Free College Education for Iowans?

January 16, 2015, 7:00 a.m.

Will Germany’s Economic Formula Work for Iowa?

Nicholas Johnson

Iowa City Press-Citizen, January 16, 2015, p. A7
The Iowa Legislature and Board of Regents emphasize college education for Iowans — at least those whose parents can afford the tuition, or graduates accepting debt with their diploma. Others debate pros and cons of extending 12 years of free public education to 14 ("Too Good to Be True? Time will tell on tuition plan," Jan. 14).

Meanwhile, Germany is only the latest country to realize that free higher education for all world citizens promotes economic growth in each of its states ("Länder"). Other countries with similar programs include Brazil, Finland, France, Norway, Slovenia and Sweden. [Photo credit: unknown. The picture is of students taking break from classes at Humboldt-Universität in Berlin. Humboldt is one of the most prestigious universities in Europe, and has educated 29 Nobel Prize winners. Many of these "international universities" offer their free courses in English as well as the native language -- although improving one's foreign language is one of the benefits of study abroad.]

Tennessee is leading the trend in the U.S. with free community college education. Chicago is among the first big cities. President Obama is urging all states to follow.

As an educator, I'd like to believe this movement reflects a simultaneous epiphany among the world's public officials regarding the many values of a liberal arts education. Have they at last come to see that quality education, like universal single-payer healthcare, is a basic human right (Universal Declaration of Human Rights, Arts. 25 and 26)?

Alas, that's not the case. Providing free college education to all, like the free food samples at Costco, is just good business.

Germany is part of a global economy. The more world citizens with German ties, the more the Länders' economies grow. It's true whether students from abroad stay, or return home with networks of German contacts. It's equally true of German students otherwise without access to higher education. The German economy benefits when they stay; it benefits when they study abroad, stay, and do business from there.

Iowa, unlike Germany, does not grasp this simple truth. Our leaders believe if Washington can pay for a war with tax cuts, Iowa can create prosperity with tax cuts. Both Washington and Des Moines are in desperate need of remedial math.

Iowa Workforce Development has warned of our challenge "to overcome a skills gap." We don't have a shortage of jobs, we have a shortage of middle and higher skilled workers. Our state universities don't have too many students from abroad and out of state, we have too few. Too few Iowans who have studied abroad and stayed there to help develop markets for Iowa products. Too few from abroad who have studied here and stayed here — or gone back home with ties to Iowa businesses. [Photo credit: UI College of Education. The picture is of Iowa students taking a break from classes on the University of Iowa's Pentacrest.]

This is not rocket science. There's data. There's history. America and Iowa enjoyed an economic boom during the 1950s. Major contributors were the 2.2 million returning veterans of World War II who received a free college education under the GI Bill. California's growth from a destination for Dust Bowl immigrants in the 1930s to one of the world's 10 largest economic powers in the 1960s is directly linked to its deliberate economic policy of free higher education. New York is, in part, a similar story.

Iowa can't gamble its way to prosperity. It can't build a growing economy on tax cuts. It can't sustain economic growth by bribing fickle out-of-state businesses to locate here.

What it can do is look to the history of the World War II GI Bill, and the growth of California. What it can do is try to understand the rationale behind Germany's policy of free education for all. What it can do is, like President Obama, follow a progressive state like Tennessee and city like Chicago.

Will it work for us? Let's think it through.

It would require the uncommon political courage of deferred gratification: putting Iowa's long-term economic growth above Iowans' short-term economic greed. And, yes, it requires a willingness to raise and invest taxes. But that educational investment could prove to be much more profitable than using taxpayers' money to bribe out-of-state corporations or as paybacks to major campaign contributors.
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Nicholas Johnson of Iowa City, a former FCC commissioner, maintains http://www.nicholasjohnson.org and FromDC2Iowa.blogspot.com.

Comments
Note: This column/blog entry produced a number of comments elsewhere -- sometimes including my own. They are reproduced below.

Email
From a former Iowa City City Council member, via email and with permission:

Hello Nick: About your opinion piece in today's Press-Citizen.....I could hardly agree more. As far back as the 1950s when I was in school, the informed philosophy was that a college education was of benefit to far more than just the individual earning the degree.

