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One option is to simply admit the corporate tax cuts are a failed experiment in trickle-down economics: Bump the rate back to 28 per cent, and use the proceeds to pay for capital spending directly. Or we could try something different. Companies that do not expand their investment spending, as a quid pro quo for the tax cuts, would be required to invest in special government capital bonds -- dedicated to public facilities and infrastructure.

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Am I missing something or did the CAW just get even weirder?

[ 28 February 2006: Message edited by: TCD ]

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Originally posted by TCD:
Am I missing something or did the CAW just get even weirder?

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First: the link works fine.

Second: Stanford's a senior CAW bureaucrat. He may be a member but he ain't rank-and-file. I consider his musings to be pretty representaive of where the CAW is at - in a corporate sense.

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Originally posted by TCD:
Always fun to get into a substantive debate comrade!

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I apologize for the sarcasm (though I don't promise it won't recur). And the link really didn't work the first time, I was just trying to be helpful, maybe I caught you in mid-edit.

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Originally posted by TCD:
Now, I may be misunderstanding, but isn't this exactly the argument for P3s? To tap private capital for public infrastructure? How is this plan different?

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Stanford says if corporations won't invest in capital infrastructure and productivity improvements, maybe the government should force them to do it by restoring the corporate tax cuts and using the increased tax revenue "to pay for capital spending directly" (whatever that means - is he saying the government should give the tax revenue back to the corporations in the form of capital investments?). As an alternative, he says the government could force corporations to invest in special capital bonds issued by the government. The proceeds could be used for public works.

This latter proposal, as far as I can see, is not the same as PPP - Public-Private Partnerships. The corporations would presumably have no say as to how the bond money would be spent and would have no ownership of the infrastructure that the money goes to pay for. Their only entitlement would be to receive some kind of return on their compulsory investment in bonds.

I find two things troubling about Stanford's thought experiment (if it is):

- A bond is an investment - by any definition. An investment that entitles the purchaser to a return. This blurs the line, for me, between taxes (wherein wealth is expropriated and used by the government for services) and privatization (wherein services are bought and sold). Under "P3s" the wealth to provide government services is provided to governments but contingent upon a financial return and private control. Under Stanford's model the wealth to provide government services is sort of expropriated but contingent upon financial return. The lines get blurry.

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Originally posted by TCD:
Under "P3s" the wealth to provide government services is provided to governments but contingent upon a financial return and private control. Under Stanford's model the wealth to provide government services is sort of expropriated but contingent upon financial return.

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Yes, it is expropriated -- with some compensation. It's not "contingent" upon financial return (the way he puts it) because it is still compulsory expropriation. I see your point but I think it's strained.

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A troubling theme is that investment is only useful to the extent that it increases productivity. Stanford never says this but it seems to be a theme - in this and other articles. I know he's trying to argue to the business class that socialism's in their own interest. But, if he is a socialist, he must know that it actually isn't.

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1. corporate profits are unprecedented in Canada

2. Reaganomics sucks as bad in Canada as it did for the Raygunites

3. about 90 percent of direct foreign investment in Canada has been applied to takeovers of Canadian corporations by foreign-based multinationals and conglomerates, and about less than 10 percent has gone into new business developement

4. Canada's banks have financed these takeovers to a large degree

5. corporate and capital taxation rates are at all time lows in Canada, and money still leaves Canada at a frenzied pace along with our non-renewable resources, hydro-electric power, water and more

Ok, Jim didn't mention points 3 and 4, so that's a bonus from me.

Aaaaand I don't see where he's endorsing P3's.

[ 28 February 2006: Message edited by: Fidel ]

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Originally posted by TCD:
Under "P3s" the wealth to provide government services is provided to governments but contingent upon a financial return and private control.

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Usually P3s involve the corporation borrowing money (to build the hospital, the sewage system etc etc) the government guarantees these loans (and offers the corporation a whole bunch of other incentives/profit replacements/guarantees).

This harms the public interest because it's more expensive for a corporation to borrow money than a municipal or provincial government.

Governments could more cheaply raise the money themselves (but it's bad optics incurring debt to build something).

Governments typically raise money by issuing bonds. The rates they offer are typically lower than corporate bonds because companies come and go, but entire provinces or cities seldom do.

I think what Stanford is suggesting is that if corporations were required to buy municipal or provincial bonds (floated to finance infrastructure projects) these governments could in fact offer a lower rate of return than normal.

This would cost the public even less.

cmkl

[ 02 March 2006: Message edited by: cmkl ]