Tussling Over TIFs: Pros and Cons

April 13, 2014, 8:25 a.m.

NOTE: For 40+ additional discussions of these issues, 2006-2015, see "TIFs: Links to Blog Essays."

Tough TIF Talk

Introduction: For years, TIFs have been controversial. ("Tax Increment Financing," by reducing a developer's property taxes, or directing them solely to his or her project, has the effect of transferring taxpayers' money to the bottom line of private, for-profit ventures.) Proponents cite a "benefit" -- essentially the existence of the developer's project -- while skeptics list a rather substantial list of the costs and burdens they believe more than outweigh any such benefit under any rational benefit-cost analysis.

The Gazette for Sunday, April 13, 2014, led its "Insight & Books" section (editorials, guest columns) with two guest columns taking opposite sides regarding the merits of TIFs: "Weighing the Pros and Cons of Tax Increment Financing; Talking TIF" -- found on the Opinion Page of The Gazette's Web site, and in hard copy as: Nicholas Johnson, "Costs Outweigh Possible Benefits," pp. A9, A12, and Chad Heiman, "TIF a Necessary Tool for Growth" pp. A9, A12.

Talking TIF: Costs Outweigh Possible Benefits

Nicholas Johnson
The Gazette
April 13, 2014, pp. A9, A12
http://thegazette.com/costs-outweigh-possible-benefits-20140413
[Submitted as: TIFs’ Multiple Costs Outweigh Any Possible Benefit]

There are many reasons why further enriching the backers of for-profit, private ventures with taxpayers’ money is a really bad idea. [Photo credit: Patrick McDonough.]

In 2006 I began a blog. Dozens of its 1000 essays deal with reasons to oppose TIFs. See “TIFs: List of Blog Essays,” http://fromdc2iowa.blogspot.com/2014/03/tifs-links-to-blog-essays.html.

Any one of them is reason enough to reject a TIF. To approve it, proponents need to show why none applies.

The issue is not whether a TIF has a single benefit. Benefit-cost analysis requires we total all the costs and burdens of that TIF and weigh them against its individual benefit.

Few if any can pass that test.

Ideological hypocrisy. How can those supporting free private enterprise, capitalism, and marketplace forces, who think “government is the problem” and want it “off their back,” justify taking money from the public collection plate?

Anti-democratic. City councils need voters’ approval of bonds for legitimate government projects. Yet they can give our money to their friends’ private projects on a whim.

Lowered credit rating. TIFs can impact credit ratings. Coralville went from a Moody Aaa credit rating, the highest, to a “lower medium grade” Baa2 in two years.

Opportunity costs. Spending money on one thing costs the lost opportunity to spend it elsewhere. Johnson County Supervisor Rod Sullivan once found a diversion of $700 million of property off the tax rolls. As a result, either we pay more taxes or Supervisors cut needed programs.

Unfairness to neighbors. The TIF-granting body’s neighbors often lose out as well – other communities and school districts with less money in their budgets.

Unfairness to competitors. TIFs tilt the playing field. They unfairly upset a free market, punishing honest competitors and benefitting no one except the TIF recipient.

Risky business. Money’s always available for good deals. If an entrepreneur, family, friends, investors, venture capitalists, and banks aren’t willing to fund a project, maybe taxpayers shouldn’t either.

TIFs complicate taxes. We don’t deserve more tax complexity and even less transparency.

“Money can’t buy love.” Why compete with bribes? A business that needs port access to the Pacific Ocean isn't coming to Iowa. If it did, it would leave for a bigger bribe. Maytag, offered $100 million to stay, left anyway.

TIFs are unnecessary. The Corridor is one of the fastest growing, lowest unemployment areas of Iowa. We already have what businesses want: skilled labor, transportation and communication infrastructure, quality education, cultural attractions and outdoor recreation.

TIF grantors’ poor skills, record. The subsidy-grantors' record is not great. Elected officials are more skilled at keeping contributors and constituents happy than at evaluating taxpayer-funded business proposals. TIFed projects have gone belly up, missed deadlines, and new jobs goals. With reasonable follow-up and transparency we’d know about many more. But TIFs in Iowa have more lenient provisions, and less oversight, than in most other states.

“Need” is unknowable. Many projects will go ahead without subsidy. If tax breaks are available, of course developers will say they need them. Maybe this is blackmail. Maybe they need to look harder for funding. There’s no way to know.

At a minimum, here are questions to ask before approving TIFs:

What is this government’s past record, when we compare promised results with ultimate return or loss?

Why is this project needed?

Why does that need exceed all conventional needs for public funds?

What will other government units lose? How much more will their taxpayers have to pay?

Of all possible TIF projects, why is this one a top priority?

Who benefits: all citizens, a small segment or primarily the recipient?

How much money is involved?

Why are those who will profit unwilling to invest what is needed? Are their reasons equally applicable to taxpayer funding?

Does the business plan indicate financial success, or reveal risks of failure?

If and when the recipient fails, skips town, goes bankrupt, or misses deadlines, how will taxpayers be protected?

What relationships are there between the potential recipient and the officials approving the funding?

How will the recipient’s unfunded private competitors be harmed?

TIFs shouldn’t be used at all. If used anyway, let’s do the wrong thing better:

Leave the tax code alone. Taxes are taxes, gifts are gifts – through appropriations, fully disclosed and audited.

Don’t privatize profits and socialize losses. It’s our money. Don’t give it. Loan it or invest it. Earn us some interest – with a City or State Bank. Invest our tax money; take an ownership share. Give us at least a gambler’s chance at occasional profit. Publicize the details.

We don’t have a fascist state, just a fascist economy, government and private enterprise blended to more resemble a purée than a stew with identifiable ingredients.

In Washington, D.C., it’s billions of tax dollars; in Des Moines hundreds of millions; in Iowa’s cities, TIFs. Without a taxpayer revolt, it’s unlikely to change.
_______________
Nicholas Johnson of Iowa City maintains www.nicholasjohnson.org and http://FromDC2Iowa.blogspot.com.

# # #
TIF a necessary tool for growth

Chad Heiman
The Gazette
April 13, 2014, pp. A9, A12
http://thegazette.com/tif-a-necessary-tool-for-growth-20140413
The 21st century global economy we live and work in is consistently evolving. The rapid pace by which business owners must adapt to meet market demands has never been more challenging.

As a community and region it is critical that we promote public policy that allows companies the option to not only operate their business under the status quo, but create an environment that promotes capital investment, company expansion and job creation.

MISINFORMATION

On the local level, the key tool to aid in doing this is Tax Increment Financing (TIF). There has been misinformation about TIF; specifically, how it works and the side effects of the tool being used. Marion has chosen to be forward thinking and responsible in using TIF as an incentive for companies to do business in our community.

It has been written that TIF incentives are awarded by a City Council without any public approval process; this would violate Iowa Code. A public hearing before the City Council is required for any new TIF project before it gets approval.

An additional public hearing must take place before an amendment to the Urban Renewal Area (designated area in which TIF project occurs) is approved. The process is public and allows for citizen involvement.

