Subsidy Shock; Billions for Batteries
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Summary
Inflation is on the way back up again, largely due to higher gas prices, food prices, and the Canadian Union of Public Employees (CUPE) is calling for the tax reductions for corporate interest rate to go back up to 21%.
Transcript
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Hello and welcome once again to The Blueprints. This is Canada's Conservative Podcast. I'm your
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host, Jamie Schmael, Member of Parliament for Halliburton Corps at the Lakes Brock.
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On today's show, we are talking about the inflation rate. It's on the way back up again.
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We're going to talk a bit about the Conservative Convention and much, much more, including the
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Canadian Union of Public Employees calling for the Flaherty-Harper tax reductions for
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corporate interest rate to go on the way back up to 21%. This and much, much more. We ask that you
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like, comment, subscribe, and share this program. Important information, of course, you can download
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and listen to it on platforms like CastBox, iTunes, Google Play, and Spotify at your convenience to
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talk about this. We're going to bring on a good friend of the show, Rick Perkins. He's coming back
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on, Member of Parliament for St. South Mary's. Sorry, St. Oh my goodness. South Shore St. Margaret's. I
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don't know how I messed that one up. Also, the industry critic. Thanks very much for coming back
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on. My pleasure to be here, Jamie. All right. Inflation rates on the way back up, largely
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driven in part to gasoline prices. Groceries are back up. According to CBC here, groceries
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increased at 6.9% at the annual pace. This is hurting Canadians right in the pocketbook.
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You know, the compounding of the grocery interest the last six months has been about 20%. That's
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a 20% increase in groceries over the same period last year. And that's why Canadians are hurting.
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Our leader, Pierre Polyev, talks about that. The Prime Minister talks about people being angry.
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They're not angry. They're hurting. They're hurting because of the cost of everything going up,
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driven by the policies of this Liberal government. But Justin Trudeau summons the grocery CEOs to
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Ottawa to give them a stern warning. A stern warning. A stern warning. A stern warning.
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He convened a meeting. He convened a meeting. The Canadians are good at convening, according to
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Melanie's early. Yeah, they convene meetings. Like most things with this government, it's all about
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appearances and input, but it isn't really about output, about actual results. The results are that
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it is not grocery margins that are driving up food costs. Grocery margins have stayed stable,
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according to Statistics Canada. They're about two to three percent on fresh food and produce. They
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haven't changed pre-COVID, COVID very much. What's driven up the cost is all the inputs into producing the
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things they sell, right? Everything they sell. The fresh food, the fertilizer to grow the food,
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the energy used to harvest the food, the energy used to transport the food to processing.
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The processed food then has to be transported to market. Everything that goes into grocery store
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operations, all of those costs, like your home, have all increased. That's what's causing it to go up.
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So every time we see an inflation increase like this, that means more food inflation. That's why food's
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going up. The cost of fuel keeps going up, we all know. In my province, Nova Scotia, at the end of
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June, the price of a liter of gas was, guess what, $1.49. Seven days later, it was 20 cents higher,
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and it was 20 cents higher because of the two carbon taxes. And now, today, it's at $1.90 a liter.
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That's only a couple months. It's gone from $1.49 to $1.90. That cost gets built into the production
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of food and our goods and is driving up inflation. And so we see worries, of course, about housing and
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about the housing costs that the Bank of Canada is causing by increasing interest rates. And we know
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last month, when the CPI, when the inflation rate last month went up to 3.3%, Statistics Canada said that
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almost 1% of that was actually the mortgage index inflation rate. So the amount that inflation
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was being impacted last month was almost a third by increased interest rates. So you compound on top
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of that the increased cost of food, the increased cost of transportation. The Bank of Canada feels
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compelled to put up interest rates, which is going to put up the mortgage interest inflation rate, which
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compounds the issue. We end up in this spiral up. And Justin Trudeau doesn't seem to understand
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any of that. He doesn't look in the mirror and actually say, maybe I've caused quite a bit of
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this. The housing market, we told them all, that printed cash, that keystrokes that created all
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this currency out of thin air would have an effect. There is a cause and effect. Now, the tax increases
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through the carbon tax and others, the escalator tax on alcohol and beer, that's having an effect.
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It's all because of poor government policy. The thing that really scares me is the same people
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who created this cycle that we're in are being asked, as they're in government, to solve the problem.
