a report this spring that makes the same points.
Bombardier has publicly noted how it has repaid $275 million on two government loans originally worth $187 million.
Private-sector lenders require repayment of the original loan with interest, so it is not clear why Bombardier thinks it remarkable it did the same on two of its government loans.
What Bombardier has not disclosed is how the company has chronically sought taxpayer subsidies, or its overall repayment records, or how much the corporation has received in grants.
According to records obtained from Industry Canada, Bombardier first started receiving federal tax dollars in 1966. Over the decades, adjusted for inflation to current dollars (critical in order to make apple-to-apple comparisons in real dollars), various Bombardier iterations received more than $1.1 billion in 48 separate disbursements from Industry Canada. (That figure thus excludes tax dollars received from other federal departments or other governments.)
Almost $300 million went to Bombardier in 17 “contributions,” government language for grants, never to be repaid. Another $79 million arrived in the form of repayable loans.
However, the bulk of the money, $759 million in 28 separate disbursements, went to Bombardier in the form of “conditionally repayable contributions.” The word “conditionally” is critical to note, as such taxpayer-financed loans are not necessarily repaid in full, even decades later.
This was revealed in a 2005 analysis prepared for Industry Canada by consultants Hickling Arthurs Low, which analyzed one now-defunct federal program, Technology Partnerships Canada. That is the program that Bombardier notes is one source of that company’s corporate-welfare income.
Hickling Arthurs Low noted: “Repayments are typically less than originally forecast.” By 2005, optimistic repayment estimates were already reduced to just $2.6 billion, instead of the original forecast of $4.3 billion.
Also, as Prof. Terry Buss, a noted expert on business subsidies, has discovered, claims of increased investment and employment from corporate welfare, promulgated in industry and government studies, often result from correlation-causation errors. In addition, such reports fail to account for how “gains” to one region are offset by losses elsewhere; for example, factories that close because of taxpayer-financed competition.
More generally, on the assertion from defenders of business subsidies that economic growth and job creation results, they forget that the money comes from somewhere — from the higher rates of tax needed to finance corporate welfare.
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.
Mark Milke is a senior fellow at the Fraser Institute.
