Friday, April 18, 2008

Golden Rules & Revolutions: A Series - VII

April 18, 2008, 7:30 a.m.

Today is the seventh in a series, "Golden Rules & Revolutions." Here are the prior entries:

I - Income Disparity & Revolution
, April 12, 2008
. "Series Introduction," "Increasing income disparity, despair. . .," ". . . and Revolution"

II - Golden Rules & Fascism, April 13, 2008
. "The Golden Rule," "Fascism"

III - Money and Lobbyists in Politics: Washington, April 14, 2008

IV - Presidential Candidates and Lobbyists: McCain, April 15, 2008

V - Presidential Candidates and Lobbyists: Clinton, April 16, 2008

VI - Money and Lobbyists in Politics: Iowa, April 17, 2008

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Money and Lobbyists in Iowa: Hormel's Pork

Part I of this series noted not just the gap in income between the rich and the poor, but the fact that this gap is continuing to grow ever wider, and that history -- as well as the daily news -- provides ample warning that this condition often produces revolution.

Part II began the exploration of the forces that may be shaping these potentially dangerous conditions -- including the ties between business and government eerily reminiscent of the early stages of what we used to call "fascism."

Part III took us to Washington for some general descriptions of how the system works, what campaign contributors get for their money, the role of lobbyists, and a columnist's description of one case study.

Part IV dealt with how the role of lobbyists extends beyond their manipulation of government into the pre-governing phase: presidential campaigns -- beginning with Senator John McCain.

Part V examined Senator Hillary Clinton's campaign from this perspective -- and tried to figure out who is the biggest "elitist."

Part VI returns to an application of the subject of Part II: "the ties between business and government eerily reminiscent of the early stages of what we used to call 'fascism.'" Although this time, instead of looking down the road to Washington for the consequences of "Money and Lobbyists in Politics" we take a shorter drive -- to Des Moines and Iowa City.

Part VII offers one example, from among dozens that could be mentioned, of "Money and Lobbyists in Iowa" -- the tax breaks, cash and infrastructure offered to Hormel.

Since the opening of the introduction to Part VI is equally applicable to Part VII, it's repeated here for those for whom Part VII is their first exposure to this series:

Part III began the discussion of "Money and Lobbyists in Politics" noting the "$2.79 billion that the special interests spend on lobbyists, and the the millions and billions of dollars the special interests 'invest' in 'campaign contributions'" -- primarily in Washington.

But it added, parenthetically, "in state legislatures as well as Congress, and among the best investments these businesses ever make."

Bear in mind, lobbyists don't head to Washington just because they like the restaurants -- though they do. They go for the same reason Willie Sutton once offered for why he robbed banks. "Because that's where the money is."

When the money is elsewhere they'll go there.
But what if they're already "there" -- in this case, in Iowa? How can public officials -- state or local -- justify transferring the tax dollars of poor taxpayers onto the bottom line of for-profit businesses (and into the pockets of their super rich CEOs)?

Inevitably, these cash transfers (and cost avoidance, such as tax breaks) are advertised as "jobs programs." But of course this is nonsense. There may be very few jobs involved. They may pay only average salaries. There's little follow-up to see if they're actually created. There's usually no payback when the company decides to leave vacant facilities behind and move on in response to a bigger bribe elsewhere -- or simply goes bankrupt because the business plan wasn't well thought through. And how can anyone ever know if they would have been created anyway even without the bribes?

Do these payments sometimes come about, even in part, because of personal friendships, or even "campaign contributions," from the beneficiary of such governmental largess to the public officials and political candidates responsible for the gifts? You have to wonder.

All of which brings us to . . .

Hormel's pork. I was reminded of all this once again the other day, reminded that "the beat (-ing up of the American citizen-taxpayer) goes on," with the news of the cash transferred from the people to the Hormel Corporation.

Hormel Foods' project to build a new food plant in Dubuque landed $444,791 in additional state incentives Tuesday.

The Iowa Transportation Commission awarded a $444,791 RISE immediate opportunity grant to the City of Dubuque for construction of new roadway in the Dubuque Industrial Center East. The one-third mile stretch of pavement south of Chavenelle Road will provide access to the plant site.

Hormel was earlier awarded $6,115,980 in state tax incentives through the High Quality Job Creation Program by the Iowa Department of Economic Development Board for the project.

Hormel is developing the plant to produce single-serving shelf-stable meals that do not require refrigeration. That product line, Hormel Compleats, are a rapid growth area for the Austin, Minn., company. . . .

