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‘The utter failure of right wing, trickle-down economics’


 

A statement from Brian Topp on today’s Electro-Motive announcement.

Caterpillar’s decision to close its plant in London Ontario, throwing over 400 workers out of work is a powerful indictment of the Harper government’s economic agenda.  

A hugely profitable company, Caterpillar benefited from millions of dollars in Harper government tax giveaways. But instead of investing in its Canadian operations, Caterpillar chose to provoke a conflict with its Canadian workforce demanding outrageous salary cuts that it knew would be rejected. In the end, Caterpillar took the tax breaks and then shipped out the jobs, all with the able assistance of the Harper Tories.  

What is happening in London, Ontario today stands as a powerful testament to the utter failure of right wing, trickle-down economics. For over 20 years, Liberals and Conservatives have argued that tax giveaways to profitable companies like Caterpillar would result in increased investment and good jobs. How wrong they were. What we got instead are growing levels of income inequality, big deficits and governments starved of revenue for vital public investments, like education and training.

Continuing down this path will only lead to more lost jobs, economic insecurity, and growing inequality. That’s why I have made tax fairness a fundamental platform in my leadership campaign. Profitable corporations and the top one per cent must start paying their fair share. And New Democrats must take this argument head on and win it. If we don’t, then the Harper Conservatives and companies like Caterpillar will control Canada’s economic destiny. It’s the job of the New Democratic Party not to let that happen.

Paul Dewar says the Prime Minister must demand that “Caterpillar reverse its decision or return the millions of dollars it took from Canadian tax payers.” Peggy Nash says this is a “a perfect example of just how poorly the Harper Conservative are treating our communities and mismanaging our economy” and she calls on potential supporters to join her in the “fight against precisely this kind of greed.”


 

‘The utter failure of right wing, trickle-down economics’

  1. Increases to corporate taxation primarily get taken out of worker wages. 
    Reductions to corporate taxation primarily go to management and shareholders.

    Unfortunately, this is just the way it is, and I don’t know a good means of dealing with it, but government tax giveaways have little to do with trickle-down economics in the first place.

    To me it seems that there’s two separate issues going on here. First, the failure of trickle-down economics (which is simply bloody obvious to anybody who understands the concept of economy of scale and supply and demand), and second, the failure of publicly supported private enterprise.

    • Here’s one.  How about we subsidize industries (or give tax breaks, or (keep) lower the corporate tax rate–whatever mechanism that you’d like) to companies based on their Canadian employment figures (excluding executive remuneration).  A very profitable company that only employs three people and the boss doesn’t get as much of a break.  Which is okay because they don’t need it.  Yes, they can move to some other place.  Or, maybe not depending what this company does.  But in any case, if they are essentially not paying much at all in taxes, nor employing anyone, would it really matter?  I want them to stay, don’t get me wrong, but I’d also hope the feeling is mutual.  If it isn’t, maybe I don’t want them to stay as much as I did when I thought it was.  Anyway, I’d want to include total payroll remuneration–pensions, benefits, bonuses and the like.  But not executive pay because that would encourage CEO salary and perks–and the last thing they need is encouragement!

      • The more people they employ the less taxes they pay? Well.. I suppose it’s a decent way to go if you don’t want anybody to have a full time job.  I’ve often thought that we should lower the work-day to 6 hours, but this seems a very round-about way to do it.

        Oh wait, you mean higher gross salary figures = lower tax percentage. Unfortunately, this serves to penalize efficient companies, which leaves them more vulnerable to foreign competitors.

        I wonder sometimes about a legislative route. Eliminate minimum wage but legislate wage parity, where the highest wage a company may pay a person (including all stock options, bonuses, pension entitlements, etc) can not equal more than 100x the wage of the lowest paid person (adjusted for full-time work, of course)

        • Yeah, but by efficient do you mean companies that invested several million dollars in robotics or something?  Because of course that’s a capital cost and has its own favourable tax treatment–while its whole purpose is to get rid of employment.  Really, we want to encourage that?  And why?  If you mean employees who are accountable, put in a full day’s work for a full day’s pay and all that, well okay, my thought needs tweaking.

          I floated that wage parity idea somewhere last year.  I got shot down as I recall although I don’t remember why.  I still like it.

          • If you floated it, than might I just say thanks. I probably stole it from you. And yes, it is a good one, in my mind.

            As for robotics, it’s not necessarily that we want to encourage it (though I think we do, see below), but rather that I don’t see any way we can realistically discourage it in a global fashion — which means our options are limited to being crushed by it or adapting to live with it.  Trying to hold back the tide is signing up to be crushed by it.

            Beyond that, I think encouraging efficient companies is the one and only way that trickle-down has any merit at all. More efficient companies can produce for less, meaning cheaper products where competition exists, meaning more equitable access to products for everybody.  The trick is finding new ways to expand employment at the same time (hence shorter work days, etc.)

          • Sadly, I think you’re right on the robotics thing–but I also think that is wrong.  I mean to say, are all our manufacturers going over to China and India because factories there have better robotics?  No, they are not.  But either way, they are still able to produce more cheaply, so I guess it is a moot point.  And no, I am NOT suggesting we pay our manufacturing employees .20 cents an hour or something.  And of course the manufacturing that does go on in the western world needs to compete with robotics plants down the road, so unless the entire western world dismantles their robotics, I guess I have to live with it.

      • Bad idea.

        Companies that can do more with fewer employees should be rewarded.  It’s the basis for productivity.  That’s the whole reason for the wonders of modern society.  It’s the whole point behind the industrial revolution.  You’re advocating a return to the 1800s. 

        The whole point of modern production is to reduce the amount of labour required to produce any one product so that as a society we can produce more.

        It’s like you’re saying you should throw away your washer and dryer and hire someone to do your laundry by hand. It’s the same with any business.

        The whole point of progress is for Canadian companies to produce more with less. That’s how life has become easier. Of course it matters if the most profitable companies leave – the whole reason they are profitable is because they produce much more for society than they take. That’s what profit is, it’s the difference been what you give and what you take. Profitable companies are the lifeblood of any successful economy. The fewer workers they need, the better! That will allow us to have more companies, cheaper goods and a higher standard of living.

        • That makes wonderful sense for a nation that provides all its citizens with a guaranteed annual income. For Canada, not so much.

          • Economics 101.  Try it.  At any local college or high school.

            That’s how we have a high standard of living, and our ancestors did not, in comparison. It’s called “productivity”.

          • You’re so cute when you act like you’re the only person who ever read a book.

          • Dr Seuss doesn’t count.

        • You’re confusing profits with efficiency, and the two are *very* different.. almost antithetical to each other.

          Consider, the most profitable company isn’t the one that produces the most for a given amount of resources. It’s in fact the one that produces the least.

          The most efficient company, on the other hand, produces the most with the least resources.

          Profit, in fact, *hampers* efficiency in the larger view.  Given two companies of equal efficiency, the one that takes the bigger profit is in fact taking away more of another person or companies resource for the same service.  The person who uses the more profitable company is less efficient, as they’re getting less for their money.

          Efficient companies are the lifeblood of any successful economy. Unfortunately, we haven’t found a better way to encourage them to work beyond profit just yet.

          • “You’re confusing profits with efficiency, and the two are *very* different.. almost antithetical to each other.”

            You’d be laughed out of the board-room of any business with a statement like that. Find yourself someone who runs a business, any business, and run that line by them, and watch them laugh.

            In fact, just run that buy your boss, if you happen to have one. See how that pans out.

            Hail the proletariat. You’re quite the communist, you. This garbage you’re spewing is straight out of the communist manifesto.

          • Aw. Was the rest of the message too long for you to read?

          • The entire message was complete nonsense.

  2. Try coming at the unfortunate loss of a Caterpillar plant in London from the other angle, that of the reasons for the closure in a period when Caterpillar is returning sparkling results from all other operations.  Could it be that militant labour unions in Canada are making exorbitant demands and thus destroying jobs? 

