The grand bargain starts to fray at the edges

I just heard that Jim Flaherty says there is $250 million in federal funds for GM to open a new plant in southern Ontario. Throw in a match from the province and you are looking at serious coin in terms of incentives. I suspect that Fiat has been offered a similar deal. After all, after Toyota, Chrysler, GM and Ford get these types of deals, it’s only fair.

Guess how many companies in New Brunswick have received $100 million or more from provincial and federal governments (direct incentives)? Zip.

Guess how many Ontario companies have received $100 million or more from provincial and federal governments (direct incentives)? I’ll take your fingers, and toes and much of the hair on the top of your head.

But that’s been what I call the grand bargain, hasn’t it? Ontario gets 75% of all new companies that move into Canada (in many cases with huge government incentives) and places like New Brunswick get some of the largess skimmed off in the form of Equalization. The grand economic development bargain.

Now, Daulton McGuinty wants to scrap Equalization and also wants $250 million from the feds everytime a new auto plant comes along. The problem is that his rationale for all this dough has been that “Ontario is the economic engine for the rest of Canada”.

The wheels on the bus go round and round, round and round, round and round – unless that bus is made in Oshawa, I guess.

Don’t get me wrong. Auto plants are big economic generators. Dropping 2,600 $36/hour jobs in Ontario does have ripple effects felt all the way down to Bouctouche.

Canada needs a strong Ontario the same way New Brunswick needs a strong Saint John (remember all the growth in Moncton and Freddy in the 1990s) were not enough to bring the overall province into positive population growth).

But now good for the goose, good for the gander comes into play. Maybe those $250 million packages should be available for large projects in New Brunswick, as well?

NBT won’t be too thrilled that the Tories are throwing around this kind of dough but it’s realpolitik – economic development style. $1 billion for biofuels plants in the strongest part of Canada, billions for auto plants in Ontario, almost a billion for sustainable technologies development -95% in southern Ontario — and a few more bucks for tourism in New Brunswick.

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0 Responses to The grand bargain starts to fray at the edges

  1. Anonymous says:

    Focus. If we want at ticket on the Federal gravy train, even in the couch section, we need a focus.

    Researching and identifying this focus should be a key priority for NB’s ED professionals.

    Look what focus has done for aerospace in PQ and automotive in Ontario.

    Yes it helps to have lots of Federal seats but even proportional support would have a big impact.

    How about energy (including alternate energy)? How about biotech? How about data servering?

  2. nbt says:

    NBT won’t be too thrilled that the Tories are throwing around this kind of dough but it’s realpolitik – economic development style.

    It’s using our money to buy votes. An old Chretien trick. And boy do they [tories] need all the help they can get in Ontario since the polls haven’t budged in their favour for quite sometime and Dalton has declared war on Harper (much like Danny boy).

    Three words: this disappoints me.

  3. Anonymous says:

    Great post David – you should put this in the TJ for the larger audience to appreciate.

  4. richard says:

    “NB’s ED professionals”

    Gaaaah!! Anything but that! How about giving the people of the province the tools to have such a discussion? I haven’t seen much wisdom or insight from “NB’s ED professionals”; is there any reason to believe they can do the job?

    You are correct that we need a focus (on something other than short term job creation, that is), but a well-researched rationale and creative focus won’t come from the navel-gazers of the consultant industry.

    “An old Chretien trick.”
    How about “an old John A MacDonald trick”? This approach goes back at least as far as democracy. It isn’t going to go away. We just need keep a database of these things handy to rebut clowns like McSquinty whines about development funds coming to Atlantic Canada.

  5. Anonymous says:

    Richard is right but if paid the hundreds of NB ED people on Federal and Provincial payrolls to stay home then used the millions saved on travel to hire a research team, we might make some progress.

  6. nbt says:

    Sorry Richard, Sir John A didn’t carry Ontario like Chretien did.

    Actually, he lost Ontario badly to Alexander McKenzie in 1874 (61-25) as a result of the patronage we speak of. Chretien never lost Ontario nor did he find himself in scandal as a result of patronage/corporate welfare.

  7. mikel says:

    He didn’t? Boy, it must be a different Chretien I remember. I suspect what was meant was that every PM used the ‘trick’ of subsidies. Which is very true, and the way of ‘our’ world. Which is why so many business critics have such a vengeful irrational hate for Chavez. Heaven forbid the government actually CONTROL the resources so that they don’t need to simply keep bailing out companies and throwing subsidies!

    However, I’ll again remind David that Irving got 50 million to start up their synthetic wallboard plant, relative to auto, that’s a pretty big chunk for a small province, and we can also look at the big money that the province has been asking for (and largely getting) for highway work.

    Thats the double edged sword, the feds DO hand out money, but not for industries people actually WANT. They hand it out to Irving and construction companies. This has been a standing debate on this issue at this blog for awhile, we know Graham has been grousing for cash, what industries that are being championed here are actually being denied funding? If the industry doesn’t exist, its hard to fault the feds, as soon as they try to ‘start an auto plant’ then the province cries foul on jurisdiction.

    Fatkat also gets federal funding virtually whenever they ask for it, twice in the past four years.

    There are two issues here, we all know Dalton is a hypocrite for griping about equalization while looking for federal bailouts-however, thats FAR from being just a concern about votes. Southern ontario right now IS the ‘job engine’ for eastern canada, maybe right over to Manitoba, and in large part most of that is Toronto. The economic viability of the country is at stake there, not just whether tories can make some inroads. You lose ontario industry to Mexico, and you start to find out that canadians aren’t the milquetoast non-complainers you thought.

  8. Anonymous says:

    If Souther Ontario is the job engine for eastern Canada then maybe its time for a hybrid engine that doesnt need so much federal intervention.

  9. David Campbell says:

    Nice.

  10. mikel says:

    Again, there is nothing stopping ANY industry from setting up shop anywhere. Numerous independant auditors-the kind that business people read and make decisions from-already state that not only is Canada one of the best places in the world to do business, but many industries even site the maritimes. The Fraser Institute says New Brunswick is a better place to invest than Columbia or any third world country where the army protects your assets-yet how much mining investment is there?

    Even for uranium, where the government gives industry carte blanche over people’s private property, that accounts for a measly 30 million dollars. The issue now is so contentious the government actually has to pay lip service to it (see the CBC NB website). The raising of the booze tax brings in more than that. Hell, they could add an extra tax of maybe 10 dollars to real estate transactions and bring in more than that.

    It’s a cute analogy, but since the ‘grand bargain’ amounts to almost a quarter of a billion from the federal government, you can ask just how likely it is you’ll see investment of that kind WITHOUT federal intervention. In fact the larger the project, the more likely it is NECESSARY that the feds be involved. What it does show is that it MAY not be the case that the feds are actively screwing the east, but that NB is simply so bad-as David aptly shows-that there is simply nowhere for the feds to match funds. I enjoy bashing the feds as much as anybody-usually moreso, but it has to be realistic or like government communications people are just getting ‘spin’.

    That’s the problem with the constant complaint that it is ‘government’s fault’ that companies aren’t investing. As we know from Saint John they ARE investing-just not the kind of growth that people want to see. In other words, its not the government that is the problem-its the private market.