Shannon Janes, a long time friend and former colleague of mine at ACT, is one of the brightest people I know. In the 1970s he was promoting higher education being a logical extension of public education. Thus, the present increasing conversions and proposed conversions in higher education/postsecondary education isn't something new to me.

I hadn't previously thought of your illustration that the post-World War II vets' access to the GI Bill does reflect well on the nearly global benefits of postsecondary education.

Do you know if any citizen efforts are developing for expressing strong support for extending K-12 to at least K-14?

Again, thanks for the interesting and most informative opinion piece.

Bob Elliott

Iowa City Press-Citizen Online Version Comments
Ed Flaherty · Iowa City, Iowa
As usual from Nick, excellent. We must change our investment policies. If we value private accumulation of wealth more than the health of our planet and of future generations, we lose our humanity and moral compass. January 15 at 9:10am

Rudolf Schmidt · Top Commenter · University of Iowa
The trouble with "free college for all" is the same problem that we have with "easy credit for college" in that we matriculate a lot of people who don't finish, and those who do finish end up with a generally worthless degree and tens of thousands of dollars in debt because of poor advice and poor planning.

Not everybody needs to or should go to college or university, but the main view is that everybody should go. Why is that? Why can't we talk about dropout rates and how young people who can't legally buy a beer are suddenly entrusted to sign away the next 20 or 30 years of their life to the government for loan payment on questionable majors? January 15 at 2:36pm

Nicholas Johnson · Top Commenter
Rudolf Schmidt:

Thank you for reading the column and posting your comment.

We mostly agree; but I'd like to draw some distinctions.

Whether free or high tuition, I agree that "not everyone needs to go to college." I suspect there are those who don't need to go to community college either -- though I'd guess a much larger percentage would benefit from the additional two years.

I also agree about the downsides of students graduating with very substantial debt -- that is but one of the reasons I'm advocating free college.

And, whether free or tuition-funded, I also agree that we could probably do a better job with admission standards that produce lower dropout rates. (However, I suspect that there will always be some students who wouldn't meet the standards who would do well if given a chance -- for, say, a limited six-week, or one semester, opportunity to show what they can do before being denied the opportunity.)

-- Nick January 16 at 7:55am

Holly Hart · Top Commenter · Works at Iowa Shares
Skills shortage? Then why is it impossible to get the training for what the state claims is needed? And why do they call :skills" things like working with Microsoft office? We have a job shortage, period. January 16 at 1:58pm

Sam Osborne · Top Commenter
A good education is not worthless to one that gets one. And, our institutions of higher education should be something other than machine shops the mill subtends into interchangeable parts to fit into the profit making efforts of others.

The supposed dropout out problem of a student leaving school prior to graduation can be done away with by simply referencing the student leaving as are other such changes---as a worker finding new opportunity, a former golfer having taken up fishing, a CEO stepping down and into retirement, a professional athlete wrapping up his career and any of us exiting into well earned retirements.

Free education is as good of an investment as is all of the money spent propping up moneychanger capitalism that is leaving this and soon coming generations of young people the red ink of debt that should have been a warning check mark against the elders who were not smart enough to avoid their own failing. January 17 at 10:07am

Rick Whitten · Top Commenter · Information Technology Specialist at State of Iowa
Nicholas: Long term thinking?? That sounds almost, um, conservative!

Facebook Comments
Note: The column/blog entry produced a lengthy exchange on Facebook. It is too long to format and reproduce here -- at least this morning. My response toward the beginning of the exchange provides a sense of what it was about.

Nicholas Johnson

Chuck Schmidt and Steve Hanken: I very much welcome your spirited exchange. That was my goal with the op ed column in this morning's [Jan. 16] Press-Citizen.

Germany and other countries are not offering free college education to every potential entering student in the world because it's a nice thing to do. They, like California years ago (prior to becoming the 7th largest economic entity in the world), are doing it because they find it promotes their economic growth faster and farther than other investments. Tennessee is doing it for the same reason with its community colleges, and the President thinks other states should follow their example.

I'm just suggesting we, and our elected representatives in Des Moines, ought to at least think about it, and the rationale of Germany, and others, for doing it. We should either do it, too, or come up with some very darn good reasons why it only works for other countries and states but not for Iowa.

