Wednesday, July 27, 2005

Paulie The Prevaricator

With his latest NY Times column once respected economist Paul Krugman earns his hitman sobriquet for leaving a few relevant things out:

There has been fierce competition among states hoping to attract a new Toyota assembly plant. Several Southern states reportedly offered financial incentives worth hundreds of millions of dollars.

But last month Toyota decided to put the new plant, which will produce RAV4 mini-S.U.V.'s, in Ontario. Explaining why it passed up financial incentives to choose a U.S. location, the company cited the quality of Ontario's work force.

Perhaps the nickname ought to be Paulie The Dunce, for thinking no one reads the news pages of the NY Times. Just last month those who do would have learned:

The Toyota Motor Corporation is expected to announce next Thursday that it will build a second manufacturing plant in Canada, people who have been briefed on the company's plans said.

The plant will be in Woodstock, Ontario, about 30 miles southwest of Toyota's operation in Cambridge. The plant is expected to open in 2008 and will cost about 600 million Canadian dollars ($486 million), including 125 million Canadian dollars in incentive money from the governments of Canada and Ontario.

As well as a few other details about Canada and Ontario's taxpayers' largesse:

The Ontario and Canadian governments have been aggressively pursuing automotive investments and offering incentives to manufacturers. The Ford Motor Company of Canada was recently given 1 billion Canadian dollars to rework a 51-year-old factory outside Toronto that makes minivans. General Motors of Canada has received 2.5 billion Canadian dollars for its operations in Oshawa, Ontario, and for expanding its research and development.

The Times later corrected the above figures to:

Ford received 200 million Canadian dollars or $162 million, not 1 billion Canadian dollars ($811 million), which was the total cost of the plant. General Motors received 435 million Canadian dollars, ($353 million), not 2.5 billion Canadian dollars...

But still a chunk of Loonies to ignore. According to Krugman it's the health care, stupid:

Canada's other big selling point is its national health insurance system, which saves auto manufacturers large sums in benefit payments compared with their costs in the United States.

You might be tempted to say that Canadian taxpayers are, in effect, subsidizing Toyota's move by paying for health coverage. But that's not right.... U.S. taxpayers, not Canadians, will be hurt by the northward movement of auto jobs.

.... the result of international competition will be to give Canada more jobs in industries like autos, which pay health benefits to their U.S. workers, and fewer jobs in industries that don't provide those benefits. In the U.S. the effect will be just the reverse: fewer jobs with benefits, more jobs without.

So what's the impact on taxpayers? In Canada, there's no impact at all: since all Canadians get government-provided health insurance in any case, the additional auto jobs won't increase government spending.

If you don't count the hundreds of millions of dollars, that is.

Krugman then finished this column with a stunning anti-economist claim:

In America, basic health insurance is a privilege; in Canada, it's a right. And in the auto industry, at least, the good jobs are heading north.

In both the United States and Canada--as well as everywhere else--health insurance is a good that has both costs and benefits. People trained as economists are not supposed to think in terms of 'rights' and 'privileges'. Those who do, aren't thinking at all.

No comments: