I am a big believer in a return on investment approach to economic development. I don’t know how else we can justify spending tax payer dollars in this area unless it can be shown to provide a return on that public investment. If we spend a million, we should get back two or three million in incremental tax revenues? If you look at it from a business model perspective, the multiplier on investment would have to be 2,3 or even 4 times investment because each new job creation adds additional social costs (health care, education, roads, etc.).
At some point, then, the auto bailout ROI turns deeply into negative territory. The G&M is reporting this morning that the bailout is now up to $10 billion (or more than 40 times as much tax revenue as every corporation in New Brunswick combined pays every year).
Supporters will say that the money is a ‘loan’ and not a ‘grant’ and they will cite the example of the Chrysler bailout in the 1980s as proof the government can make a return on this type of investment but I think most people that study these things are getting nervous.
We are definitely into uncharted territory here. If we look at what the feds/prov gave Honda and others to set up in Ontario, at some point you have to ask yourself should that money be used to invest in new auto companies rather than bailing out the old. Electric cars? Indian cars?
Just a few months ago they were talking about three billion dollars. Now it is $10. I hope we are reaching some type of end.