How do cities protect their investment? TIF incentives are financed through new property taxes that are generated by the development; current public funds are not used to finance the TIF incentive. An estimate is provided in the development agreement, but the actual TIF award is determined by the assessor. Taxpayers are protected because whoever has title to the property will be subject to pay the associated property taxes. With new development, no existing revenues are lost because of TIF.

ESCO GROUP’S TIF

The ESCO Group in Marion was awarded a TIF incentive package for construction of its new corporate headquarters in Marion’s Tower Terrace Road corridor. The ESCO Group is a Marion-based company that provides plant automation, electrical construction, power engineering, testing and safety training. The City of Marion provided ESCO with a $200,000 grant and an annual 60 percent rebate on their property taxes starting in 2013 and expiring in 2022, The total rebate will not exceed $1 million, per the agreement.

Because of this incentive package, ESCO chose to locate in Marion and brought a capital investment of $5.8 million for the community. The expansion is leading to the creation of 25 new, highly technical, quality jobs in the corridor. A law of economics states that people respond to incentives. The ESCO Group responded by building in a newly developing region in Marion and the commercial property tax base is expanding because of it. Many projects would not have happened without the economic development tool of TIF.

Before the development of the ESCO headquarters, the 2.85-acre piece of ag-land that ESCO now sits on would bring an estimated $4,000 in property taxes. Following development of this land, the estimated property tax bill will stand at an estimated $130,000 annually. I think we can all agree that a 1,315 percent increase in assessed value is a quality return on investment for Marion, our schools and our citizens.

The return on investment is magnified when one considers that new employees in the community will need places to live, stores to shop and restaurants in which to dine. Existing private business benefits because of TIF. The positive impact of this economic development tool is felt well beyond the brick and mortar involved with new construction.

ESCO CEO Ray Brown told us: “By opening up this valuable development area, Marion has great opportunity to expand its tax base to more commercial-light industrial, helping ease the tax burden of residential while also creating quality of life opportunities within this development.”

FAIR PLAY DEALS

Positive community development is everyone’s goal. One recent opinion was that “trying to move businesses from one community to another with competing TIF bribes is a lose-lose game,” and I would agree with that assessment.

That is why the communities in the Cedar Rapids metro area have signed fair-play agreements with each other establishing guidelines for communities when creating TIF incentive packages in the Corridor. When Marion experiences expansion, the Corridor as a whole benefits; the same can be said about business growth in the entire Cedar Rapids metro area.

Marion is one of the fastest-growing communities in Iowa, and that presents challenges, but we are growing our commercial and industrial tax base in a responsible manner. Making policy decisions or sweeping generalizations about TIF without facts, and based on one occurrence or anecdotal evidence, is dangerous.

TIF is anything but a lose-lose tool — it is the tool that allows private enterprise to flourish while giving communities the opportunity to realize its true economic potential. It’s a win-win for everyone.
_______________
Chad Heiman is Communications Manager for Marion Economic Development Company. Comments: chad@medcoiowa.org

# # #

TIFs: Too Many Negatives

March 25, 2014, 9:25 a.m.

Introduction: There has been a little spurt of TIF (tax incremental financing) stories and comments recently.

On March 18 an op ed column of mine was published by the Press-Citizen: Nicholas Johnson, "TIF: If You Can't Beat 'Em, Insist on More Transparency," Iowa City Press-Citizen, March 18, 2014, p. A7, embedded in "TIF Apology," March 18, 2014. Its assertions regarding the categories of reasons to oppose TIFs were supported by the earlier, "TIFs: Links to Blog Essays," March 16, 2014. [Photo credit: Patrick McDonough.]

The point of the March 18 blog essay/column was that TIFs are merely a natural instrument within a fascist economy. The reason they are the wrong thing to do lies within the nature of our economy rather than the nature of TIFs. Like other mixes of government and private money, however, they can better protect the interests of taxpayers (whose money it is that funds grants to business) if the money is loaned and invested rather than gifted -- thereby producing a return of interest and dividends, like any other conventional transaction.

The Gazette continued with articles that, in part, were efforts to justify TIFs and tax breaks to for-profit buinesses as a legitimate part of a capitalist economy. Chelsea Keenan, “The Benefits of Tax Breaks,” The Gazette, March 23, 2014, p. D1, online as “Are Tax Incentives an Effective Economic Development Tool?.” Rick Smith, "The Upside of TIFs," The Gazette, March 15, 2014; online as "TIF Incentives Can Bring Happy Endings; New Jobs, Infrastructure Improvements, Advancement in Shovel-Ready Sites Grow with Help of Incentive Programs."

I continued to take issue with those arguments for TIFs in the following letter to the editor:

Too Many Negatives, Too Little Upside to TIFs
Nicholas Johnson
The Gazette
March 25, 2014, p. A6
Your “The upside of TIFs” (March 15) needed what Paul Harvey used to call “the rest of the story.” No one I know argues there has never been any benefit from any tax increment financing deal, anywhere, at any time.

But that’s not the issue in a rational benefit-cost analysis.

There are 10 to 20 categories of reasons why all TIFs are a bad idea (See http://fromdc2iowa.blogspot.com/2014/03/tifs-links-to-blog-essays.html). And I have yet to see any TIFs benefit that could begin to outweigh all of those categories of disadvantages.

Here’s an example:

There would be “a benefit” to letting elementary school students simply roam freely throughout the community without parental supervision or need to attend school. They might better develop their natural curiosity and sense of self-reliance.

But the costs of that proposal — lack of student safety and education among them — would so heavily outweigh its potential benefit that no one seriously would propose it.

So it is with TIFs. An occasional “upside?” Of course. But hardly ever enough to outweigh the multiple downsides.

Nicholas Johnson
Iowa City

# # #

TIFs: Links to Blog Essays

From the time this blog began, in 2006, a recurring topic of the blog essays has involved the variety of ways in which governments transfer taxpayers' money to the bottom line profit of various businesses.

Categories of reasons why these transfers are bad for taxpayers, consumers, competitors of the recipients, the general economy, neighboring communities and governments have been repeatedly identified and illustrated -- all with about as much impact as an oak leaf in October, falling upon a lake, and slowly drifting to the bottom. Nonetheless, it seems worthwhile to maintain this single site of titles and links for any who share the author's concern. -- Nicholas Johnson, March 16, 2014.

