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Auto bailout lacks vision, imagination

My column in today's Mercury addresses the strange circumstances we now find ourselves in with regards to spending about $360 per Ontarian on one of the most heavily subsidised industries in the world. To put it mildly, I am not impressed.

In one of the newscasts covering the US' debate on the auto industry bailout, a US congressman in debate asked if we should have bailed out the horse and carriage industry when the car was invented. It is mildly alliterative, but it makes the point.

There are plenty of successful auto manufacturers left in the world, many of them manufacturing their vehicles in North America while making cars that consumers actually want, instead of asking consumers to want the cars they are making*. Moreover, if we are going to bail out American auto manufacturers, what bang are we going to get for our buck? If we invest the roughly $17 billion in the US and $4 billion in Canada to keep them afloat, what will we accomplish? Will we remain world leaders in the construction of SUVs, or could we perhaps exercise just a little imagination and use these billions of taxpayer dollars that, in Canada alone, add up to around $10,000 per affected auto industry employee to become world leaders in something that needs a little leadership?

Through part of the fall, I saw one wind turbine head up Guelph's Highway 6 just about every weekday afternoon. They were offloaded in Hamilton harbour and sent north by truck. Why? Because they had to be imported from Europe; they are not manufactured in Canada.

During the Second World War, North America's industrial might was very quickly changed from the manufacture of consumer goods and vehicles to the manufacture of war machinery including trucks, tanks, aircraft, ships, weaponry, and ammunition. Is our failure of imagination so total that, in an age when technology allows us to contemplate a manned mission to another planet, we can not re-task our manufacturing sector to prepare us for a more sustainable future?

The whole process of bailouts has been broken from the outset. The US' $700 billion bailout package is largely being used to buy up bad credit from creditors so that they can once again lend money. Had the same money been used to pay off the huge consumer and mortgage debt in the US, consumer confidence would have returned in spades, the credit markets would have been re-invigorated, and millions of people would not have had their homes foreclosed. If we are going to spend taxpayer dollars to that phenomenal extent, we should at least be helping people live rather than only ensuring that bankers' profit margins are not hurt too badly.

The big concern for me is that the failure of imagination is so comprehensive that the current governing generation is taking a huge debt-load, and doubling it for my generation -- those of us born well after the war in Vietnam -- to pay off. Recent policy in Canada has been to "give back surplus tax dollars to Canadians" in the form of huge tax cuts, but only during boom times. All it serves to do is bankrupt the country so that proper, forward-thinking investment is impossible.

Canada has a long history of building itself up only to sell itself short. It is a cycle we need to break. From being world leaders in the aviation industry until the cancellation of the Avro Arrow, a crime for which I will never forgive Diefenbaker, to turning from the most prosperous country in the G8 to essentially bankrupt under another Conservative government, Canada has a long history of getting to the top of its game, and then backpedalling with apology to those that we had outshone. The bailout Canada and the province of Ontario are offering to the auto industry here, measured as a simple function of how much the US is offering in their bail out multiplied by the percentage of the industry that is in Canada, is yet another example of how we are failing where we should be leading.

The ideas are out there. A report in the Mercury a few days ago related a new study proposing a high speed rail network for the greater Toronto area, stretching from Waterloo to Orillia to Peterborough to Niagara Falls. According to the study, the network could cost as little as $4 billion -- the amount we are giving to the auto industry.

With the prospects for my generation being as dim as they are with what we are inheriting, I feel I have to call attention to the existence of the future to those currently in power, as nobody at the top seems capable of seeing beyond the tips of their own noses.

This lack of vision and foresight extends to Guelph, which at a recent council meeting voted unanimously to ask GO Transit to set up a single station in the downtown core, not setting aside any other land for use as a future station, and committing downtown to building vastly more and more expensive parking -- no doubt at the expense of further increased transit fares. To council's credit, only three members voted in favour of a motion calling on GO never to consider any additional stations in Guelph. While the "Stone Rd extension" right of way connecting one of the main east-west strips at the south end of the city with highway 24 has been set aside for generations, preparing our transit infrastructure even a few years in advance is beyond the capability of our politicians at any level. Why are we so chronically incapable of planning ahead? Is it too much to ask that we plan as far ahead for our transportation infrastructure as we do for our water usage? We do have abstract plans, but without action, it's essentially meaningless.

With that, here's today's column.

Bail-out places a second mortgage on my generation

My generation is in for the surprise of its life.

We have never endured a recession. Sure there was one in the early 1990s, but when your parents tell you at nine years old that they are on their last $20, your reaction is "that's more than I have!" So as we head into this period of economic uncertainty, what do we have to consider?

I am a firm believer in the role of government. For the economy, government's responsibility is to eliminate debt and build a reserve when times are good. When times are bad, taxes can then be lowered and we can rely on those reserves and short-term debt to invest in our national infrastructure, stimulating the economy.

Government's role is to reduce the peaks and troughs of the economic cycle. The bigger the boom, the bigger the bust, and by taxing the boom, we can mitigate the impact of the bust.

U.S. president Franklin D. Roosevelt's New Deal and president Dwight D. Eisenhower's Interstate system demonstrated this. Both took the economy out of recession through massive investment in the future. We almost had it figured out on this side of the border this time, too.

For 10 years we paid down the debt of the previous two recessions. We were making headway, but a new government came in and opted to cut taxes when the economy could actually afford the level of taxation we had.

Both Paul Martin and Stephen Harper brag about the amount they cut taxes: Martin by $120 billion, and Harper by another $200 billion. Between them, we could have almost completely paid off our debt and could have had the money to invest in public infrastructure during this recession without mortgaging my generation.

We pay in excess of $30 billion a year from the federal pot just for interest on the debt we have.

