Highlighting Corporate Failure

There are two lead letters in today's Star that bear reproducing. Expect no admission of a flawed ideology on the part of the neoliberals among us, however:

Re: House of Harper quickly crumbling, Feb. 22

Suddenly a lot of people from banks and corporations are in favour of the Liberals running infrastructure-investment-driven deficits from $30 billion to as high as $50 billion. In other words, they want government to do the really heavy lifting in stimulating the economy along with assuming, on behalf of the Canadian taxpayer, all of the financial as well as political risk.

This is the same group that for years has said governments really don’t create jobs, but rather are responsible for creating the right “environment and supports for investment,” by which they usually mean taxes.

Over the last decade, Canada’s corporations were given some of the deepest tax discounts in the world, and yet they have utterly failed to do anything other than mostly pocket the rewards.

We need to remember that those same corporations also failed to reinvest their tax windfalls in new Canadian jobs (ex-Bank of Canada governor Mark Carney’s “dead money”). Recent data from Statistics Canada also suggests many of the corporations were in fact investing their tax windfalls outside of the country.

Canada’s books for 2013–14 show personal taxes accounted for 48 per cent of total federal revenues, while corporate taxes accounted for a mere 13.5 per cent of that total.

So yes, Canada should indeed invest heavily in infrastructure investment in the coming years, but the question remains: Why can’t those corporations assume a larger financial input and responsibility in the country’s job and economic future?

Edward Carson, Toronto

In response to the CBC Power & Politics Ballot Box question, “How big should the deficit be?” 77 per cent responded “whatever is needed.” These voters understand that the deficit should be judged by results and not by arbitrary targets such as budget balances or debt-to-GDP limits.

The practical limit on spending for a sovereign country with a floating currency is the availability of domestic resources unused by the private sector. A reasonable measure of these resources is unemployment. When infrastructure, program spending and direct job creation measures result in jobs for all Canadians who want one, then government must either limit expenditures or increase taxes so as to prevent inflation.

But the Canadian economy is far from experiencing inflation, and there are 1.3 million Canadians who could be doing productive work. The federal government must challenge the conventional wisdom and spend whatever is needed.

There is no question it can do so, because it owns the Bank of Canada, which allows the federal government to run deficits of any size for as long as required.

Larry Kazdan, Vancouver

The Harper Legacy: Empty Mantras And Empty Ideology

I hope readers don't think I have grown lazy or burnt-out when I reprint letters from The Toronto Star. It is just that their observations and ideas are frequently so nicely expressed that I think they merit some exposure in the blogosphere.

Today's offers a sharp rebuke to the tired Tory ideology of low corporate taxes as the path to prosperity, a mantra that has been repeatedly shown to be as devoid of value as the head of their leader and our Prime Minister is devoid of ideas and vision.

Re: Canada hit by unexpected rise in jobless rate, Jan. 10

When asked about the December job losses, Finance Minister Jim Flaherty lamely trots out his usual PMO-approved talking point that we must “keep taxes low to create the environment where job creation can flourish.” Translation: Slash government.

Not just hogwash, sir — stale hogwash!

Taxes are already low enough. It is the continual bleeding by mass employers that drive these kinds of losses, like plant closures announced by Kellogg in London, Heinz at Leamington, CCL Industries in Penetanguishine and others that have already occurred over the past several years, including the steel industry. True, many closures are in Ontario, but that’s because that province traditionally formed our industrial heartland.

Indeed, some jobs are lost because of technology but the majority are because U.S. head offices are taking jobs back to the U.S. or other firms are moving to low-wage countries that Canadians can never compete with, with labour rates as low as $1 a day, such as the garment industry.

If the Conservative government in Ottawa is serious about job creation, it will formulate and actively promote an industrial strategy for Canada, one that goes beyond the Alberta tar sands and the oil industry. Elsewhere, tinkering with a few high-tech projects may create a relative handful of well-paying work but not the thousands of jobs and steady wages that industry can provide.

The Tories demonstrated that they knew this sort of thing could work when they pumped life-saving public funding into GM of Canada and Chrysler Canada when those two industrial titans were threatened with bankruptcy. It’s that or reverse course on slashing government, the only other mass employment sector we have left.

In the end, it seems the Harper government is rendered impotent on jobs creation by its own narrow-minded ideology based on fantasy and blind to the reality of our preventable national decline.

