As The Mask Slips Away

My late father-in-law, a man of deep conviction and integrity, was fond of this saying: "Socialism for the rich, capitalism for the poor."

Although he did not originate the adage, he felt it firmly described the thinking of those who control the levers of power, our governments. And now that his mask is slipping away, it seems an apt description of Justin Trudeau's true sentiments and the policy decisions he is making.

As preliminary evidence, sauce as it were to the great corporate feast, consider his Canadian Infrastructure Bank scheme, about which I wrote last year. While its ostensible purpose is to raise private capital to fund various projects to rebuild our steadily decaying roads, bridges, etc., it can also serve as a neat little package of corporate welfare:

Federal investments doled out through the government’s new infrastructure financing agency may be used to ensure a financial return to private investors if a project fails to generate enough revenues, documents show.

What investors have recently been told — and what the finance minister was told late last year — is that if revenues fall short of estimates, federal investments through the bank would act as a revenue floor to help make a project commercially viable.
Experts say the wording in the documents suggests taxpayers will be asked to take on a bigger slice of the financial risk in a project to help private investors, a charge the government rejects.

All of that perhaps palls, however, now that Kinder Morgan has issued a May 31 ultimatum to the feds, threatening to suspend construction on the Trans Mountain Pipeline twinning project unless the impasse between the B.C. and federal government ends. As a remedy, a strong dose of socialism is now being considered to protect Trans Morgan's nervous shareholders:

Finance Minister Bill Morneau says the federal government will act on the Trans Mountain pipeline project in “short order,” sending the strongest signal yet that it will move to financially backstop the project to reduce the risks for its American-based backer.

[Rachel] Notley has already said her government is open to buying the Trans Mountain pipeline — meant to move Alberta oil to port near Vancouver for shipment overseas — to ensure the expansion goes ahead.

Morneau, who has been in touch with Kinder Morgan officials, said earlier in the day that Ottawa is “considering financial options” to ease those concerns. Speaking later, he wouldn’t provide specifics but said there was a need to “derisk” the project so it can proceed.

Significantly, but not surprisingly, the Finance Minister

framed the issue as an economic one, talking about the need to enhance opportunities and good jobs while saying nothing about the concerns around the environment or rights of Indigenous Peoples raised by the project.

As usual, his boss, Justin Trudeau, continues to speak out of both sides of his mouth, claiming his environmental vision is bound up with an economic one, insisting there is no contradiction between the two.

Mr. Trudeau likes to talk about what Canadians know and understand. I suspect he is speaking of those Canadians who go through life blithely and willfully unaware of the immense peril our world now faces thanks to climate change, not those of us who understand that a drastic reordering of our priorities is crucial if we are to survive what lies ahead.

A Corporate Gift?

Recently, the Star's business editor, David Olive, offered some cautious optimism about the Canadian Infrastructure Bank, the scheme dreamed up by the Trudeau government,

to “leverage” its $35 billion in CIB seed money by a factor of four, creating roughly $140 billion in infrastructure spending. It will do this by enticing private-sector partners to put up most of the infrastructure funds, backstopped by Ottawa.

Seen in a charitable light, Ottawa means to stretch taxpayer dollars in a way not possible with the traditional model of purely public spending on publicly owned infrastructure.

Less charitably, the CIB looks like a device for nationalizing the risk and forfeiting the profits from CIB projects that will be largely owned by private interests.

It is the later interpretation I have written about previously, as it seems to me that all of the risks will be borne by the taxpayers who will also, conversely, receive few of the benefits.

Apparently I am not the only one dubious of the benefits of this proposal. A Star letter writer offers his concerns:

Re: Feds bet on bank as social justice tool, Olive, June 17

David Olive’s proposal that public pension funds provide financing for infrastructure is flawed.

First, there is no shortage of low-cost government funds when we own the Bank of Canada — witness the recent $200-billion bailout of big banks and corporations after the 2008 financial crisis, or the government’s sudden decision to increase defence spending by $62 billion.

Second, while pension funds may be non-profit, the public-partnership model eats up enormous accounting, legal and management charges, and pension funds expect a 7- to 9-per-cent return. Such financing is expected to double the cost of projects.

Third, while helping retirees may seem admirable, the monies are extracted through tolls and fees, largely from overstretched middle-class families when they can least afford it.

However, Olive makes a good point regarding CPP’s meagre investments in Canada. At a time when 1.3 million Canadians are unemployed, why is our national pension fund sucking money out of the domestic economy and building up competitor companies overseas?

Larry Kazdan, Vancouver

As the old saying goes, "If it sounds too good to be true, it probably is."

The Infrastructure Bank: Another Taxpayer-Funded Subsidy To Big Business

There are undoubtedly those who will never accept the fact that in electing Justin Trudeau and his sunny band of men and women, they were, in fact, putting into power a group as neoliberal as the outgoing Harper regime. It is a hard truth, one that I have had to accept despite the fact that mine was one of the many votes that put the Liberals back into power.

The latest evidence of this sad truth is found in new information about the Canadian Infrastructure Bank, a scheme ostensibly designed to raise private capital to fund various projects to rebuild our steadily decaying roads, bridges, etc.

Federal investments doled out through the government’s new infrastructure financing agency may be used to ensure a financial return to private investors if a project fails to generate enough revenues, documents show.

What investors have recently been told — and what the finance minister was told late last year — is that if revenues fall short of estimates, federal investments through the bank would act as a revenue floor to help make a project commercially viable.

Experts say the wording in the documents suggests taxpayers will be asked to take on a bigger slice of the financial risk in a project to help private investors, a charge the government rejects.

The devil, as they say, is in the details:

An October briefing note to Finance Minister Bill Morneau ahead of the fall economic update where the government unveiled the financial plan for the bank, said federal funding could be structured in such a way that the bank’s “return on investment will only materialize if defined institutional investor revenue thresholds are met.”

“The infrastructure bank could enter in the capital structure to bridge the gap between reasonable returns on investment for investors and the revenue generation capacity of specific infrastructure projects,” reads the briefing note, obtained by The Canadian Press under the Access to Information Act.

In other words, if I interpret this correctly, should revenues for private investors fall below expectations, we, the taxpayers, will be propping up their profits.

Despite my aging olfactory system, I am forced to conclude that this scheme does not pass any reasonable smell test.

On Public-Private Partnerships

Much has recently been written about the Trudeau government's plan to establish an Infrastructure Bank whose putative purpose is to leverage private sector money to help fund projects. One can legitimately ask why that is necessary, given the record -low rates at which the government can currently borrow money.

Trapinawrpool provided a Twitter link to an analysis that should give everyone pause. Perhaps its most salient point is this:

It appears that public private partnerships (P3s), and not low-cost financing, will be the focus of the bank. The likely impact will be interest rates of 7 -9% on Infrastructure Bank projects, instead of 0.8 per cent, the current federal borrowing rate.

In other words, the proposed structure will increase interest costs by a factor of 10: 8% instead of 0.8%. Those higher costs will be paid by governments, by higher user fees, or both. Municipalities are not blind to this issue, preferring public financing due to its lower costs and improved control over public infrastructure.

For a quick look at the forces of unfettered capitalism that may very well be unleashed by the cozy relationship that Mr. Trudeau seems intent on fostering and furthering with his corporate pals, the American experience with such dalliances may prove instructive, especially when the report describes the field day private interests are having with toll roads they financed:



Clearly, Canadians should be very, very worried about what lies ahead under Mr. Trudeau's plans.