2015
"Chauncey's TIF," June 8, 2015

"TIFs -- Chauncey -- For the Record," May 25, 2015

2014
"Sycamore TIF Unnecessary," Iowa City Press-Citizen, November 23, 2014, p. A5, embedded in "Lucky's Gets Lucky: $1.7 Million of Taxpayer's Money," November 23, 2014

"From Earmarks (D.C.) to TIFs (I.C.): America's Fascist Economy; TIFs -- Therrre Back!," July 15, 2014

Nicholas Johnson, "Talking TIF: Costs Outweigh Possible Benefits," The Gazette, April 13, 2014, pp. A9, A12 [submitted as "TIFs' Multiple Costs Outweigh Any Possible Benefit," and embedded in "Tussling Over TIFs: Pros and Cons; Tough TIF Talk," April 13, 2014

"TIFs: Too Many Negatives," March 25, 2014

"TIF Apology," March 18, 2014

2013
"A TIF Discussion; Evolution of a Family's TIF Policy Position," June 9, 2013

"TIF Towers; Giving TIFs the Sniff Test," April 9, 2013

"Crony Capitalism's Failures: Iowa City Style; Gone With the Wind," April 8, 2013

"First Step to Reducing National Debt; Sunlight is the Best Disinfectant," April 4, 2013,

"Repealing Corporate Welfare: Step One; The Journey of a Trillion Dollars," March 25, 2013

2012
"Big Boxes, Little Bookstores and Taxpayers; We'll Leave the Prairie Lights on For You," June 6, 2012,

2011
"TIFs Wealthy Relatives; $7 Trillion Secret Giveaways to Banks; Marlins' Stadium," December 6, 2011

"TIF Impact Statements; The Questions We Should Insist Officials Ask First," November 29, 2011


"SSMIDs, Taxes and TIFs: The Lessons; Say 'No' to Tax Increases, 'Yes' to SSMIDs?!" November 3, 2011

"The True Price of TIFs," October 1, 2011

"The Religious Indictment of Republicanism; Catholic University Professors Say Republican Budget Violates Basic Catholic Moral Teachings," May 14, 2011,

"Brother, Can You Spare a TIF? TIF Helps the Rich Get Richer," April 25, 2011

2010
None.

2009
None.

2008
"Taxpayer Rescue; The Way Free Private Enterprise is Supposed to Work: Thinking and Acting Globally and Locally," September 15, 2008

"Growing Iowa's Economy the Right Way," April 27, 2008

"Bush and Giveaways to Sheraton; Who's Best Bush? And, Raising Taxes to Increase Corporate Profits," April 25, 2008

"Call the Cops, Robbery in Progress," April 24, 2008

"Golden Rules & Revolutions: A Series - VIII," April 19, 2008 (with links to prior 7)

"Football, Skating and Corporate Welfare," January 25, 2008

2007
"Understanding TIFs," October 5, 2007

"Courage, Councilors," October 3, 2007

"TIFing Your Doctor," September 12, 2007 (with TIF lyrics for "Folsom Prison Blues")

"Public Money, Private Profits," August 24, 2007

"Cable, Coralville, Coal and Consultants, August 17, 2007 (subsection headed "Desperately Trying to Put a Good Face on TIFs")

"The Terrible TIFs; They're Back: The Terrible TIFs," July 26, 2007,

2006
"Riverside's Deeper Gambling Debt," November 11, 2006

"Riverside's Tax to Nowhere," October 31, 2006

"It's Not About 'Taxes,'" October 24, 2006

"More on Corporate Welfare from 'Hat's Off' Winner," October 22, 2006

"Call the Cops: $3.755 Million Robbery in Progress," October 18, 2006

"Why Do They Hate America?" October 4, 2006

"Press-Citizen Says 'Tough TIF,'" September 22, 2006

"Supervisor Sullivan Says 'TIF, TIF, Tsk, Tsk,'" September 16, 2006

"TIF-ing My Toolshed," September 2, 2006

"Coralville's Hotel: 'Trust But Verify,'" August 16, 2006

"Are TIFs 'Corporate Welfare'?" July 22, 2006

"More: Justifying Corporate Welfare," July 13, 2006

"Neutral Principles, Anyone? Justifying Corporate Welfare," July 12, 2006

# # #

Crony Capitalism's Failures: Iowa City Style

April 8, 2013 12:13 p.m.
Gone With the Wind

"Two years ago, we were among those cheering the good news that a [wind-energy-focused] Maryland-based company — North American Ductile Iron Company (Nadicom) — had big plans to locate its first North American foundry in Iowa City . . . promising to bring 175 jobs to the area by the second quarter of 2013 . . ..

"But over the second half of last year, a good deal of wind went out of wind energy’s sails (and sales). The industry nationwide began to wobble on shaky ground . . ..

"Nadicom CEO Prasad Karunakaran recently told the Press-Citizen that . . . it’s already the second quarter of 2013, and not only are there no new jobs on the immediate horizon, but Nadicom officials basically have had to go back to the drawing board as to what type of facility would still make the best use of the land available at the park.

"At best, they won’t be able to move on anything until 2015. At worst, that starting date will be a permanent question mark."

Editorial, "'Shovel ready,' but no one's digging anytime soon," Iowa City Press-Citizen, April 8, 2013, p. A7.

The State of Iowa and City of Iowa City bet $14.2 million of your money and mine on this gamble -- without checking with us first. Now it looks like we'd all be better off if they'd just taken that money to the Riverside Casino and tried their chances.

"Tough TIF Talk" outlines 20 categories of reasons why this kind of "business deal" with taxpayers' money is a bad idea.

Today's Press-Citizen editorial is a classic example of just one of those categories: "All ventures have risk. TIFs have more, because public officials with little business experience and no skin in the game make more mistakes than experienced investors watching their own money."

The Nadicom venture discussed in the editorial also fails most of the other 19 categories of reasons why corporatism is a bad idea. But this blog essay is just going to concentrate on that one.

As the editorial reports, the City spent "$2.4 million [of taxpayers' money] to purchase 173 acres" for Nadicom. Believing that to be insufficiently generous, it then passed along an additional "$9.5 million to extend roads and utilities," following which the State, feeling flush as well as generous with other people's money, chipped in "$2.3 million for rail and additional road work."

The road to "economic development" is littered with billions of wasted taxpayers' dollars -- federal, state, county and city taxpayers' dollars. Thousand of projects that may have once looked promising to politicians end up belly up. Capitalism is supposed to meet our economy's needs with the ventures of private investors -- individuals who are willing to risk the possibility of great loss because of what they see as the probability of great gain.

Bear in mind, I'm not objecting to this project. I think renewable energy resources are the Planet's only long term hope. I don't object to permitting clean industry to locate in and around Iowa City -- the right projects, in the right locations. I'm not worried about the shadow Nadicom's structures would cast over Scott and Highway 6.

Indeed, if there was no taxpayer money involved I would not even complain about a failed business. After all, roughly half of all new businesses fail within their first five years. As has been said of Silicon Valley's hopefuls, "in this California cradle of Internet startups . . . failure is accepted, or even welcomed, as a guide for future success." Failcon.

No, my concern has to do with the risks for taxpayers when our local officials do the equivalent of taking our money to the Riverside Casino and gambling it away; and then, when questioned, try to justify what they've done by saying (a) it creates jobs, and (b) "Gee, you know, we might even have won." When governments are cutting the investment of public dollars in legitimate, traditional public functions of benefit to all Americans -- in the name of "cutting taxes" -- is no time to be gambling with those very same tax dollars, betting on private ventures that ought to be funded with private dollars.

And that's just ONE of the 20 categories of what's wrong with corporatism (the blending of government and business). Read the other 19 in "Tough TIF Talk." Go down the list. Can you honestly tell me you disagree with every single one of those 20 categories of reasons why crony capitalism is a bad idea?

