Bush and Giveaways to Sheraton

April 25, 2008, 6:45, 8:15, 10:15, 11:55 a.m.

Who's Best Bush? And, Raising Taxes to Increase Corporate Profits
Best Bush? Who is most likely to give the American people "four more years" of President George W. Bush? Professor Tung Yin's analysis may surprise you.

Sheraton's Scandalous Subsidy. Most Iowa City residents' response to the City Council's enthusiasm for handing over taxpayers' money to the Sheraton is either uproarious laughter or "I'm mad as hell, and I'm not going to take this anymore!" -- including virtually all of the authors of the 26 comments currently residing on the local newspaper's Web site. But the idea apparently passed the Press-Citizen's laugh test. I guess the editors know a class of "residents" who refuse to give the paper their responses in writing, because they editorialize this morning, "Don't Close Sheraton Walkway, but Do Discuss Possible Tax Incentives."

More on both stories to come.

The Best Bush
Tung Yin asks in yesterday's blog entry. "Who's the real '4 more years of George Bush'?" April 24, 2008. Here are some substantial excerpts from his analysis -- although you really need to go to his site to also see the videos that drive his point home.

He begins,

I hear the constant refrain from the Clinton and Obama campaigns that John McCain can't be allowed to win, because that will be just 4 more years of the Bush Administration. It's not an implausible argument, given that McCain has started to repudiate some of his past views on taxes, for example.

However . . . this is focusing purely on political issues. Now, I'm not downplaying the importance of issues, since for many people, such things as Supreme Court appointments, tax policy, Iraq, and so on are key points. But I can't escape feeling that on a procedural level, the candidate who would represent 4 more years of the Bush Administration is . . . "

Whom to you suppose he has in mind? Care to guess?

Hillary Clinton.

How can I say that? Let me explain.

Obviously, I don't mean that Clinton, if President, would duplicate Bush's policies. Rather, what I mean is that she strikes me as most likely to replicate the Bush Administration's approach to dealing with the opposition and the public: a malleable understanding of truth and reality; and questionable judgment about and excessive devotion to blindly loyal subordinates.

Malleable understanding of truth and reality

As far as I can tell, nothing ever matters except what the Clinton campaign says at this very moment; certainly, not anything that was said in the past by any member of the Clinton campaign. The best example of this is the "3 am ad" that Clinton ran against Obama in the days leading up to the primaries in Texas and Ohio. The ad asked voters to consider whether the person in White House would be up to answering the phone at 3 am to deal with a national security crisis.

The suggestion here is that Obama is not ready, and the country would suffer if he were the President. Yet, in 2004, Bill Clinton, when campaigning on behalf of John Kerry, told a crowd that if one candidate was selling fear (i.e., Bush) and one was selling hope (i.e., Kerry), you better vote for the one selling hope(!).

Is this at all consistent? Of course not, because all that matters is the present, and in the present, Clinton needed to sell fear.

There are so many other examples of this kind of malleable, "reality is what we say it is" attitude, including:

She admits here that she said some things she knew not to be true. Why? If she's willing to lie about something this trivial, what else would she lie about that matters to her? What is especially galling about the Bosnia sniper lie is that it was so brazen -- as if to say that the public is a bunch of dupes who wouldn't possibly find out the truth.

Another example of Clinton's reality: Florida and Michigan. . . .

Questionable judgment about and excessive devotion to blindly loyal subordinates

One of the key complaints that I've heard about the Bush Administration is that it made mistakes in appointing people like former Defense Secretary Donald Rumsfeld, former Attorney General John Ashcroft, and of course, Vice President Dick Cheney. It compounded those mistakes by not listening to "good" appointments, like former Secretary of State Colin Powell and the generals who advised the President not to invade Iraq, at least not without committing 500,000 troops. . . .

Then there's her former campaign director, Mark Penn, who was able to keep his day job as the CEO of his lobbying firm, Burston-Marsteller. Of course, he was fired when it became known that, while Clinton was opposing a free trade deal with Colombia, Penn was representing Colombia in that same deal. Why didn't Clinton think that it was a problem to have Penn continuing to work as a lobbyist while running her campaign? Heck, even Dick Cheney resigned as the CEO of Halliburton!

Is this an example of what her "35 years of experience" has led her to conclude is an acceptable arrangement without a conflict of interest?!?

Of course, she didn't even fire Penn -- he remains on her campaign as an advisor!

Speaking of questionable judgment about subordinates, I have to end with this observation. We have a mess in Iraq in part because Bush did not listen to the generals who warned him about invading. Lesson: military commanders might know what they are talking about.

Redux:

Hillary Clinton declared Thursday she will begin withdrawing troops from Iraq within 60 days of becoming president, regardless of what her military advisers say about the situation on the ground at the time.

True, invading and withdrawing are different. But the bald-faced willingness to dismiss what military commanders have to say evinces a similar attitude of disrespect toward the professionals and a ruthless desire to advance one's own agenda regardless of the facts. . . .

[T]here would obviously be differences between Hillary Clinton and John McCain on a range of issues. But that is focusing on what the President does, and ignoring how the President will do it. Both are important, and when it comes to replicating how the Bush Administration is perceived to do things, I see the danger as coming from Hillary Clinton more than John McCain.

(Tung Yin's posting contains, as well as more text, videos supporting the statements to which he refers.)

In effect, what Professor Yin is telling us is that there are two considerations here. (1) One, for Obama supporters, is whether they are willing to forgive Bill and Hillary Clinton, and their staff members and supporters, for the tactics and character they've displayed during the campaign in the event Senator Clinton were, in the end, to get the nomination. Would they vote for Clinton in the general election anyway, "come together as Democrats," and "let bygones be bygones." Or, would they be so "bitter" (to use Senator Obama's ill-fated word) that they would be willing to "punish" her (and many would say, "themselves") by staying home, or voting for Senator McCain (or some other candidate)?

But, (2), there is now another and much more significant issue. If Professor Yin is right, all voters -- Democrats (whether supporters of Clinton or Obama), Republicans and Independents alike -- need to at least think about (whether it affects their ultimate vote or not) the qualities of character attributed by him to Senator Clinton, and the weight they as voters would assign to them, in evaluating who they wish to vote for in November. This is not a matter of retribution or anger, or judgment about what tactics are, or are not, acceptable and to be expected in a campaign. This is not about the effect of her "high negatives" on her ability to win an election. This is a judgment to be made as to the qualities of character one wishes to have in a president -- in light of what we've all learned about their relevance from 8 years of George Bush.

Subsidizing the Sheraton
See yesterday's, Nicholas Johnson, "Call the Cops, Robbery in Progress," April 24, 2008, regarding this Sheraton subsidy, and Nicholas Johnson, "Courage, Councilors," Iowa City Press-Citizen, October 3, 2007, p. A12, regarding TIFs and corporate welfare generally.

And, of course, you won't want to miss State29, "Just Say No to Corporate Welfare," April 25, 2008 (sample: "They could reduce the price to $29 a night and you couldn't get me to stay there").

(The Press-Citizen's description of the details of this attempted unarmed robbery can be found in Kathryn Fiegen, "Sheraton's case presented to city; Economic committee asks for more information on TIF," Iowa City Press-Citizen, April 23, 2008 (the demands "included asking for a new parking agreement in the Dubuque Street Parking Ramp, taking out the public access point through the center of the hotel and tax incentives to make repairs"), and this morning's editorial endorsement of giving the idea serious consideration in Editorial, "Don't close Sheraton walkway, but do discuss possible tax incentives," Iowa City Press-Citizen, April 25, 2008, p. A11.)

Ms. Fiegen's story reveals some other interesting facts:

Columbus, Ohio-based RBD LLC announced this month that it bought the 234-room Sheraton for $9.5 million, the property's third owner since 1999. The company has said it wants to invest $11 million to replace everything in the hotel from the carpets to the roof. . . .

"The cost to fix the hotel is far greater than what it's worth as it stands," Geshay said [Thom Geshay, senior vice president of business development for Davidson Hotel Company [which] operates the Sheraton].

According to 2007 assessor data, the property is worth $6.7 million. At its height, the Sheraton was worth $12.1 million. Geshay said it hovers a little above a 60 percent occupancy rate, with the average room rate at $109 a night.

Note the following:

o We're negotiating with the operator, not the owner.

o There have been three owners of the hotel in the last 9 years. And just why is it we think "RBD LLC" -- whatever the hell that is -- is going to last any longer? And do we propose to underwrite the next owner's refurbishing as well?

o The owner planned to put $20.5 million into this project when it bought it -- $9.5 for the building and $11 million to refurbish -- notwithstanding its 60% occupancy rate. That was the marketplace decision of this multi-billion-dollar corporation: that it could make money from a $20.5 million investment in a hotel in downtown Iowa City. It doesn't care about "Iowa City" -- downtown or otherwise. Had it thought it could make a better return on a $20.5 million investment in $900/ounce gold it would have done that. It's thought this Sheraton purchase through and concluded it's a "go," a prospective profitable return equal to, or better than, whatever it can get on its $20.5 million in pocket change if invested elsewhere. It's not like we're attracting a new business that, but for our bribe, would never build the new plant, hotel, or other business.

o Given that the property -- once worth $12.1 million, and for which it's paid $9.5 million -- is assessed at $6.7 million, isn't the company already receiving a significant break from taxpayers?

In "Courage, Councilors" I list 11 categories of reasons (each of which could have numerous examples) why TIFs and other corporate subsidies don't make sense for taxpayers.

Notwithstanding our Mayor's belief that those who oppose TIFs "are simply philosophically opposed to city’s providing financial support to corporations," I don't consider myself either an ideologue or a philosopher. I like to think of myself as a pragmatist: What works? Where's the data? "What do you mean, and how do you know?" "How would we know if we had ever been 'successful'?"

Indeed, a major reason for my persistence on these issues is that, so far as I know, none of the TIF-and-corporate-subsidy advocates has ever addressed those 11 categories I identify in "Courage, Councilors" -- any one of which should be enough to dissuade them from corporate welfare. They cite instances in which TIF-benefited businesses have not gone bankrupt or otherwise run off with taxpayers' money before providing any return. They say, "Well, but everybody's doing it." It's not that they've made no effort to defend their giveaways. It's just that they have not, yet, ever taken on the task of disproving what seem to me to be 11 serious flaws in their approach.

Whatever they may think, the fact is that I am open to persuasion and often change my mind. I have to. I live in the midst of law professors. In faculty seminars, offices, hallways, over lunch, and the reading we do there is a constant challenging of data, assumptions and analyses regarding a wide range of legal and public policy issues and proposals. (Yesterday it was the impact of "sentencing guidelines" on federal judges sentencing of criminals.) I love the process much more than any preconceived notions I may bring to school any given morning, and often end up changing my position by the time I leave for home -- as was the case yesterday.

So somebody, anybody, tell me what's wrong with my "Courage, Councilors" analysis. I'll listen. I'll react. I'll test and push both your analysis, and mine. I may well change my mind.

For example, although I haven't yet investigated the program and its payback rates, I'm intrigued by another story in this morning's paper, Kathryn Fiegen, "City Loans Help businesses Get Started; Number of Applications for program Has Almost Tripled," Iowa City Press-Citizen, April 25, 2008, p. A1.

So how can I be so repulsed by a tax break for the Sheraton and potentially attracted to a loan program? Because of differences I find significant-to-decisive:

o The Sheraton subsidy involves local taxpayers' money going to a for-profit business (as distinguished from an appropriate governmental function, or even a City-owned business). The loan program utilizes a federal grant administered by the City, but not local taxpayers' money.

o Loans are paid back; grants and tax forgiveness are not.

o The loan program goes to new, start-up businesses owned by local residents. This TIF would go to a substantial, well-funded, pre-existing out-of-state business for a pre-existing building and business in Iowa City.

o The primary beneficiaries of the gift to the Sheraton are the owners of the Sheraton; the secondary beneficiaries are the downtown merchants who will benefit from selling stuff to the folks who stay at the Sheraton. Few Iowa City residents and taxpayers will ever stay at the hotel or otherwise benefit directly from this corporate welfare. The primary beneficiaries from the loan program will be the loan recipients. The secondary beneficiaries will be the Iowa City residents and taxpayers who use and benefit from these new businesses.

In "Courage, Councilors" I made clear that I see no problem with alternative ways for a community's residents to encourage business.

Alternative approaches do work. Businesses look for more than taxpayers’ bribes; things like an educated and skilled workforce, transportation and communication infrastructure, and quality of life – schools, parks, theaters, neighborhoods, restaurants and natural settings. Those investments will both attract business and benefit the public. [Note, not incidentally, that notwithstanding the Mayor's belief that some people "are simply philosophically opposed to city’s providing financial support to corporations," many of the kind of City expenditures mentioned here would not be at all controversial, even though one of the consequences would be "providing financial support to corporations" -- along with everyone else.]

Try “seed funds.” There’s nothing to keep the business community from creating group venture capital efforts called community seed funds – as it has. Those are investments of private money, not gifts of public money.

The potential problems with government loan funds are at least that (a) they are unfairly competing with the banks and credit unions that are in the same business, and (b) they create at least the potential risk that taxpayers (whether local or federal) will be left holding the bag. "Seed funds" and venture capitalists, because they use private funds, avoid those problems.

A global model that has been quite successful is what are called "micro-loans." Often even $200 can make an enormous difference to a third-world entrepreneur -- when available at reasonable loan rates. That is what the organization Kiva makes possible -- in part because of payback rates to Kiva from its borrowers that are far in excess of those our own banks have been getting from Americans recently. I encouraged readers to consider loaning $25 or $50 to such worthy entrepreneurs last December. Nicholas Johnson, "Kiva: The Gift You Give, Keep and Give Again," December 26, 2007 ("The Charitable Gift That Literally Keeps on Giving . . . and Costs You Nothing").

With Kiva, as with venture capitalists, an advantage is that economic development is kept entirely separate from government. Such efforts are run by private citizens, using their own money. This makes for smarter decisions than when government officials are giving away someone else's money. It helps hold down the costs of government -- and the taxes paid by citizens.

I would be troubled not at all if the downtown merchants who stand to benefit from a Sheraton upgrade (if, indeed, they think they would), and the members of the City Council and Press-Citizen editors who think it's a really swift idea, would take up a collection and make a loan, or gift, to Sheraton. That's their choice -- and their money.

It's just that no one has ever asked the rest of us if we'd like to support this for-profit enterprise with our money, and I, for one, were I asked, would decline the opportunity.

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