Brad Savage, Scarborough

On Corporate Welfare

David Lewis, the one-time head of the federal NDP and father of Stephen Lewis, used the phrase corporate welfare bums in his 1972 federal election campaign to describe the various subsidies handed out to the corporate world. It was a withering jab at the world of business, so proud to trumpet the merits of unfettered capitalism while not too proud to take every bit of free money that government has to offer it.

Today, that concept has never been more relevant. Probably the most egregious example of corporate welfare will become apparent in the coming months as the rest of Canada ponies up to pay for the environmental devastation wrought in Alberta that is, in my mind, the direct result of climate change, change which the corporate world continues to deny, evident in its ongoing concerted effort to oppose any measures that might ameliorate its most devastating effects. Corporate Canada will be asked for nothing by the Harper regime, which will continue to lower its tax rates as soon as the deficit is eliminated.

The futility of corporate welfare is, I think, very nicely addressed in the lead letter appearing in this morning's Star as Morgan Duchesney of Ottawa points out the folly of lowering corporate tax rates and getting nothing in return:

Re: The Great Recession still lingers, June 22

Stephen Poloz, the newly minted governor of the Bank of Canada, is working hard to distance himself from former governor Mark Carney’s “dead money” warnings to corporate Canada. Does that mean that Poloz also approves lowering tax rates for non-investing Canadian corporations that happily ship jobs to low-wage destinations like China?

As former CEO of Export Development Canada, Poloz is an expert proponent of corporate welfare. As corporate Canada continues to avoid research and development investment while stridently demanding lower taxes, the regime of public subsidy for private profit continues unabated under the Harper government’s well-advertised Economic Action Plan. Such behaviour exemplifies the eternal mythology of the so-called free market.

Private sector investment could reasonably be left to corporate Canada if our industrial titans were not so addicted to public subsidy. Ongoing multi-billion-dollar tax breaks and outright grants to the energy sector are good examples of this public-risk- for-private-profit model. In spite of the cost to working people, stiff corporate resistance to investment remains strong, although this hesitation is categorized as “thrift” by the generous Poloz. There is every indication that the Harper government plans to reward Canadian corporations with further tax cuts in spite of their continued reluctance to invest their profits in necessary research and development.

Of course, our political leadership has little desire to take a hard line on the business elite, who are, after all, their funding source and future employers. The tired excuse about not wanting to punish “job creators and innovators” is a bit threadbare in light of abysmal levels of corporate investment in Canada.
If Canadian corporations are operating overseas while shifting profits to low-tax jurisdictions, exactly who is benefiting and just how “Canadian” are these companies if they employ foreigners and only benefit arms-length stockholders?

An Insatiable Appetite

I couldn't think of a single hole to punch in this letter-writer's logic, but then, of course, I am not part of the 1%:

Re: Bonuses at Canadian banks hit $10.3B on record profit, Dec. 11

Canada’s Big Five banks combined to report $7.8 billion in profits in the third quarter. Undoubtedly they benefited from the ongoing corporate welfare system of tax cuts, granted them by the federal government.

It seems hard to understand why the Conservatives would choose to increase already excessive bank profits through corporate tax cuts, which have eliminated funds that could have been used to reduce the need for some 900,000 people having to rely on food banks.

This pathetic situation requires a reallocation of government assistance away from the banks, to needy people who would actually spend their assistance and benefit the economy.

I wonder if those bank executives would have a more difficult time enjoying their absurd profit-based bonuses if they actually thought about how much good those lost tax revenues could have done to assist the most disadvantaged in our society.

Steve Griffiths, Meaford

If They Won't Spend It, Perhaps We Should Tax It Back?

That is the question I am left with after reading this article in today's Star on the over $500 billion (the article erroneously describes it as $526 million) corporate Canada is sitting on, in part thanks to generous tax cuts, rather than investing some of it and creating jobs.

Inconvenient Truths for the Corporate Sector

Given that recent reports have helped to puncture the myth of job-creation benefits arising from corporate tax cuts and corporate welfare, I was pleased to read Martin Regg Cohn's article in this morning's Star.

Entitled NDP leverages vote results to pressure big business to create jobs, the article discusses the current popularity of the provincial NDP in Ontario. Leader Andrea Horvath used her leverage in the last budget to both secure a tax hike on the income enjoyed by the wealthiest Ontarians and prevent another scheduled corporate tax reduction; the party also blocked Premier Dalton McGuinty's ruthless bid for a majority government in this month's by-election in Kitchener-Waterloo through the victory of NDP candidate Catherine Fife.

As Cohn reminds us, she also won McGuinty's pledge to look seriously at a job-creation tax credit that would reward companies for increasing their payrolls. Horwath argued her $250 million program, modelled on a similar U.S. plan, would deliver better value for taxpayers' money that is now doled out to corporations with no strings attached.