# # #

Tough TIF Talk

February 3, 2013, 10:20 a.m. [Looking for the Feb. 1 "Pat Paulsen on Guns" blog entry? Click here.]

Like Death and Taxes, TIFs and TIFing Seem Here to Stay

Nicholas Johnson

Iowa City Press-Citizen

February 3, 2013, p. A7

Considering all the downsides of tax increment financing (TIF), you have to wonder why public officials continue to use it. Is there that much joy in playing Santa with other people’s money?

Whatever the reason, like death and taxes TIFs are here to stay. Officials and their lucky beneficiaries love them, and the public doesn’t seem to care — at least not enough to make an organized, political difference.

Nonetheless, it’s worthwhile to remind ourselves from time to time why they are such a bad idea. Here’s a summary.

• Roads and schools are traditional government undertakings. Funding private enterprise is not.

• TIFs are backwards: voters must approve bonds for legitimate public projects, like the justice center, but private TIFs are awarded without public approval, often over taxpayers’ objections!

• They’ve lost their way. Initially designed for urban renewal and low-income housing, taxpayer-funded TIFs are now used to build upscale condos.

• It’s ideological hypocrisy to praise free markets while coming to city hall tin cup in hand.

• Telling taxpayers, “I’ll keep the profits, you cover the losses,” conflicts with capitalism’s gamble of risks as well as rewards.

• TIFs intertwine government and business in something that’s neither socialism or capitalism. It’s called “corporatism,” and combines the worst qualities of both.

• TIFs distort the market.

• Even if distortion of market forces was desirable, governments have more effective tools than TIFs that don’t require taxpayers’ money — zoning regulations and building codes among others.

• It’s inexcusably unfair to fund one business person while leaving his competitors on their own.

• TIFs take money from schools and other government units, causing either cuts in programs or increased taxes.

• Even if TIFs would produce taxes many years from now, and they often don’t, are ever-increasing taxes (and budgets) an appropriate metric for measuring good government?

• TIFs aren’t needed. There are plenty of investors for sound, profitable business plans. If they and bankers won’t fund a project, why should taxpayers?

• Many TIFed projects would have gone ahead anyway; it’s virtually impossible to know if the beneficiary’s professed “need” is genuine.

• All ventures have risk. TIFs have more, because public officials with little business experience and no skin in the game make more mistakes than experienced investors watching their own money.

• Trying to move businesses from one community to another with competing TIF bribes is a lose-lose strategy.

• Businesses pick cities for reasons other than TIFs: workforce, local economy, schools, transportation, communication, quality of life.

• Telling officials to TIF “prudently” is as effective as beer ads urging University of Iowa binge-drinking students to “drink responsibly.” TIFs can be as addictive as alcohol.

• When officials give millions in taxpayers’ money to private, for-profit businesses, the temptations for good-old-boy corruption are great — and virtually impossible to uncover.

• TIFs are, for a taxing authority, what impulse buying is for the rest of us — an expensive, unbudgeted, one-off “I’ve got to have that!” moment, often followed by buyer’s remorse.

• TIFs can devastate a government’s credit rating, thereby increasing the cost of future legitimate projects.

These concerns are relevant for any city.

But Iowa City has another reason to avoid TIFs: We don’t need them. Businesses here will thrive; others come because of what we offer. We’re ranked near the top of the nation’s cities in numerous categories.

I know our officials will continue dropping millions of taxpayers’ dollars to the bottom line of for-profit, private ventures. But it still doesn’t hurt to ask from time to time, “Why?”
__________
Nicholas Johnson, a former school board member, teaches at the University of Iowa College of Law and maintains www.nicholasjohnson.org.

# # #
For discussion of the taxpayer subsidy of a previous Moen project, along with footnote documentation, and links to a sampling of other prior TIF discussions, see "TIF Towers; Giving TIFs the Sniff Test."

E-Commerce Challenges Businesses, Governments, Taxpayers

June 11, 2012, 6:40 a.m. p.m.

Brief Intro:

Businesses, governments and taxpayers across Iowa's 99 counties and hundreds of cities and towns (indeed throughout America) are confronting three challenges from e-commerce in a global economy.

(1) Iowa's nationally and locally owned retail outlets, newspapers, and bookstores are struggling to find business models that will carry them from small town virtual monopoly storefronts into the highly competitive global marketplace of Web pages and social media.

(2) State, county and local governments are trying to figure out what they can best do to help the economies and communities of constituents for which they feel some responsibility.

(3) Taxpayers are questioning the wisdom of a "solution" that involves transferring their tax dollars from legitimate government projects to the bottom line of a handful of politically favored for-profit enterprises. Especially do they question the transfers when the money is used for business plans that appear to be pretty unimaginative responses to "e-commerce."

These issues were recently explored in depth here in "Big Boxes, Little Bookstores and Taxpayers; We'll Leave the Prairie Lights on For You," June 6, 2012.

That blog entry provided the research and source material, with links, for what ultimately became a column in this morning's Press-Citizen, below. If this is a subject that interests you that earlier blog entry is worth your exploration. Otherwise, this lighthearted 644-word column will provide a quick-read, summary view of these deadly serious issues.

Maybe Taxpayers Should Buy Wal-Mart a Gift Shop
Nicholas Johnson
Iowa City Press-Citizen
June 11, 2012, p. A7
The Iowa City Council, at least three members, recently leapfrogged over their colleagues to rule that local taxpayers should pay for a local business’s “museum quality gift shop” and café.

To “speed things up a little bit” they delegated the matter to the discretion of the city manager.

The grant is not even a TIF. It’s a $27,500 gift, plus a possible $15,000 1 percent loan.

Why do it? They want to “educate the public about eCommerce.”

The lucky beneficiary of this largesse? Iowa City’s Prairie Lights — widely beloved, and by no one more than me. But our love is not the issue.

The issue? Whether taxpayers really support the council handing over taxpayers’ money, without their approval, to favored for-profit businesses.

Clearly, the council is not interested in the answer.

Confronted with a petition to put public review of one of its latest controversial TIFs on the ballot, the council’s response is to suggest using a legal technicality to make the payment anyway, using a bond that citizens’ petitions can’t challenge.

This council switch would cost taxpayers an additional $300,000. The council thinks it’s worth the money to keep citizens at bay.

If it’s legally required we vote on the bonds to fund legitimate governmental projects, like the proposed county justice center, isn’t it even more appropriate the public be involved in taxpayer funding of private, for-profit businesses?

Capitalism means owners provide the capital, sometimes profit handsomely, but also bear all risks.

Socialism means governments own and provide traditional governmental services like police, fire, parks, schools, roads, libraries — and smoldering landfills.

What we’re doing — in Washington, Des Moines and Iowa City — is corporatism, the intertwining of business power and government largesse.

During World War II, in Benito Mussolini’s Italy, we called it fascism. Owners take the profits; taxpayers take the risks.

If that’s what local taxpayers truly want, there’s probably a way it can be provided constitutionally. But is that really what we want?

E-commerce? Aside from the café and gift shop, the city says this is the store’s “attempt to adapt to the ever-changing traditional and electronic market.”

That raises some issues.

According to the store’s website, it’s already in that business. Moreover, the owner concedes, “there’s no overhead.”