    • No.

      • Is this a considered view?

        • Yes.

    • Demanding pay increases may be an “exorbitant demand” but I don’t think most Canadians would consider fighting large pay cuts to be an “exorbitant demand”.

      Even people who aren’t unionized and don’t like unions can presumably understand a worker resisting a 50% pay cut.

  3. Most Canadian companies have been hiring for the last three years. This is one unfortunate example where it simply makes no economic sense for Caterpillar to continue operating this factory in Canada, and it has absolutely nothing to do with tax policy. In fact, the only thing that might have prevented this from happening would be even deeper tax cuts.

    Paul Dewar is an idiot. Cat’s been a net-tax-payer in Canada, they didn’t “take” anything from taxpayers.

    • ‘No economic sense’ – would you  like to flesh that one out?

      • I think the part of Dewar’s comment that was idiotic was his suggestion that the government should — and somehow can — force this company to remain in Canada and remain operating here.  I don’t see how a government can force a business, any business, to remain operating if it doesn’t wish to.  Unless someone can explain to me how that’s supposed to work.

        • “Unless someone can explain to me how that’s supposed to work.”

          Communism. That’s how it’s supposed to work. Of course, it doesn’t work.

          • Thanks for the confirmation and clarification.  That’s sort of what I assumed.

    • Rick Omen be careful of whom you call an idiot . Perhaps, as a quick start you should read an article in this months issue of Our Times  (in Canada’s Independent Labour Magazine)
      Article named “What’s wrong with caterpillar” by Laurel MacDowell.
      Don’t take the authors word for it though and verify it . I did.

      • “Independent Labour Magazine”

        How does THAT work?

  4. Anyone who thinks the union was the problem at Caterpillar should return half their income to make their employers more efficient.

  5.  “For over 20 years, Liberals and Conservatives have argued that tax giveaways to profitable companies like Caterpillar would result in increased investment and good jobs.”

    The good news for liberals is they can skate away from that paradigm with no more damage than looking like hypocrites or simply being flexible and adaptable; it’s the price of doing business for them…

    …but the conservatives must take the risk of Ezra pounding out another of his ethical tomes; this one one on the ethical upside of tax giveaways and why N. America is a far less secure place without them and ending them would bring down that last shreds of what separates us from the Islamo fascists or commie Asians- i forget which right now. Wait for the book!

  6. Greedy union goons and their unreasonable demands drive another factory into the ground.  They were “hogging” $35 an hour jobs others would do gladly for $22 an hour, and now those jobs are gone.  100% the fault of unions and our current labour policies.

    • And the race to the bottom continues.

      • Don’t you get it? American and Canadian workers are greedy! They expect to make more than Chinese slaves who make 25 cents per hour! Why can’t lazy westerners be happy working for 70 hours a week in a sweatshop with abusive management like the Chinese, while the folks who run the factory sit on some beach somewhere in southeast Asia getting head from underaged prostitutes? Those factory owners worked hard so they could sit on that beach, darn it! Selling out their country’s middle class is excruciating work!

        • Yabbut, you’re forgetting all those “union fat cats” that M. Terence Trent D’Arcy McGee seems to see everywhere. They must all be on a beach somewhere, too, because you don’t see them out and about flaunting their bling, do you?

          • The Caterpillar workers made $36/hr, $69K a year, plus overtime.  The company offered $34.5K/yr + overtime, workers declined, so they went somewhere else.

            They turned down slightly below average paying jobs with union perks and no PSE required.

            There is pressure on the workers from the union not to make heavy concessions because that affects other negotiations.  This was a #solidarityfail, if you will.

          • So a worker accepts the offer and immediately files for bankruptcy I guess. 

          • “union perks?”

            I haven’t seen any information about that. What union perks?

    • Is this a considered view?

      • Unions form a “job cartel”, hence hogging jobs.  Our labour policies and refusal of UNIONIZED police (in solidarity with strikers) to uphold rule of law are unfair not to corporations, but to everybody.  Andrew Coyne says much the same in a thousand more words and he’s not ignorant. 

