Sunday, October 14, 2007

Economic idiocy

Dion's promise to cut the corporations already low tax burden even further isn't just bad politics, it's bad economics. It's premise, like all Liberal Party efforts to cut Corporate Canada's responsibilities to civil society, is that big business will re-invest these savings in the economy, in new industry and new jobs.

Except that despite record profits due largely to past Liberal giveaways, Canadian corporations have a lousy productivity record.
Canadian corporations are riding a wave of record profits and sitting on an unprecedented pile of cash, according to a bank study released yesterday.

The TD Bank report, which comes amid outbursts of anger by corporate Canada over the minority Liberal government's shelving of their promised tax cuts, raises questions about whether, in fact, they need or would make productive use of further tax relief.

"Certainly that would be the conclusion, looking at their cash flow," said TD Bank chief economist Don Drummond, a co-author of the report.

Canadian Labour Congress economist Andrew Jackson said the TD report also reveals that the surge in profits, which are in part due to the tax cuts businesses have enjoyed over the past half decade, have not led to a matching increase in corporate investment.
That was two years ago. Their record hasn't improved.

So Dion's giveaway would probably help the bottom line of boardroom fat-cats and finance even more obscene executive compensation. That's about it. Given the anemic state of corporate investment this is rewarding low productivity. Hardly looking after the concerns of ordinary Canadians.

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