Hormel said its choice of Dubuque for the plant was due partly to its proximity to the company's grocery products distribution center in Eldridge.
David DeWitte, "Dubuque Hormel plant lands more state incentives," GazetteOnline, April 9, 2008, 5:50 p.m.; The Gazette, April 10, 2008, p. B7.

Why should Iowa's taxpayers have put over $6.5 million of their money into this for-profit project that will primarily benefit Hormel's executives and shareholders? Roads that Hormel would otherwise need to pay to build? Taxes Hormel would otherwise have to pay -- as a result of which either programs will need to be curtailed or someone else will have to pay Hormel's share?

Was this taxpayer generosity needed to develop some new agricultural, bio-fuel, or energy-creating product -- or other great contribution to humankind? No. The free private enterprise system was fully up to the task of coming up with this new artificial food. These "single-serving shelf-stable meals that do not require refrigeration . . . Hormel Compleats" are already on the market.

Does the company need a hand with the promotion of an innovative product that has not yet caught on in the market? No. The product is already a "rapid growth area" for the company.

Was it necessary to give the company these bribes to get it to locate the plant in Iowa (accepting for the moment the erroneous assertion that such bribery would ever make good economic sense for Iowans)? No. "Hormel said its choice of Dubuque for the plant was due partly to its proximity to the company's grocery products distribution center in Eldridge."

Indeed, companies' choices of location are somewhere between often and always significantly affected by factors other than bribes: access to raw materials, an educated labor force, customers, "quality of life" factors attractive to professionals, or as in this case access to transportation systems and "distribution centers."

In Part VI there was reference to a Press-Citizen column of mine dealing with these issues. Here now are some excerpts from that column, identifying not just reasons but some of the categories of reasons why what I call this "infant fascism" (a government-corporate financial axis) doesn't make sense for anyone -- especially taxpayers:

"Corporate subsidies make no sense for Iowa City both because of the multiple categories of reasons they’re foolish for any community, and the additional reasons they’re especially silly for Iowa City.

The "opportunity costs" are enormous. County Supervisor Rod Sullivan estimates nearly $700 million of property value has been diverted from normal taxation – resulting in either more taxes for the rest of us or cuts in needed programs.

They reek of hypocrisy. How can a business simultaneously say, “Get the government off my back,” while holding out a tin cup?

Corporate welfare tilts the playing field. It’s fundamentally unfair to ask businesses to compete against a favored few funded by government. It upsets a smoothly working free market to no one’s benefit – except the lucky recipient.

If the market won’t back a project, why should the public? If private sector money isn’t forthcoming that’s a pretty persuasive indication it’s not appropriate for the public's money either.

It doesn’t work. Governor Tom Vilsack offered Maytag $100 million not to leave Newton. It left anyway. Should he have offered $200 million? I don't think so.

“Money can’t buy love.” It may buy sex – but we have another word for that. Why compete for businesses that won’t come without bribes? Let ‘em go elsewhere. Besides, a firm that likes San Diego's climate and needs port access to the Pacific probably isn't going to come here for any amount of money.

The subsidy-grantors' record’s not great. Public officials are skilled at keeping constituents and contributors happy, getting re-elected, and moving to higher office. They’re less skilled at evaluating taxpayer-funded business proposals – a lot of which go belly up, miss construction deadlines, or new job goals even with our money.

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.

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.

“Need” is impossible to know. Many projects will go ahead without subsidy. If tax breaks are available, of course entrepreneurs will say they won’t act without them. But how can we know when that’s just blackmail?

Lack of transparency. It’s virtually impossible for the public and media to follow the shell-and-pea game of cheap land, tax abatements, cash grants, and other transfers of their money. Few projects would be funded if all benefits were translated into public cash on the table for voters to approve.

That’s why business subsidies don’t make sense for any city.

Why are they especially inappropriate for Iowa City? We don’t need them. We’re not in a 1930s depression with boarded-up store fronts and 40% unemployment. Our economic growth is satisfactorily driven by entrepreneurs, investors, venture capitalists and banks – plus the University.

We’re one of America’s top ranked cities by virtually any measure.

Have a little self-confidence, City Council candidates. It makes us less attractive, not more, to tell the world we, too, have to offer bribes."

Nicholas Johnson, "Courage, Councilors," Iowa City Press-Citizen, October 3, 2008, p. A12.

Think about these categories. Then think about Hormel. Isn't it a classic case study?

Hormel buys pork by the ton in the marketplace and seems perfectly capable of profiting handsomely by doing so. How do Iowa's taxpayers benefit by going into business with the company -- assuming some of the costs of its business, giving it "pork" for free, while reaping none of the profits?

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