More Cash for a Bottomless Pit

The Globe and Mail is reporting this morning that Canada's contribution by the federal and Ontario governments to GM and Chrysler may rise to as much as $13 billion dollars. This would be more than four times the original commitment of $3 billion. And these figures, which are being steadily revised upward are the key factor in the ballooning federal deficit, currently pegged at $50 billion. The Ontario government is also running a historically high deficit of $14 billion, thanks in part to a $3 billion contribution to the auto sector.

As another piece in the same paper notes, one result of this will surely be years of government restraint reminiscent of the early 1990s when both Queen's Park and Ottawa made a series of drastic and painful cuts to turn large deficits into surpluses. Another will be tax increases that will stifle economic recovery.

The difference between now the the early 1990s is that we are not repaying deficit spending on social programs but instead the pain will be the result of bailing out an industry that has been ill-managed and produced shoddy product despite seeing the writing on the wall for at least thirty-five years. And most of this is going to just two companies.

While we have an obligation to protect pensioners, it seems increasingly clear that maintaining a dynamic automotive sector, which is crucial to Ontario, will require allowing manufacturers who are not viable to fail or to be absorbed by other, more promising companies. Over the next decade we will likely face substantial cuts to education, health care and a wide range of other programs because we propped up two companies that will likely fail anyway. This is not sound policy.

Ontario has a vibrant automotive industry. Magna International, which already assembles cars for other manufacturers, is set to purchase the Opel division of GM. We have Honda and Toyota plants that are world leaders. And our parts industry takes a back seat to no one. These are our future champions. It is time we stopped propping up aging dinosaurs.