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Yeah. Well, and their spending, let's not forget their spending, because eight months ago in the
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economic statement, the Minister of Finance, the Liberal Minister of Finance, Christia Freeland said,
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you know what, we're going to have a balanced budget within five years. And then six months later,
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when she presented her budget, there's no sign of a balanced budget. In fact, the spending and the
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deficit will be and remain at about $44 billion and growing under the Liberals. And there was some press
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over the summer that they were cutting $15 billion out of a $450 billion budget, $15 billion over the
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next five years, not in one year, over the next five years. Well, it turns out even that wasn't a cut
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to reduce the spending, because when the government spends, that puts more money into the economy. And
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when they put more money into the economy, that helps cause inflation. And so $15 billion, turns out,
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all they were doing was, we want to claw that money back from things that you don't think are necessary,
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or they don't think are necessary, so they can spend it on something else. So it wasn't actually
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an attempt to restrain government spending. There are two aspects of trying to battle inflation. One
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is monetary policy, interest rates, the Bank of Canada. The other is fiscal policy. And there have been
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many economists who have commented that on fiscal policy, the government's not doing its job,
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they need to rein in spending. Without rein in spending, what happens is, interest rates go
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higher than they would have to in order to try and fix inflation. And all of that is a result,
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then, of this compounding issue that the Liberals are creating, that is causing interest rates to be
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higher than they need to be. But they won't take ownership of it, because I don't think they
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understand basic economics. We know the Prime Minister doesn't understand interest rates, because he doesn't
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spend time thinking about it. Although most Canadians are spending pretty much every night
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thinking about how to meet their mortgage payments when they come up, or the rent costs that are going
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up and being forced up as their leases roll over. What really concerns me, and I think as we've seen
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through the past few years, real estate is really driving a lot of the Canadian economy right now, but
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the endless government subsidies that you're seeing the Liberals deal with, the overspending, the deficit
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spending, it almost creates that false economy that if you ever have to take it back, as you said,
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they said they were going to take it back, they really didn't. But once you start to do that,
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without that foundation, without the anchors of our economy, our strong oil and gas sector,
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our mining sector, natural resources, lumber, you're really putting the country on thin ice,
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so to speak, because you do not have the structures in place when you do decide to bring down that spending level.
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Well, you know, after us talking about this for years in the House, and the
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Liberals living in denial and blaming everyone, including their dog, for the situation, it's Europe's
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fault, it's the war, it's somebody else's fault. You know, there were wars during Stephen Harper's
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time, there were actually more wars during Afghanistan, very expensive war in many ways for the world, and
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that happened. But we didn't have inflation like this, because we had a government understood basic
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economics. And so, so the, the responsibility lies with them. And you think after the summer,
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that they heard from Canadians, as we all did when you were home, knocking on doors and meeting with
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constituents and going to barbecues and going to parades and all the community events that we do as MPs.
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And they all came back anxious. We all read that in the press. And, and their, their response is not
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actually to fix the things that caused the problem. Their response is, well, let's spend more money.
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Another government program. Right. Let's just increase checks to people. Let's spend more money,
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because it's just a question of spending. We created an $82 billion program for housing that has not built a
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single house two years ago, but let's put more money in that program that hasn't built anything.
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Yeah. And that's the thing with these endless government programs, like the question always can
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be, and in my opinion, seldom gets asked, what if the government is wrong? Right? Is it just more time,
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patience and more money thrown at the problem? They, it's never a acceptance of responsibility.
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So, you know, budgets are an art, right? You have to put together things. And, and the presumption
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that we would have a $44 billion debt this year. Remember, the government is now spending twice
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as much today as it was in 2015. So the, the idea of meeting even that insane target of a $44
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billion deficit, irresponsible target, depended on this year, the average interest rate, or the average
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CPI being two and a half percent, the average inflation rate being two and a half percent.
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Well, as we know today, it's gone up to 4%. Last month, it was up to 3.3%. It's going back up. In order
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for the government to have met its inflation rate projections, July, August, September, October,
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November, and December, inflation would have to be 2% to counter what's already happened in those months
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beforehand. But that's actually going nowhere near to it's going the opposite way back up.
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So the federal government's budget is already blown out of the water, because the cost of everything
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is increasing. And that eventually affects the cost that the government pays in interest payments,
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like your mortgage, the government has a mortgage, which you have to pay on all of that debt. And this
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government has doubled the debt of the entire country in only eight years. They've added more
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debt to Canada than all previous governments since Confederation. Imagine that. Like, do you think our
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150 year plus history, that that was blown out of the water by Justin Trudeau and these liberals in
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eight years that they spent more than all of that? Are we double better on our services? Are our roads
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better? Is our health care system better? Are we able to produce better passports faster? Do we have
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a better military? Do we have anything in this country in eight years that's operating better other than
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banks making a lot of money off the interest payments that the taxpayer now pays for all this debt?
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Well, okay, there's a whole bunch of things I want to expand on in there. Going back to what you're just
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talking about, the banks doing well, but in terms of the Prime Minister and even Judg Nixon, the leader
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of the NDP, saying that, you know, grocery store CEOs have to account for the record profits. Take a step
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back too, and you alluded to as well, just right there, the government's never been so flush with cash as
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well. They've had record profits, right? Like, when are we going to look in the mirror here and just see this
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hypocrisy? Well, yes, that's a great point, Jamie, because here they say, you know, because the revenue,
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which is not profit, the revenue of grocery stores have gone up because inflation is driving the price
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of groceries up, that somehow it's the grocery stores that are responsible, not all those things we've
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been talking to the government about. Meanwhile, government spending has almost doubled in eight
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years, and there are now over 102,000 more public servants working for the federal government than
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eight years ago. Imagine that, 102,000. Do you know any business in this country that has grown
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their workforce by more than one-third in eight years, which is what this government has done? It's
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insanity. But they're not getting the results, but that's always been the benchmark of this government,
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how much money we've spent on something. It's not exactly getting results, because as you just
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mentioned, everything seems to have gotten worse under this federal purview. So that's the benchmark.
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How much can we spend? And look at us, we're heroes. Well, you know, it extends to all kinds of things.
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Their only solution is taking our competitive advantage as a country, which is our natural resources.
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That's our oil and gas, our mining assets, our renewable resources, agriculture, forestry,
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fishery, and taking them and trying to shut them down for some other mythical green jobs.
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And in order to do that, the only way the government can make it happen is by massively subsidizing
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industries that don't really have a market-based economic model for profitability and sustainability
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and moving forward and removing all those things that we have as competitive advantage over the
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world that pay for themselves and actually pay for our healthcare system and pay for our roads.
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The profits from our natural resources are the great natural advantage that we have over every
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nation on earth, yet we have a government that has focused its efforts on shutting down every single
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one of those industries in order to get some mythical job. A perfect example is these VW and Stellantis
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contracts. They're a production contract. So in the past, we've subsidized, governments have subsidized
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the flip over of a plant from one vehicle to another in order to keep those actual assembly of vehicle
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manufacturing jobs in Canada as part of the North American auto business. But that's not this. This is
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a production subsidy for a piece of a car. So this is a production subsidy, which we've never done before in
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this country. We've never subsidized actually producing the product and in essence nationalizing part of our auto industry.
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But it's not really nationalizing our auto industry because it's only the assembly of EV batteries. It's not
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manufacturing anything. Most of these parts for EV batteries are made in China. They hold most of the
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world's critical minerals. They refine most of the world's critical minerals and they make most of the world's
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cathodes and anodes for the world's batteries are mostly 80 percent plus made in China. So we're
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subsidizing to the tune of 30 billion dollars, according to the parliamentary budget officer,
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and it's going to take 20 years to get that money back.
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An investor would say, yeah, that's where I'm putting my money.
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The prime minister and the minister of industry said, we're going to get a payback on this in five
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years. I kept asking them, how, when, where's the calculation? And a return on investment was the term,
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meaning you make a profit. Return on investment means you make an investment and you get it back
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plus a return on it. That's return on investment. They said, this will have a return on investment in
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five years. Well, in fact, this doesn't have any return on investment. And it's going to take 20 years
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if you believe these plants will stay here. And if you believe that technology will be relevant in 20
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years. It could be the Betamax. It could be the Betamax.
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Right. The Blu-ray of car batteries. And the fact is that the subsidies last for five years.
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And when those subsidies are gone on the heaviest part of the car, I doubt that those jobs are going
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to stay here. Because why would you truck these massive heavy EV batteries from Ontario,
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in the case of Volkswagen, to Tennessee to be assembled in a car without a government subsidy?
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So, subsidizing production doesn't work. Let me put it to you. No, it prolongs the inevitable.
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Yeah, let me put it to you this way. Let's say, you said, we wanted to become the world's leader in
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making laptop computers. But the only way we could do that is to say, we're going to subsidize
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Dell to come here and open up a factory. But why would Dell do that even with the subsidy, right? Because
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there's a lot of things that go into this. But if you said, you know, for the first number of years
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that Dell comes here, the taxpayer will pay 100% of the production costs of every one of those
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computers, maybe Dell would come for that. But when that 100% subsidy on the production ends,
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what do you think is going to happen? Do you think they're going to stick around?
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They're going to either say, keep giving us a subsidy, or we're going to move.
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Well, in this case, that's the kind of subsidy we're talking about for Volkswagen and Stellantis.
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We're talking about a subsidy on the production, a massive subsidy on the production of every
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battery over five to six years. And when that stops, that $30 billion investment, as they call
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it, to me, it's an expenditure to create 3,000 jobs is gone because those plants will disappear down
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to the U.S. Yeah, or the next technology will take over. See, that's the big problem with these
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government grants. It's not which company is making the best product of big service. We talked
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about this before, right? It's the company that aligns itself best with what the government believes
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is true, right? In this case, it's the EV batteries. Not to mention the other technologies
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that are being developed out there. They just completely sidelined them.
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You know, often I hear when we talk about this, you know, well, what would you do?
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Well, what we would do is say, you know what, if you believe that we should go to zero emission
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vehicles, which is a laudable goal, that the government should set regulations about when to
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do that. But let the private sector figure out the various technologies that can get us there. And it's
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not just one. And let the market decide which technology they want to buy. Do they want to buy
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Blu-ray? Yeah. Or do they want to buy another technology? Or if you live in a rural area,
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maybe you want a hybrid or you want some other type of zero emission vehicle. But why? Government's
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got a perfect record in picking winners and losers. And its record is usually failure, 100% failure
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of picking the right technology. In my part of the world, Nova Scotia, we have a long history of
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government trying to pick winners and a perfect record that everything has failed, whether it's
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Sydney steel, making steel, whether it's heavy water pants, whether believe it or not at one time,
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automatic lifting toilet seat covers, all of these things got massively subsidized by government to
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be in Nova Scotia. And of course, when it didn't work, they all disappeared, including the taxpayer money.
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Absolutely. And something we can all visualize, if we're talking about the automobile industry,
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in the 80s and early 90s, was anybody clamoring for a Russian made car?
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There were a lot of cars, but nobody was saying, yeah, we should get them over here.
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Yeah, I had a friend's parents who bought one because it was the ugliest car they could find.
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It was basically a box. And they figured their teenage son would refuse to drive it,
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which was true. He wouldn't drive it. I don't think many Russians wanted to.
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It was too embarrassing to drive up to high school in Elada. But you didn't have any choice. So
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they were all clamoring for mainly American and North American Canadian made vehicles.
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And so we're not making EV vehicles in this great strategy, a liberal government with these
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record setting $30 billion plus subsidies. We're assembling a small piece of it. The cars are
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still being made elsewhere. They're being assembled in where the value add. There's no R&D required as
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part of this. So we own none of the technology. So there's no value added in our productivity. It's
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just a few 3,000 assembly jobs. When ministers say we're saving the 100,000 people in the auto
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industry in Ontario, well, this $30 billion subsidy is only committed to create 3,000 jobs for the
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duration of the contract, which is five to six years. So that's not saving 100,000 jobs.
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No, it isn't. I have so many other things. Blacklock's reporter here, headline, the seeking
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the repeal of the Flaherty tax cuts, 750 union members, well, I guess the executive is asking
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parliament to remove the tax breaks, which brought the corporate tax rate from 21 to 15,
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lowering the cost of doing business here. Again, if we're talking about lowering the cost to consumers,
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doing this will only make prices more expensive. So let's talk about business taxes. All right,
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we got to do it quickly because we got to get out of here. Business taxes. The NDP,
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Liberal government, of course, is going to probably be big on, you know, sticking it to the big
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corporations. But the reality is there's only one taxpayer, everybody out there. So I wrote business
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plans for businesses for 25 years, big and medium-sized businesses. And you know what your tax rate is,
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and you build it into your cost of production, and you pass all those costs on. So if the
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union wants the tax rate to go up, that will create more inflation, it will force the cost
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of everything up. Companies don't eat those taxes, they get passed on in the pricing of the goods and
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services they produce. So what they're asking for, ironically, is inflation. Yeah, more price increases
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for the average person. And it's not as if we're just shelling for the big corporation, we're shelling for
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a competitive environment. Because the more regulations, the harder it gets to make money,
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the less small businesses start up. Well, we're also promoting the idea that government policy
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shouldn't cause inflation. Well, that too. That too. All right. We got to get a question period.
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So much more I got to talk to you about. I appreciate you coming on. My pleasure. Always a
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pleasure. I love our conversations. Rick Perkins, Member of Parliament for St. Margaret's South...
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South... No. Oh my goodness. South Shore St. Margaret's. I can't believe I keep getting this wrong.
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We're gonna have to come for a visit. Absolutely. Also, the industry critic,
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we appreciate your time, Rick. We appreciate yours as well, as we have the second episode in
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