Without any debt that would be $30 billion more per year that the federal government would have to work with before going into deficit.

Our deficit is projected to be $30 billion in 2009, all of which will be borrowed to pay interest on what we have already borrowed.

The trouble is, we called our financial situation a "surplus." There is no such thing as a surplus as long as there is a debt.

Surplus is a bad word: it implies the government is taxing more than it needs.

That way of thinking considers only the here and now, it does not account for the spending done yesterday that we could not afford. Ultimately, it means we are measuring our government's financial health in terms of cash flow, not in consideration of the long term.

You and I would not reduce our income if we still have a mortgage to pay off and a retirement to plan for. Why should we do so collectively?

Government is not some mysterious institution that robs from us. It is our way, as a society, to manage ourselves and share communal costs and responsibilities.

If we, as a society, are spending more than we can afford, it is our collective responsibility to pay off the excess just as it would be for us to do personally. When governments at any level have a debt-target that is not zero per cent of GDP, we have a problem, just as much as if we abuse our credit card, or refinance our homes simply because we can, with the deliberate intention of carrying a debt that we could have paid off.

After having quickly squandered our reserves when times were good, the governments of both Canada and the United States are now preparing to give the American auto industry thousands of dollars per manufactured vehicle to keep their inefficient business models afloat. Meanwhile, their foreign competitors continue to clean up the market with better, more efficient vehicles, built for less money that cost less to maintain.

This bailout is wholly uninspired and does nothing to invest in our infrastructure or our future.

The $23 billion being spent by the governments on the two sides of the border could be put into our national infrastructure in a way that is truly meaningful while stimulating our economy.

Canada's $4 billion figure, just to bail out one industry in one province, along with all the other money governments around the world are giving to save dated business models, could instead have been invested in rethinking our approach to infrastructure.

Why are we not refocusing the industrial might of the auto sector on redefining how our cities are built, how we move around, and how we power it all?

Why are we not taking this opportunity to invest in becoming world leaders in sustainable technologies?

The auto industry has the potential to do it. We would be better served investing our billions of dollars to convert these failed manufacturers to the construction of technologies largely made elsewhere today including buses, passenger trains, wind turbines, solar panels and the like.

Purchasing the results would improve Canada's infrastructure. This would turn our automakers into world leaders in those fields, saving hundreds of thousands of jobs, and truly preparing us for the future. All it takes is vision.

Cars are not going anywhere, but they do not need to go everywhere.

Instead of paving over my generation with poorly considered short-term fiscal policies from unnecessarily emptied federal coffers, this recession could be our chance to invest wisely in our rapidly changing world.

At least then my surprised generation could contemplate a better future.

As an aside, Guelph spends a huge portion of its annual budget building and maintaining our 538 km of public roads. Mayor Farbridge's recent State of the City address confirmed this. 538 km represents approximately 4.5 metres or 14' 8" of road for each of Guelph's approximately 120,000 residents. It is 6.1 km of road per square km of city. All of those km are funded by the taxpayer and exclude the provincial highways in city limits, bridges, boulevards, traffic signals, and the other expenses we pay for to allow our cars to run. The level of subsidy for the automobile includes all these factors. By contrast, the City of Guelph turns an actual, real profit that is returned to city coffers on its railway operations. The subsidy for cars and trucks on our roads is so ingrained in our governing attitude that, in spite of the Guelph Junction Railway's profit, Guelph has, in the past, tried to convince its rail customers to switch to trucks. I suppose, given that, it is not that much of a surprise that we would seek to bail out the least profitable or visionary auto makers in the world.

* - Although I am unable to find a car I want to buy from any manufacturer to replace my venerable 1993 Oldsmobile Cutlass Cruiser 8-seat wagon as it approaches forced retirement. No car on the market today can seat more than five people aside from a fuel-thirsty Mercedes C350 7-seat wagon, which is a tad outside of my price range. Vehicles built on car frames rather than truck frames with a large capacity rather than the wasted space of a sedan, and bench seats up front allowing three occupants per row (something I use more than you'd think), simply do not exist any more from any manufacturer, with half-hearted attempts to correct a decade of SUV/Minivan obsession by building slightly smaller SUVs nicknamed "crossovers." Sorry folks, they're still SUVs.

Posted at 09:56 on December 30, 2008

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Harper truly gives up on Quebec | columns environment money politics | Lafarge-Howitt deal an improvement, but still hampers transit future


Lilian Nattel (liliannattel.wordpress.com) writes at Tue Dec 30 11:47:11 EST 2008...

The bail-out is Don Quixote tilting at windmills instead of building them. I agree--where's the imagination? It doesn't take a whole lot of it to picture throwing our money at an industry already well-served. It doesn't take a lot of rational thinking to figure out that it's an industry without a lot of life left in it. Last summer's gas prices were just a foretaste. The recession has lowered gas prices drastically. But that's just for the moment. The bubble and the subsequent recession are both based on perception. But the amount of oil in the ground and the carbon in the air are both realities. There is an opportunity here being missed. Why?


Observant writes at Tue Jan 6 10:26:21 EST 2009...

Yes, government subsidies using taxpayers money is troubling. ...........I calculated the Canadian auto bailout costing approximately $110,000 per direct auto job. The argument is that the bailout package should also be spread out over the jobs saved in the associated industries, temporarily. .......... Interestingly, the Canadian taxpayer annually subsidizes the CBC and it's 10,000 employees some $1.1 Billion, making that a $110,000 per job subsidy as well. ....... Perhaps we can all get on the government payroll and earn a comfortable living wage and stimulate the economy too.


petty writes at Tue Feb 24 20:31:02 EST 2009...

yes, no wonder we're now loosing any hope..

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