The well-known quip - "The definition of insanity is doing the same thing over and over again and expecting different results" - is often attributed to Albert Einstein or Mark Twain. Accurate attribution has never been confirmed.
What is certain is that the cliché applies to governments of every partisan stripe. They continually dress up failed corporate-welfare strategies of the past in ever-new language, but with the same predictable results for taxpayers: billions of tax dollars in up-front losses due to how governments hand out grants to business. And billions more forgone because of poor repayment records - where tax dollars are even required to be repaid.
The newest example comes from a look at Industry Canada over the past three decades. During that time, the department has managed literally hundreds of programs that give or loan money to businesses - every type of entity small and large, from gas stations and craft shops to aerospace and automotive companies.
In information gleaned from a recent access to information request to the department, I found that between 1982 and 2012, the federal Department of Industry spent $13.7-billion on subsidies to business (not adjusted for inflation). That works out to $456.6million per year on average from a single federal department.
Of the $13.7-billion, $6-billion (44.3%) was disbursed with no repayment expected - grants, in other words. A much smaller amount, $236-million (1.7%) was paid out after various businesses defaulted on loans previously guaranteed by Industry Canada.
Another $7.4-billion (54%) was in the form of loans ("repayable contributions" in government language). Where repayments occur, the track record is poor. Of the $7.4-billion expended since 1982 in repayable contributions, just over $2.1-billion (28.8%) has been repaid to taxpayers.
The response to such numbers from successive Industry Canada ministers (Liberal before and Conservative now) is that taxpayers should be patient. The department and its ministers invariably claim that the "investments" involuntarily made on behalf of taxpayers will one day roll back in, manna-like from heaven, and that our patience will be rewarded.
But let's examine this claim. Consider one Industry Canada program, the Defence Industry Productivity Program (DIPP). It was in existence from 1968 until 1995 and transferred billions of taxpayer dollars to Canada's aerospace companies. For just contracts that require repayment, Industry Canada disbursed just over $2.1-billion, but only $767-million has been repaid. That is a 35.6% repayment record in a program that has been defunct for 17 years.
On DIPP's successor program, Technology Partnerships Canada, just $789-million (or 25.2%) has been repaid of the $3.1-billion doled out in repayable contributions between 1996 and 2006.
In its public statements about the usefulness of such corporate welfare, Industry Canada regularly asserts that predicted repayments "are on track."
However, a 2005 analysis prepared for the department by consultants about Technology Partnerships Canada undercuts that claim.
Back then, the consultants, Hickling Arthurs Low noted that expected total repayment estimates, including in all future years, had been reduced by 55% since the original contracts were signed. It is thus not accurate to claim that repayments are in line with forecasts when forecasts are routinely revised downward.
Another bit of information also reveals how many companies get a great deal courtesy of Industry Canada - though not so great for taxpayers.
Over the past three decades, only $9-million in interest was ever paid to the department. That amounts to barely more than one10th of 1% of the original $7.4-billion disbursed in repayable loans.
The department did not provide a breakdown of which contracts were signed that require interest, or in which programs interest was even charged. So it is unclear as to whether interest was charged on every loan or very few between 1982 and 2012.
The $13.7-billion in corporate welfare at Industry Canada is one part of a much bigger problem. In a previous study from 2009, I found that $202-billion had been spent on subsidies to business across Canada by every government between 1994 and 2007, or over $15,000 per tax filer who paid tax in those years.
Corporate welfare is a losing proposition. Peer-reviewed research on business subsidies does not support (political and recipient) claims that corporate welfare is responsible for economic growth or job creation, two of the most oft-heard claims. At best, a generous interpretation of the literature suggests that subsidies may, in very specific locations, produce some effect on local economic behaviour.
Problematically, even that limited impact is typically offset by losses elsewhere in the economy from tax rates that are greater than would be the case without business subsidies. The literature also finds the supposed benefits are a mirage because when one government bribes business to stay or to move to its region, lost jobs and lost tax revenues show up somewhere else.
Unfortunately, political action to cut back on taxpayer subsidies to business is rare. Instead, successive governments have kept up old corporate-welfare habits. They just invent "new" reasons for why taxpayers should be forced to subsidize this or that company. But the results, and the folly of doing so, are entirely predictable.