Tories revive corporate welfare politics – FullComment/Canada
December 14, 2010.    Adrian MacNair

The Conservative government has announced it is loaning aerospace giant Pratt & Whitney Canada $300 million for a $1 billion research project to develop the next generation of aircraft engines.

Industry Minister Tony Clement made the announcement on Monday saying it will create 700 high-skilled jobs in the GTA and more than 2,000 over the 15-year lifespan of the project. He also claimed the firm is in the process of hiring 200 engineers.

“The project will create and maintain Canadian research jobs and keep Canada at the forefront of the international aerospace industry,” Clement said to workers and media at the Pratt & Whitney plant in Mississauga.

‘Create and maintain Canadian jobs’ has been the Conservative mantra during their recent shift to Keynesian economics and massive long-term deficits for the next half decade. The same political party that once decried government largesse and corporate subsidies (also known as corporate welfare) is now a major player in the ‘too big to fail’ macroeconomics game.

Tony Clement was on the defensive on Monday, explaining that the investment was a loan and a guarantor of jobs in the important Canadian aerospace industry. But as reported by the CBC, this is the same company that got $350 million in loans just four years ago, and that debt is as outstanding as Stephen Harper’s deflection rate during Question Period.

In fact the last time the corporation got money from the feds it was under Maxime Bernier’s watch. Tony Clement deflected financial questions about the cost effectiveness of the loan to the former industry minister while fielding a barrage on Twitter Monday night.

At last glance, Pratt & Whitney owes taxpayers at least $1.2 billion dating back more than 13 years. David Lewis, who coined the term “corporate welfare bums” almost 40 years ago, must be turning over in his grave.

Even if we assume that 200 Canadian workers are hired immediately, those workers would have to pay $100,000 a year in taxes over 15 years for the immediate investment to repay itself. For the investment to really make sense we have to assume that the government’s estimates of 2,000 new hires, already qualified as being over the 15-year period, would have to happen sooner than 15 years to make mathematical sense.

But the Conservatives have an answer for that one, too. According to Clement’s press secretary, “hypothetically, without the project, the workforce would have shrunk.”

That’s the catch-all for the whole stimulus spinning wheel now isn’t it? If the economy gets better  it’s because of stimulus dollars or government subsidies. If it stays the same or gets worse then the government says the situation would have been even worse without the investment.

The company doesn’t have to pay any of the loan during the research and development period, expected to take five years. It then has 15 years to repay the money, which means that by the time we (theoretically) get to see a return for the investment, the players who made the decision will have changed ministries, jobs, or governments.

And what will it matter by then? The corporation hasn’t taken any risk. The taxpayers have. The loan is entirely interest-free because it’s being offered under an official government program.

The recession had an effect on the company, which sold almost 20 per cent fewer engines in 2009 than a year earlier. To mitigate the effect, the company began a series of cost-control measures in the past two years, including a hiring freeze, a temporary summer plant shutdown, and layoffs of about 15 per cent of its workforce. This, despite the fact the company has been propped up in Canada with taxpayer funds for at least 13 years.

The question might not be how many jobs has the government saved by dumping over $1 billion into Pratt & Whitney over the past decade. It’s how many jobs have been stolen from competing companies and industries who haven’t had the good fortune to be publicly subsidized? And won’t the money merely restore the 15 per cent (1,000 new hires would account for it) of the workforce lost during the recession?

Where the members of the Conservative caucus learned about the invisible hand of economics 101 is anybody’s guess. Based on the performance of this government I suspect they skipped it entirely.

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