Tuesday, May 6, 2008

St. Louis Post Editorial Right on the Mark

Its not everyday I get to read something I agree with, especially something controversial. Drinking my morning coffee, preparing myself for the day, and reading the paper I found my day getting brighter by an editorial piece that said all the things I was thinking. Yes, the Bombardier deal. First, they were asking for $800 million in tax credits. Good to know they lowered this amount. However, they still want millions of dollars. This money would decrease the amount Missouri takes in through revenues, which will lower the amount we can give out or we would have to pay higher taxes to offset it. We should not have to offer such large incentives to bring a business here, especially one from Canada. We should focus on our own businesses and citizens.
Anyways, without further ado, here is part of theeditorial I think everyone should read.
Last week, the state Senate chopped the offer down to a more reasonable size; the Senate deal would allow Bombardier to use only $155 million in state credits at any one time. If Bombardier really does hire 2,100 people, that would amount to about $74,000 per job. That's not an unheard-of investment to acquire the kind of good, blue-collar manufacturing jobs that once formed the backbone of the middle class.

The state would pay Bombardier through tax credits, which offset state income taxes. Every dollar in tax credits is a dollar that doesn't go into the general revenue fund. That means less money for Missouri schools, police, health care and other state services.

World Trade Organization rules say such government help must be repaid, and the Senate is demanding 5 percent in annual interest. Bombardier would pay the state a commission on each plane it sells.

If the deal works as advertised, it would produce a net gain for the state in economic activity. But there's a lot of "ifs" in this deal.

The state Department of Economic Development is being vague with details such as what sort of guarantees and timetables Bombardier would be required to meet. Also, Standard & Poors rates Bombardier's debt a weak BB-plus, which is on the border of junk bond territory. The Fraser Institute, a Canadian think tank, says Bombardier has taken in $745 million (Canadian) in subsidies since 1982, and paid back only $188 million. Missouri might well kiss its money goodbye.

And then there's the fact that the airline industry faces an era of uncertainty, with high fuel prices leading to bankruptcies and mergers. The C-series jetliners will be short-haul aircraft that compete with Boeing's 737 and 717 jetliners. Should the state help a foreign firm undercut a U.S. firm that has a big presence across the state?

1 comment:

Powell lucas said...

As a Canadian I can tell you that your remarks are right on the money. Bombardier has sucked hundreds of millions out of the Canadian government coffers and repaid next to nothing. Then, as an additional slap int he face, they have shifted a major portion of their assembly facilities to Ireland where they are now the biggest employer in that country. Just as soon as they see an opportunity to shift production to a cheaper environment they will do so and Missourians will see their investment vanish into thin air.
Fortunately, at the moment, Canada has a federal government that doesn't believe in buying jobs. That, however doesn't stop the idiots in the provinces from following this money losing tactic; witness the province of Ontario that just leased 600 jobs from Ford. Thees goofs just laid out 17 million for Ford to reopen an engine planr to produce, of all things, V8 engines. That money and the jobs will disappear as quickly as the rising price of fuel. The stupidity of politicians on both sides of the border is mind boggling to behold.