        • “Andrew Coyne says much the same in a thousand more words and he’s not ignorant.”

          That’s a great turn of phrase. I’m going to add it to my lexicon, right next to “…and that’s just science.”

    • And others would do the jobs for $10 an hour instead of a greedy $22

      Somebody else would happily do it for $5

      Someone else will come along to do it for $2

      Welcome to China.

      • OE1, you are being silly again.

        • It’s certainly a silly path to follow….but it’s not me that’s doing it.

      • Without the ability to form together under freedom of speech and freedom of assembly to form their own corporations fo employees called unions where like with a shareholders vote, majority rules, without these rights which are being dismantled, wages will just be driven down as low as owners can drive them. 
        As long as you have  a few functioning unions there is an  an alternative to workers at non union shops which gives them some power to resistn the rush to the bottom Emily correctly identifies. 
        Hey right wing guys!! Read Jonathan Kay in the post sometime.

        • It would help if right-wingguys even knew some history….this is how and labour unions got started in the first place!

          • Like read the “Grapes of Wrath” might help.

          • Obviously studying History is for Communists*. non-Communists have their eyes firmly set on the future and the glories contained therein.

            *I think I must be a Communist.

          • Heh…if I was in charge of education I’d make sure that history was the one mandatory subject for everyone.

            Maybe it would help keep us from making the same stupid mistakes over and over again.

      • Hey – some would do it for free just to get the experience…

          • ‘Invest in Canada – you will love our voluntary work force’.

        • LOL yup, just like interns

    • They were “hogging” $35 an hour jobs others would do gladly for $22 an hour.

      Maybe so, but Caterpillar was only offering to pay $16.50 an hour, so all those people gladly willing to take $22 would have been out of luck too.

      • I don’t know  if offer is thr right word.  It doesn’t sound like a serious negotiation to me.

        • I certainly agree with that. The notion that the company was negotiating “in good faith” seems laughable.

          • Of course they negotiated in good faith.  They can pay workers in Indiana $16, or they can pay workers here more for no reason whatsoever. They’re headquartered and founded in the USA and they are supposed to give Canadian workers more money than US workers?  That was their leverage in their negotiation.  That’s how negotiation works. Some people are good at it, some are bad, and this labour union is really bad at it. Of course Caterpillar negotiated in good faith. They would have accepted any offer that had a grasp on reality, which means it would have had to approach the Indiana wages. It was the union that was unwilling to negotiate in good faith – they simply failed to provide an acceptable offer that reflected reality.

            When you negotiate, you don’t give things away for free, that’s not negotiation, that’s Christmas.

    • You honestly believe that $22/hour workers would somehow magically be competitive with Chinese slave laborers who make 25 cents per hour in some way that workers who make $10/hour more are not? Do you honestly believe that multi-billionaire CEOs who gave North American jobs to these 25 cents/hour Chinese slave laborers would have re-considered their decision if western workers made even minimum wage, much less $12/hour, or $22/hour? Really? Honestly?

    • Would you meekly give up 50% of your income at the request of your employer? This company boasts about its profits and can’t claim dire straits.

      To say the unions drove this factory into the ground is a silly, woefully simplistic suggestion unsupported by facts. You are apologizing for naked union-busting behaviour motivated by corporate greed.

    • Lol nonsense. Unions were not demanding any more. It is a highly skilled workforce, just like those working for the oil sands making 60+ an hour for the most unsustainable industry our planet has to offer. If your employer decided to slash your already established benefits and cut your pay in half, you can bet your ass you would be pissed off too. Again, no pay increase was demanded. But a half pay CUT was given, while the company boasted record profits! Absolutely absurd and irresponsible.

      This union is not to blame. You’re a typical union hater. I’m not a huge fan of unions myself but that type of non sensical blame gaming is what has kept Caterpillar from opening that plant back up. 