Every business confronts the “ever-changing traditional and electronic market,” including this newspaper.

Change can put a business out of business. However, this is the capitalist’s challenge, not the taxpayer’s responsibility.

Swiss watchmakers respond to digital watches, slide rule firms to calculators, mainframe computers to desktops, cellphones to smartphones — the examples are endless.

Bookstores are challenged with online sales, e-books, online self-publishing, Wal-Mart (40 percent of all best-seller sales), the cornucopia of Internet resources, the decline in discretionary time for reading.

Convenience, as well as savings, motivates e-book readers. If they can download a book to their Kindle while in bed and get advice from the Internet, why would they get out of bed and come to Prairie Lights for “a staff member to assist customers in e-book sales”?

Moreover, the city’s solution, adding a gift shop, is a way of getting out of the book business, it’s not a creative 21st-century e-commerce business model for staying in it. It’s like a pharmacist — also online and Wal-Mart challenged — adding groceries to the drug store merchandise.

In the greater Iowa City-Coralville area, every retail outlet must respond to the opportunities as well as the challenges offered by change.

Does the council intend to give our tax money to all of them? If not, why Prairie Lights?

Want to know which stores are suffering the greatest e-commerce impact? The Big Box stores, like Best Buy, Sears and Wal-Mart. Shoppers come to look, then order online from elsewhere. The companies are closing stores; their common stocks have declined.

Want to save those jobs, council?

Maybe local taxpayers should buy Wal-Mart a “museum quality gift shop.”
__________
Nicholas Johnson, another satisfied Prairie Lights customer, teaches at the University of Iowa College of Law and maintains http://FromDC2Iowa.blogspot.com.

# # #

Big Boxes, Little Bookstores and Taxpayers

June 6, 2012, 3:15 p.m.

This blog entry became the source research and links for an op ed column ("Maybe Taxpayers Should Buy Wal-Mart a Gift Shop") published by the Iowa City Press-Citizen, June 11, 2012, and embedded in "E-Commerce Challenges Businesses, Governments, Taxpayers," June 11, 2012.

We'll Leave the Prairie Lights on For You
Internal Links:
First, the basics: Capitalism, Socialism and Fascism.
Next, Today's Corporatism Stories.
A TIF Gone Bad: Last Resort.
Bookies for Bookstores.
City Council's Opposition to Citizen Participation.
The Ever-Changing Traditional and Electronic Markets.
Where Will It Stop?

There's so much transfer of taxpayers' money going to for-profit businesses in this morning's [June 6] news that I'd say I'm speechless -- but for the fact those who know me wouldn't believe it. And they'd be right, as you're about to see.

First, the basics: Capitalism, Socialism and Fascism.

(1) Capitalism. An economic, for-profit venture or institution owned by one individual, or a group of shareholders, is an illustration of capitalism. Such money as it may need to get started comes from the owner, investors, bank loans, venture capitalists, family members and friends -- not taxpayers. If the business plan works as intended, those with a stake can become rich, and sometimes very rich. If it doesn't they can lose their investment, and sometimes a very large investment.

(2) Socialism. Facilities and programs traditionally created and operated by government can be characterized as "socialist." Examples include police and fire protection, public schools, libraries, parks, roads and bridges. In Iowa City it also includes the provision of drinking water, collection of trash, and maintenance of the smouldering landfill.

(3) Fascism, or corporatism. When Italy's Benito Mussolini did it during World War II, the intertwining of for-profit enterprises with government was called fascism. Today it is more commonly referred to as corporatism. It can take the form of government grants, low-interest loans, subsidies, earmarks, tax breaks -- including, locally, the grant of TIFs by the City Councils of Iowa City and Coralville.

Corporatism is what we have today, without any of us ever having voted for it, whether the government is in Washington, Des Moines, or Iowa City.

As an aside, given these definitions a healthcare delivery system funded by insurance premiums paid to for-profit insurance companies, and largely administered by those companies, delivering medical services with well-compensated private doctors -- a system pilloried by opponents as "Obama-care" -- is scarcely the socialism opponents allege it to be. You may or may not think it a good plan, but it isn't "socialism." Depending on the details, the preference of the rest of the industrialized world, "universal, single-payer, healthcare," often could be fairly characterized as a socialist system.

Next, today's corporatism stories.

There are two disturbing aspects to them.

(1) They embody all the risks (for taxpayers) and unfairness (for the recipients' unfunded competitors) of corporatism. Officials use the money of non-consenting taxpayers to enrich the profits of for-profit owners. ("You can keep all the profits; my taxpayers will cover your losses.")

(2) We are now beginning to witness a new phenomenon: public officials' overt, candid antagonism toward some efforts to democratize this process.

A TIF Gone Bad: Last Resort.

An all-too-common story of another TIF gone bad is spread across the front page of this morning's Gazette. Orlan Love, "Last Resort: Sheriff’s sale closes book on failed Clayton County resort; Project near McGregor ending in financial loss for some in area," The Gazette, June 6, 2012, p. A1:

A June 19 sheriff’s sale will likely end the costly and contentious River Buff Resorts economic development saga.

The $138 million planned resort complex . . . was to have been an upscale tourist attraction consisting of a hotel, water park, golf course and condominium and single family housing. . . .

The prospect of taxpayer-funded incentives — initially through a state Vision Iowa grant and later through a county tax increment financing district — encouraged developers to undertake the project.

After Vision Iowa announced its intention to issue a $3.5 million grant to the project, [Tim] Mason and his colleagues — local farmers Harlan Dettman, Greg Koether and Shawn Kleinow — researched the backgrounds of the developers, Conrad Seymour, then of La Crosse, Wis., and James Daughtry, then of La Quinta, Calif., . . .. Their research uncovered widespread dissatisfaction with their refurbishing of a downtown building in La Crosse and their development of a golfcourse/residential project in Necedah, Wis. . . .

The developers then persuaded the Clayton County supervisors to establish a tax increment financing district that was to have provided the source of payments for a $20 million tax-exempt urban renewal revenue bond to be issued to Daughtry. . . .

Kevin Lambert, who runs an appraisal business in Portage, Wis., said he wrote off “a five-figure loss” several years ago for unpaid work he did on the [Necedah] project.

“Everyone was gung ho for water parks” at the time. “They believed people would come if you built it, but that was not necessarily so,” said Lambert, who analyzed a feasibility study commissioned by the developers. . . .

Necedah Village Administrator Roger Herried said the tax value of the projects in the TIF district — a golf course, assisted living units and residential lots — is about a third of the $12 million needed to cash flow.

Herried said the underperforming TIF district has strained village finances, forcing it to refinance its debt under a state law passed specifically to aid communities like Necedah.

Clayton County, Necedah, and their taxpayers were not the only ones to bear the losses. In addition to the county and community, losses from this venture were sustained by the State of Iowa ("Vision Iowa"), the Iowa Department of Natural Resources, banks, contractors, suppliers, consultants, and others.