That pledge is about to come to fruition through McGuinty's new Jobs and Prosperity Council, chaired by Royal Bank CEO Gordon Nixon, hardly likely to be favorably disposed to such a notion. As Cohn makes clear, Nixon embodies the corporate welfare and tax leakage that the NDP condemns: Canada's banks benefited handsomely from a series of Liberal corporate tax cuts, reaping record profits without creating the kind of high-value jobs that merit taxpayer subsidies. He has, however, promised to hear Horwath out on her proposal

Let us hope that a clash of ideologies does not prevent some productive recommendations from emerging. I suspect that ignoring increasing public awareness of the injustice of unproductive tax cuts could prove politically costly to the beleaguered McGuinty.

From a Star Reader: Welcome to Harper’s Harsh New World

A particularly insightful lead letter is found in today's Toronto Star. Because most letters seem to be available online for but a short time, I am reproducing writer Stephen Douglas' thoughts on the folly of our pseudo-economist Prime Minister's tax giveaways to the corporate sector, which continues its relentless mission of eradicating good-paying jobs from Canada:


On Jan. 1, 2012 the last of five annual corporate tax cuts took effect, reducing the federal rate by another 1.5 points to 15 per cent, now among the lowest rates in the industrialized world. This amounts to a total $2.85 billion in tax savings for the most profitable of Canadian business.

The notion that this will spur new jobs is a fallacy; tax breaks don’t benefit those businesses starting up who are not yet in a profitable position. Nor will it lead to increased capital expenditure by those business who do receive it; Stephen Harper himself was recently complaining about all the private business money “sitting on the sidelines” in Canada during these recent difficult times. His solution? Give them more.

At the same time, Harper’s government is proceeding with increases in employment insurance premiums. The Canadian Federation of Independent Business, representing those small- and medium-sized businesses least likely to benefit from the new lower corporate tax rate, are protesting loudly with a 15,000 signature petition that this will, in fact, deter the hiring of any new employees. It is completely without merit, they add, as they have been overpaying into EI for years. As evidence, Employment Insurance currently has a robust surplus of $57 billion (2009-10), which our own auditor general has described as excessive.

The net effect of Harper’s New Year 2012 package is yet another transfer of several billion dollars in annual income from Canadian workers and small business to the largest of corporations, which are already reaping the highest profits. To add salt to the wound, these big players that Harper is generously rewarding are also significantly held by foreign-ownership (some estimates are that foreign ownership holds more than 50 per cent of the petroleum and gas industry shares and more than 50 per cent of all manufacturing in Canada).

Without any justification, for there is no economic analysis pointing toward any type of capital exodus out of Canada (to the contrary, we are traditionally considered a safe haven in turbulent periods), this New Year’s Day package pinches hard-earned dollars out of the pockets of low- and middle-class workers and pads the war chest of corporations and the wallets of their shareholders, among whom disproportionately are the wealthy, the elite and the foreign financiers.

For the last 25 years in the U.S. and Canada — under both Conservative and Liberal administrations — economic policy has been dominated by the economic philosophy of neoliberalism, emphasizing the primacy of market competition while vilifying government intervention and regulation of markets. Neoliberals insist that price adjustments ensure full employment.

In contrast, to quote Thomas Palley, what we have witnessed has seen “a slip between the cup and the lip” as the wealthiest have concentrated their power; a fall in real wages, the undermining of unions and the erosion of workers’ rights, and growing problems of poverty alongside an increase in wealth amassed by a very small minority. What neoliberalism has failed to account for is the abuse of power that accompanies the control of media and the funding of politicians.

Money does not have a conscience, and those who act to increase their personal wealth at the expense of their neighbour will find their rationalization within neoliberalism.

Harper and his cadre of conservative ideologues share this collective denial. In these hard economic times where concern is growing about the disparity of wealth, when one in nine Canadian children live below the poverty line while fewer than 4 per cent of the households hold 67 per cent of our total financial wealth (estimated total holdings of $1.8 trillion), he is thrusting us back toward a harsh Dickensian world and hopes we will be grateful for the crumbs we receive.

Stephen Douglas, Toronto

Our Prime Minister's Great Economic Plan Seems To Be Working .... For the Corporate Sector

In light of the ongoing dismantling of our industrial base by our corporate 'masters,' coupled with the latest reduction in the corporate tax rate engineered by the pseudo-economist Stephen Harper, this video is worth viewing: