Friday, August 24, 2007

Public Money, Private Profits

August 24, 2007, 1:40 p.m.

"The Marketplace" vs. Public Money, Private Profits

It's no secret to any regular reader of this blog that I find it a little hypocritical, putting it mildly, for those who are ideologically committed to "the marketplace" and the "free private enterprise system" -- those who believe that "government is the problem, not the solution" and that "social programs" are repulsively "socialistic" if not worse -- and yet cannot see anything objectionable about taxing the public in order to further enrich the wealthy and their for-profit enterprises.

[As I wrote last month:

"I've had it with the Iowa City City Council and TIFs. I'm going to do my best to see to it that anyone running for council who persists in continuing to take Iowa City taxpayers' money and give it to wealthy, supposedly "free private enterprise" for-profit corporations -- while denying it to their competitors, not to mention needed social programs -- is prevented from serving on the City Council." Nicholas Johnson, "They're Back: The Terrible TIFs" in "The Terrible TIFs," July 26, 2007.]
The ways in which "corporate welfare" can be done -- TIFs, subsidies, tax breaks, government contracts, use of public property, among others -- are limited only by the imagination of the beneficiaries' lawyers and accountants.

All too often, the press ends up on the side of those beneficiaries who, if not advertisers, are at least "pillars of the community."

So that's why I want to award a "Hat's Off" to the Register for not only its position, but the analysis and rhetoric represented in its editorial yesterday (August 23). Editorial, "Let a Developer Pay for Convention Hotel; Marketplace Will Say When Hotel Needed," Des Moines Register, August 23, 2007. Here are some samples:
Polk County and Des Moines . . . are no closer to getting a convention hotel . . .. It's to the point where local leaders need to listen to the marketplace rather than consultants.

A study by a Chicago consultant released Monday concluded that market demand is growing for another hotel downtown, which would boost events and attendance at the Iowa Events Center . . . [and] throw off $39 million in economic benefits to the community.

The catch: For that to happen now, taxpayers would be expected to kick in a substantial subsidy. That is something city and county officials should firmly resist.

There is cause for optimism that downtown Des Moines will eventually support a new convention hotel. But that should happen when the market is ready for one without a public subsidy. . . .

Other local hotel owners, whose occupancy rates according to the study are below 60 percent, could be forgiven for wondering whether they, too, will be eligible for government handouts.

. . .

City and county officials will know the time is right when developers start lining up to build the hotel - without expecting government subsidies.
What would it take to get Iowa's legislators and city officials to start thinking that way? Enough of this "free private enterprise for the poor and socialism for the rich."

I can give you as long a list as anyone of market failures, corporate abuses, the inequity and other evils of "the marketplace." And I have an equally long list of things I'd like to see government doing. Unlike many who oppose government programs, and want nothing more than to "cut taxes," I have less problem with paying my fair share for rational, efficient, and needed government programs.

But when it comes to setting priorities for the allocation of economic resources among all the potentially competing for-profit projects, the marketplace is like democracy. It's the worst possible way to do it -- except for all the other alternatives.

It's when we try to combine the two -- transfers of taxpayers' money to for-profit enterprises -- that we really get the worst of all possible worlds. (For example,
talk about "a level playing field," as marketplace advocates are wont to do! When we throw public money onto the bottom line of one business person, while denying it to all their competitors, we have really tilted our economy.)

This morning's Gazette editorialized along a consistent line this morning. Editorial, "Don't Focus on the Rankings," The Gazette, August 24, 2007, p. A4.
How does Iowa’s business climate compare to other states?

If you look for the answer among the numerous rankings compiled by various business magazines and think tanks, prepare to be more confused than enlightened. It’s best not to rely on these lists to judge our state, or others, for that matter.
. . .

Peter Fisher, University of Iowa professor and research director for the Iowa Policy Project, a non-profit public policy organization, determined the indexes were produced by ideological organizations that advocated mostly lower taxes and less government regulation. He concluded that their validity thus was diminished.

. . .

Peeling back the layers on taxes, for example, shows that Iowa’s overall business tax burden is lower than in border states Minnesota, Wisconsin and Illinois.

Business climate isn’t easy to define. However, a favorable environment for long-term growth must be based on more than tax rates. A skilled work force attracted by good schools and other quality-of-life measures is certainly just as important. Access to markets and materials is another.
Much of Iowa, including the Cedar Rapids-Iowa City corridor, can offer those things. But a looming worker shortage as the baby boomers retire poses a major challenge to this state.

Iowa’s focus should be on making sure our children are well-educated and well-informed about career opportunities here. That will do more to keep good companies here and help attract new business than a think tank’s lofty rating.
In short, the emphasis on "taxes," and the necessity of corporate welfare is often bogus.

In terms of the quality of life for those already living there, not all "development" and new or expanded businesses are a net plus.

Speaking of rankings, Iowa City, for example, is constantly being well ranked by those publications evaluating best places for college students, retired couples, entrepreneurs, and other categories. It's an attractive community -- attracting citizens and corporations alike. Additional growth is no longer our number one need, if it ever was.
That's not to say we should put a fence around the town and forbid any growth. It is to say that it makes it much more difficult to make a case for handing out taxpayers' money to for-profit enterprises to encourage even more and faster growth.

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2 comments:

Anonymous said...

Does anyone have a good reference - book or article - about this topic?

thanks

John Barleykorn said...

Again, some projects are more worthy of TIF's than others. The Des Moines Hotel is a case in point. Every state in the union offers economic incentives of one kind or another to business. In Iowa TIF happens to be one of the major tools. Iowa is already competing with other states and countries, if you take away TIF you do nothing but leave us short handed. I can think of several TIF projects that have created many jobs, not just get the investors rich.