Thus, the transfer of taxpayers' money to these "developers" is a classic case study of a number of the categories of reasons why TIFs are not a good idea: the lack of ability and incentive of public officials to evaluate for-profit ventures (since none of their personal money is involved), the inability of anyone to predict with accuracy either the genuine need for the money or the prospects for a project's success, the fact that they so often simply don't work, the cascading losses that can fall on others than just the taxpayers of the granting agency, and the unfairness for the recipient's capitalist competitors deprived of public funding. For more, see "Sampling of Prior TIF Op Ed Columns and Blog Entries" and especially the listing of those categories in "The True Price of TIFs," October 1, 2012.

Bookies for Bookstores.

Meanwhile, "we got trouble, right here in River City, with a capital T and that stands for taxes" (with apologies to Meredith Wilson's "Music Man").

The Iowa City City Council -- or at least three members, leapfrogging over their colleagues -- have ruled the City (or more precisely and worse, its City Manager) can take your money and mine and go into the local, independent bookstore business -- gambling like bookies for bookstores with other peoples' money. Although it's not even a bookstore venture really. It's more like a cafe and a gift shop. Mitchell Schmidt, "City recommends $27,500 in funds to Prairie Lights; Aid for renovations also mentions possible loan for the bookstore," Iowa City Press-Citizen, June 4, 2012, p. A3 ("City officials recommended offering the bookstore $27,500 from the fund with the option of a low-interest 1 percent loan of up to $15,000 . . .. The request for funds [includes] . . . an expansion and addition to menu items including a small catering component at the store’s The Times Club cafe and modifying the building’s display areas to include gifts and toys similar to museum quality."). [Photo credit: Christina Janiczek.]

Lee Hermiston, "City to give Prairie Lights $27,500 development grant; Portion of money will let bookstore create eBook kiosk," Iowa City Press-Citizen, June 6, 2012, p. A3:

Iowa City Council members Matt Hayek, Michelle Payne and Susan Mims unanimously approved a $27,500 grant to Prairie Lights at a meeting of the Economic Development Committee on Tuesday morning.

However, rather than taking the recommendation to the full council, the committee took advantage of a recent rule change allowing City Manager Tom Markus to exercise his discretionary authority and bypass the council. . . .

The three councilors said they were in favor of approving the grant, expressing an interest in educating the public about the intricacies of eCommerce and how local businesses can be involved.

“I’m comfortable with you using your discretion,” Mims told Markus during the meeting. “It will speed things up a little bit.”

There are at least three reasons why those three felt they probably could keep this under the radar.

(1) The lucky beneficiary of this largesse is Iowa City's beloved landmark, Prairie Lights. (The bookstore is beloved by no one more than by me. But this blog entry is not about the contribution of this institution to Iowa City and its university. It's about the propriety, and process, of handing over taxpayers' money to what is, after all, a for-profit business.)

(2) Iowa City has a pretension to progressivism, volunteerism, citizens community involvement, culture and intellectualism (as home to one of the nation's top research universities and its designation as a "City of Literature"). However, as we discovered yesterday [election day, June 5] not everyone is registered to vote, and among those who are 90 percent choose not to bother. So it's unlikely these three City Council members will ever have to pay a political price for their generosity. ("Turnout in Tuesday’s primary was slightly less than average in Johnson County. As of press time Tuesday, 9.5 percent of voters had cast their ballots, a total of 7,635 votes." Tara Bannow, "Weipert defeats Slockett; Slockett concedes after serving as county auditor for 35 years," Iowa City Press-Citizen, June 6, 2012, p. A1.)

(3) What with Queen Elizabeth's "Jubilee" in London, high school sports, and the local elections in Iowa City, there's plenty to divert the voters' attention, even if there was anyone who both cared and would have otherwise been paying attention.

So the three Council members may very well be right in their belief that their gift will be appreciated by Prairie Lights' owner, but unknown to those whose money it was.

City Council's Opposition to Citizen Participation.

Why did I say, above, that "We are now beginning to witness a new phenomenon: public officials' overt, candid antagonism toward some efforts to democratize this process"?

For this we must reflect back on the last City Council TIF brouhaha. See "TIF Towers," April 9, 2012.

Now there's a new development in that giveaway. Local citizens want to be involved in this process, and are circulating a petition to make that possible. Mitchell Schmidt, "Petition asks for public vote on TIF funds; Group spurred by city giving Moen $2.5M in TIF money for new tower," Iowa City Press-Citizen, June 2, 2012, p. A1.

So how has the City Council responded to this request from its constituents to participate in the decisions regarding the distribution of their money to local for-profit businesses? With an utter, total, rebuff -- indeed, one that will end up costing the city's taxpayers an additional $300,000! Read on.

The cost of the deal between the city and Moen is estimated to be closer to $3.7 million when interest is added. The city plans to sell what are known as general obligation bonds to cover the amount.

General obligation bonds are subject to a reverse referendum, which is the goal of the petition. Kevin O’Malley, Iowa City’s finance director, said Monday he has been instructed to look into financing the deal instead with TIF revenue bonds.

A petition is powerless against those bonds. But they have higher interest rates than general obligation bonds, and O’Malley said an initial estimate has it as being $300,000 more expensive. . . .

[First assistant city attorney Sarah] Holecek said that if the petition is successful, the council would have two choices: call an election on the matter or issue the other type of bonds. She said voiding the agreement was not an option because of the city was already contractual bound to the project.

Council member Susan Mims said her preference would be for changing the financing if the petition is successful.

Gregg Hennigan, "Petition Seeks Vote on $2.5 Million Deal for Downtown Iowa City Building," The Gazette, June 5, 2012, p. A2. And see, Mitchell Schmidt, "City may have few options for funding Moen tower; Uncertain whether contract obligates city to fund project in event of possible election," Iowa City Press-Citizen, June 8, 2012, p. A1.

In other words, the Council will tolerate citizen participation only so long as it is ineffective. We can circulate petitions only if we don't get enough signatures. However, if there's a risk citizens might be able to accomplish something the Council opposes, it will create an end-around to nullify citizen participation.

It's one thing to shut out direct democracy, such as petitioning for a right to vote. It may be better than a poke in the eye with a sharp stick, but not by much. But in the case of the gift to Prairie Lights the three Santas don't even like representative democracy -- they don't even want their fellow members of the City Council to be able to participate.

"The Ever-Changing Traditional and Electronic Markets."

Although the Prairie Lights proposal appears to involve a rather traditional cafe and gift shop, "Wendy Ford, economic development coordinator, said the request stems from Prairie Lights officials’ attempt to adapt to the ever-changing traditional and electronic book market. 'The book market is changing,' Ford said. . . ." Mitchell Schmidt, "City recommends $27,500 in funds to Prairie Lights; Aid for renovations also mentions possible loan for the bookstore," Iowa City Press-Citizen, June 4, 2012, p. A3.

This is apparently a reference to "a special sales counter to devote a staff member to assist customers in e-book sales." Ibid.

There are a number of things wrong with this.

(1) For starters, from the looks of Prairie Lights' Web site, it would appear the store is already in the e-books business. Prairie Lights Books. Thus, the grant is not start-up money for a new electronic venture. It is simply a gift. Especially is this so given the owner's acknowledgement that "there’s no overhead” for this part of the business. Lee Hermiston, "City to give Prairie Lights $27,500 development grant; Portion of money will let bookstore create eBook kiosk," Iowa City Press-Citizen, June 6, 2012, p. A3.

(2) These are the kinds of expenses, or investments, that most business owners would assume to be their responsibility, rather than something to be paid for by local taxpayers. They would assume the business judgments behind them are theirs to make as well -- not the judgments of City officials.

(3) Thirty years ago, when sent by our State Department, and others, to foreign countries to provide advice on adapting electronics in general, and media in particular, to the coming 21st Century, I came upon an insight. The respect accorded one's ideas and opinions is in direct relation to the square of the distance one is from home. Thus, I was well regarded in Kazakhstan -- exactly half way around the Planet from Iowa City. And yet when I offered to provide comparable counsel for free to the local Chamber of Commerce members on how best to prepare for their coming online competition there was no interest whatsoever.

So, from that perspective, I'm pleased to see both City Council members and Prairie Lights owners addressing the implications for local business of cyberspace commerce.

(4) One of the greatest challenges facing any business person is watching out for the competitive innovation that will put them out of business -- and then preparing and responding to it before it arrives. Horse-drawn carriages had to respond to the "horse-less carriages," Swiss watch makers to digital watches, slide rule manufacturers to pocket calculators, mainframe computers to desktops, cell phones to smart phones -- the examples are endless.

Bookstores are now in that position. How quickly, creatively and effectively they respond is the measure of how and whether they will survive as anything similar to 20th Century bookstores. That's a part of what it means to be "in business." That's a part of the risk involved in any business. In a capitalist economy, these risks fall upon the owners of for-profit businesses -- just as the profits, and sometimes very large profits, are theirs to enjoy. In the corporatist economy favored by the City Council these risks becomes something for taxpayers to bear, while the profits remain with the owners.

(5) Authors, literary agents, publishers, distributors, and bookstores -- especially independent local bookstores -- have been hard hit by the arrival of online sales of both conventional (hardback and paperback) and digital "books," not to mention the ease of no-cost, online, self-publishing (plus distribution and sales) of conventional books.

(6) Wal-Mart, and other alternatives to traditional "bookstores," have dealt bookstores another blow. ("The growing clout of Wal-Mart and the other big discount chains -- they now often account for more than 50 percent of the sales of a best-selling album, more than 40 percent for a best-selling book, and more than 60 percent for a best-selling DVD -- has bent American popular culture toward the tastes of their relatively traditionalist customers." David D. Kirkpatrick, "Shaping Cultural Tastes at Big Retail Chains," New York Times, May 18, 2003.)

(7) Today much of the knowledge and entertainment the world offers is available, often for free and near-instantaneously, on one's laptop, netbook, iPad, smart phone, or other electronic device. (That's how that quote, and citation, immediately above were obtained.) A researcher may still end up in a library (school, public, or one's own) or bookstore before the research is done, but it is no longer always essential that they do so, let alone that they start there.

(8) There's less discretionary time available for reading, and reading must now compete for what there is not only with over-the-air television stations, cable and satellite channels, but with video game and Facebook time, the 50,000 radio stations available on smart phones, the world's newspapers, and other Web surfing.

(9) Clearly, bookstores have a challenge in their search for a business plan that works in the digital age. But adding cafes and gift shops is more of an alternative to the bookstore business than a business plan for staying in the 21st Century version of selling what books used to be and are today. It's like pharmacists -- a profession also challenged by online sales and Wal-Mart pharmacies -- deciding to start selling groceries as well as more conventional drugstore products. It may help their bottom line, but they're not filling any more prescriptions.

Want one example out of many of a little 21st Century creative thought for staying in the book business? Consider something that "can, potentially, give them [independent, local bookstores] a huge virtual inventory so they can have as many books as Amazon, all in a little bookstore . . . a new thing for the bookstore to do: not just sell books, but actually create books." Stacy A. Anderson, "The Antidote to e-Books," Associated Press, International Herald Tribune, June 12, 2012.

(10) Buying e-books online (from, say, Amazon) is not just a matter of a new format for books, and a cost saving. It's also the convenience of lying in bed at night and buying and installing on a Kindle, in less than a minute, a new novel you'd meant to read.

Since Prairie Lights is already selling e-books, does it really need that "special sales counter to devote a staff member to assist customers in e-book sales"? How many potential Prairie Lights' customers with the equipment, inclination, experience, and ability to read e-books need "assistance" in doing so? And for those who do, why are they going to travel all the way downtown, find a parking place, and walk to Prairie Lights, to get that advice? Isn't the advice just as likely to be available somewhere, somehow, on the Internet? And wasn't the convenience of doing all of this from home at least a part of the motivation for their interest in the e-books in the first place?

Where Will It Stop?

Every business, every retail outlet in the greater Iowa City-Coralville area, has been affected by, and must respond to, "the ever-changing traditional and electronic markets" -- the opportunities as well as the challenges they offer.

If the citizens of Iowa City aren't troubled by their City Council practicing corporatism (instead of insisting on capitalism and practicing socialism), which seems to be the case, and they want to address what local businesses can do about these changing markets, they're going to have their hands full.

It remains to be seen whether the Press-Citizen's new business plan (charging for online content) will turn out to be Gannett's salvation, or a mere handgun wound in the foot. One thing's sure, the paper's challenge can't be met with a tea room and gift shop. "Frequently Asked Questions, May 31, 2012.

Would the City Council be willing to make a gift to the Press-Citizen? Isn't a local newspaper at least as important to the community as an additional cafe and gift shop, even if they are in a bookstore?

Among the local businesses hardest hit by the changing markets are our so-called big box stores: Wal-Mart, Best Buy, Sears, and others. Miguel Bustillo, "Best Buy Forced to Rethink Big Box; As Shopper Habits Change in a Mobile World, Electronics Retailer Pares Stores, Tests Smaller Formats," Wall Street Journal, March 30, 2012, p. B1 ("Consumers armed with smartphones are changing the fundamental relationship between shopper and retailer. The new ease of mobile shopping and price comparison is accelerating the trend of 'showrooming'—where shoppers come in to stores to see an item but buy it elsewhere. . . . [E]lectronics are expensive enough to make price comparisons worthwhile, and because electronics are easy to order online."); "Walmart vs. Amazon: Can brick-and-mortar stores hang onto shoppers?; Not even the world's largest retailer is safe from Amazon, as more consumers turn to the web to buy everything from diapers to televisions," The Week, April 12, 2012.

If the City Council thinks it worthwhile to fund the creation of additional cafes and gift shops in support of the city's economy, isn't it at least ten times more important to provide taxpayer funding to such significant anchor stores in our metropolitan market area as Wal-Mart and Best Buy? Wouldn't losing them result in much greater economic and job loss than the lack of an additional coffee shop?

How about it City Council? Can I count on you to save my Big Boxes as well as my Little Bookstores -- or are you truly just picking favorites?