      @s_c_fy:disqus  What makes a company profitable is not the difference between what it gives and takes. Demand is the first principle you missed, without the demand the company cannot function at all. The second is a labour force, which you must enter into a contract with to ensure fair compensation on some reasonable level. If you cut off your labour force, and if companies collectively do this, you therefore reduce the demand that your workers have to offer the entire economy! This is why, along with tax breaks, inequality has skyrocketed globally since the 80’s. Lay off workers, then increase remaining workers productivity with no additional pay or benefits (for the company this is optimal for it increases their margins). 

      Perhaps those who simply decide to attack unions, and call them greedy, should take some steps back and realize how little union leaders make in comparison to private CEO’s. you want to talk about greed, start there. Yeah, some union leaders can try and increase their own pay out of their own selfish self-interest… but for every one of those I guarantee you can find 10 more greedy examples from privately run corporations with limited regulations. Without demand, AKA income being re-circulated through society (also known as the multiplier effect), there is NO economy. The entire global economy is dependent on steady and growing demand. 

      See the missing links? You can go ahead and fire all the people you want, but don’t expect people to buy your products if they don’t have any money to buy it.

    • $35 an hr. is the going rate for the skill sets required to build a complex piece of equipment like a locomotive.To the average person who sees a train going down the tracks its highly doubtful any thought is given to what it takes to produce such a machine.Highly skilled welders,fabricators,pipe fitters,electricians and machinists are just a sample of the complexities involved in this process.Check the rates of pay for these skills and you will find that it is not an outrageous sum.As for unions you obviously have no concept of what their existence has created for everyday workers everywhere.For example…the 40hr. work week,overtime pay,stat holidays,vacation with pay,safe working conditions,social programming for abused women and the homeless.The list goes on and on.These are things that you take for granted in your everyday life and assume you have earned as a right.You really need to investigate what unions not only have done but continue to do for you and I before you condemn them to be “Greedy Goons”

  7. Socialists and corporations like oil and water. Nothing new here folks, move along.

  8. OK – does anyone seriously think that if the corporate tax rate had stayed at say 22%, instead of going down, that the outcome would have been any different??

    I just don’t get dippers, corporations do this all the time.  Bombardier is a master at this.  It is sad for the EMC workers, but the union heads should have seen this coming as soon as they were bought out in 2010.  Right now there is an over suppy of workers in the US who are willing to work for less.  Perhaps the skilled EMC workers should be sending in their applications to Alberta, northern B.C. and Newfoundland.

  9. It appears Toronto’s workers are the next targets in the war against organized labour.

  10. And another thing: this post reveals Brian Topp’s fatal flaw: he’s a real a**hole.  And he always spins it way past the point of being believable.  

    Program spending in Ontario and federally has skyrocketed over the past 10 years and federal income tax levels have hardly budged – ‘right wing trickle down’ is wholly a figment of his imagination and not evidence-based.

    • A real a**hole who spins beyond credibility – hmmmm…

  11. For 15 years following Reagan’s election, the US underwent the greatest economic expansion ever seen by humankind.

    Meanwhile socialist paradises crumbled one after another during that period.   Since then, the socialist lite nanny states are now crumbling in Europe and states like California are bankrupt, with companies fleeing that state for more business friendly environs in “right wing” Texas and elsewhere.

    Mr. Topp’s ideology is the complete and utter disaster.  About the only group not to recognize this are the marxist/socialist academics and journalists, who dwell outside the confines of economic and business reality.  Unfettered by the shackles of reality, they are free to dream about utopic paradises, which when put into actual practice forms the pavement of good intentions on the road to hell.

    • I hear 1982 and 1987 we particularly fruitful years.

    • “Since then, the socialist lite nanny states are now crumbling in Europe…”

      Not socialist but socialist “lite.” Heck, I’m counting this as an improvement in right-wing rhetoric.

    • Yes, Sweden’s downfall is well known.
      Oh wait, sorry, I was thinking Ireland.

      • Pandemonium in the streets of Stockholm, Copenhagen, Oslo, and Helsinki. 

        Massive depopulation as they immigrate en masse to Texas.Ten-gallon hats are flying off the shelves as they make desperate attempts to fit in with their new gracious hosts. 

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