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Palin Attacks 'The Corporatist Agenda'

February 9, 2011, 9:00 a.m.
[As you may have noticed, while I'm teaching Sports Law, the blogging has had to be cut back to something more like once a week than once a day. But there may be occasional exceptions. This is one.]

Progressives and Conservatives Take Note: Palin's Going Populist
(bought to you by FromDC2Iowa.blogspot.com*)
Sarah Palin had some things to say at the President Reagan Tribute the other day that deserve more attention and reflection than they've received so far -- by those of every political persuasion in America, whether Palin normally causes them to swoon or to sputter incoherently.

New York's Boss Tweed used to say, "I don't care who does the electing, just so long as I do the nominating." It ought to be a motivator to your active participation in the caucuses and primaries of your party of choice.

In my case, it causes me to think carefully about the least worst candidates of both major political parties. One will win. If it's not going to be my favorite, I can at least hope, and work to ensure, that both of the nominees are competent enough to function as President.

To remove any possible question in your mind, Sarah Palin is not now my first choice among the possible Republican nominees. Most of her positions I disagree with, many I find uninformed, and -- as many conservatives also believe -- I don't think she now has what it takes to function effectively as President.

But I hope it is true that I have never been one to dismiss entirely all of anyone's views with ad hominem comments. I find life more interesting and rewarding when I look for agreements with, and new ideas from, those individuals my acquaintances and colleagues may be rejecting out of hand.

And so it was that when I heard a quote from Sarah Palin the other day I made a mental note to try to track down the source sometime. It wasn't easy to find, but I came upon it this morning.

It was from a talk she gave at a dinner tribute to President Reagan at the Reagan Ranch Center museum in Santa Barbara, Friday evening [Feb. 4, 2011], sponsored by Young America’s Foundation (unaffiliated with the Reagan Presidential Library in Simi Valley). Jeff Zeleny, "Palin Keeps Position Clear and Intentions Vague," The Caucus/New York Times, February 5, 2011. (The date marks the occasion of what would have been Reagan's 100th birthday.) And see, Jeff Zeny, "Palin, Rallying Base, Paints Dark Picture of Obama’s Policies," February 6, 2011, p. A19.

Her speech contained much with which I would disagree, expressions I would not have used, and conclusions that I might think don't logically follow. But that does not surprise me, and should not surprise you.

What did surprise me was what she said with which I totally agree.

By way of introduction, background and glossary, here are my definitions of some relevant terms:

Words like "socialism," "communism" and "fascism" are seldom used anymore in their original, technical, literal sense. They are swear words, words of derision carelessly thrown at anything one does not like.

That's too bad.

"From each according to ability; to each according to need" [Karl Marx, "Critique of the Gotha Program" (1875)] -- "communism" -- can be applied to professional sports' revenue-sharing schemes designed to keep the teams more or less competitive, and the games more interesting. It also applies to the "negative income tax" proposals of conservative economist Milton Friedman and conservative President Richard Nixon.

"Socialism" -- government owned and operated enterprises, such as the Interstate Highway system, public schools, libraries and parks (among other things) -- also works pretty well for us.

"Capitalism" -- free private enterprise, the marketplace -- rewards the successful entrepreneur (sometimes, as with a Bill Gates, overwhelmingly so), and leaves those who fail to the bankruptcy courts, with nothing but the opportunity to start all over again.

What do you call a system of joint government-corporate partnerships -- "heads I win, tails you lose;" "If I make a profit I get to keep it; if I have big losses the taxpayers will give me a bailout"? Subsidies, tax breaks, government contracts, tariffs, bailouts, price supports are often just rewards for major campaign contributions. Those who remember World War II will identify government by interlocking relationships between corporate and government interests as what we then called "fascism." (If the government owns and operates an automobile manufacturing company that's "socialism"; if it provides a private, for-profit car company a "bailout," that's "fascism.")

Enough of the definitions.

The point is, I am a fan of both capitalism and socialism -- as I have defined both, above. I am not a fan of fascism.

More significant for purposes of this blog entry, it turns out that Sarah Palin is not a fan of fascism either. So on that proposition we agree.

Here is what she had to say -- in words very close to what I was writing about yesterday in "Super Boosters' Super Bowl; Champions' Wins Can Be Taxpayers' Losses; Lessons for Iowa," February 8, 2011, and numerous prior Web pages, newspaper columns, and blog entries.

This is not an economic policy. . . . It is the road to ruin. It’s crony capitalism, too, on steroids. The corporatist agenda — big government, big business collaboration, with powerful friends in DC who can afford to hire the lobbyists to grease the wheels of government in their favor for these investments.

In the interest of certain special interests, the government invests our money in technologies, in industries that venture capitalists tell us ‘no, those are nonstarters.’ but they’ll provide lucrative returns for favored corporate interests with major stakes in these areas. . . .

This collusion, this isn’t competition. It’s crony capitalism and it stifles our economy. It stifles the free market . . .. Government makes it increasingly impossible for anyone but cronies to get ahead. . . .

And ["the little guy"] that’s who is left out in the cold today. Big business, big labor, big finance — they have seats at the table. The little guy doesn’t. But we’re the ones left holding the tab. We’re paying the bill. This is not the way it’s supposed to be. This is not the way that it must be. American exceptionalism is not exceptionally big government with a command and control industrial policy. . . .

History has proven again and again when government picks the winners and losers, we are stuck with the losers. And we the taxpayers subsidize the failures. . . .

Do we still believe in . . . free-market capitalism?

Or do we surrender to big government and a corporatism agenda?. . .

We must be as motivated and optimistic as our parents and our grandparents were, many of whom started off with nothing and yet they were able to build a fulfilled life by the sweat of their brow. . . .

They didn’t demand bailouts.

Text of Governor Palin's Keynote Address: Tribute to President Reagan, Feb. 4, 2011.

So why are these excerpts from this transcript of her talk of vital importance to what I described, above, as "those of every political persuasion in America, whether Palin normally causes them to swoon or to sputter incoherently"?

Thomas Frank, What's the Matter with Kansas? How Conservatives Won the Heart of America (2004), posits the thesis that the big business wing of the conservatives (those who advocate and practice what I have defined, above, as "fascism") have managed to bring along millions of voters, willing to vote against their own best interests (the funding of social programs and regulations designed to protect them), by talking about (while doing little or nothing about) "God, guns and gays" (opposition to abortion, gay marriage, immigration, and handgun control).

This has been accomplished, in part, by attacking "big government" and "taxation" while remaining eerily silent about the very linkage that big business has with that "big government," and the cash transfers it receives from the taxpayers who pay that "taxation."

So the big business, big money, funders of the conservative coalition should be (and probably are already, as they watch the events in Cairo unfold) a trifle concerned about Palin's turn toward an anti-fascism populism.

Similarly, the Palin-haters -- and progressives concerned about the rest of what she says, and might do in office -- should be wary of the consequences that might flow from a Palin-as-Populist campaign. It wouldn't take that much to expand the Tea Party's appeal to those who ought to have been a solid part of the Democratic Party's base (e.g., the poor, working poor, working class) -- and were, until the Party turned its back on them in its own search for corporate dollars.

It's something to think about.
_______________

* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
-- Nicholas Johnson
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