It seems to me from your exchange that much of your difference derives from an unarticulated distinction between "expense" and "investment." Which is the "cheaper," or the "better buy," for an Iowa farmer: A $95,000 Tesla automobile, or a $150,000 John Deere tractor? Both are a "cost." But they are not both an "expense" (as I'm drawing the distinction). The Tesla is an expense. The tractor is an investment. Eisenhower's Interstate Highway system was an investment, not an "expense." The U.S. universal free K-12 public education systems in 15,000 school districts represent investments. So will be free 14 years of education instead of 12 (community college). And so, Germany believes, is its states' investment in free higher education.

-- Nick
January 16 at 10:42am

# # #

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.
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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.
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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

# # #

TIF Apology

March 18, 2014, 7:20 a.m.

Note: And see "Addendum: If North Dakota Can Prosper from a State-Owned Bank, Why Not Iowa?" at the bottom of this blog essay/op ed column; and "TIFs: Too Many Negatives," March 25, 2014.

Note: The following was submitted to the Iowa City Press-Citizen with the headline, "TIF Apology," and was published this morning with the headline below. That headline's use of the word "transparency" is somewhat misleading. The column is not calling for governments to be more forthcoming and transparent regarding the details of their gifts to for-profit enterprises under the current system. [See, e.g., "TIFs: Too Many Negatives," March 25, 2014.] It is calling for a different system, a recognition of the reality that ours is a blended corporate-government economy, one that should substitute investments by taxpayers for what are now simply gifts. Taxpayers should get an ownership share, and a return on their investments. (The hard copy version also had a link to a nonexistent site. As reproduced in this blog essay the link is correct.) -- N.J. [Photo credit: Patrick McDonough.]

TIF: If You Can't Beat 'Em, Insist on More Transparency
Nicholas Johnson
Iowa City Press-Citizen
March 18, 2014, p. A7
I now realize that the dozens of my columns and blog essays over the years, itemizing in detail the evils of TIFs, grew out of a faulty premise.

It is not easy to admit a mistake, especially when one has made it so often. But you are owed that admission – along with a fuller explanation.

We’ve heard that “seeing is believing.” However, it is also true that “believing is seeing.” And what my upbringing and early education imbedded in my brain was a belief that colored my vision like the rainbow from a prism in the sun.

And what was that belief? It was that we have a capitalist, free private enterprise, market economy. Oh, sure, we had socialist enterprise as well: the Interstate highway system, national and state parks, libraries, public schools and universities. But business did business and government did government.

Now comes the realization that what I once saw so clearly was but a child of the ignorance born of ideology. It was the believing that made possible my seeing -- like the lines from the poem, “Last night I saw upon the stair/A little man who wasn't there.” (Hughes Mearns, 1899.)

I was believing in, and seeing, an economy that wasn’t there.

That’s why TIFs were seen to be an aberration, a cancer simultaneously attacking both capitalism’s foundation and taxpayers’ pocketbooks. (For numerous links to sources, see “TIFs: Links to Blog Essays,” http://fromdc2iowa.blogspot.com/2014/03/tifs-links-to-blog-essays.html.)

Like "Amazing Grace," I was blind, but now I see: We don’t have a capitalist system. We probably never did.

So how should we describe our economy? The word “fascism” carries too much baggage from World War II -- dictators, suppression of opposition, aggressive nationalism, and even racism. “Fascism” doesn’t describe America today. But from Washington, D.C., to cities, counties and states all across America, in terms of an economy, ours is the economy of fascism.

The more acceptable word today, “corporatism,” is less accurate. Because the economy we have is a blend, more resembling a purée than a salad or a stew with identifiable ingredients.

Cities’ taxpayers who cannot afford the tickets to an NFL, or even college football game, invest billions in stadiums, given as gifts to attract the billionaires who own teams of millionaires.

States have multiple funds of taxpayers’ money used to compete with other states by giving it away to attract businesses.

Washington is essentially an open bazaar, awash in money gladly given and generously rewarded.

Is this system corrupt? Of course. Welcome to the real world. All economic systems can have corruption – communist, socialist, capitalist, or our fascist.

Is our fascist economy less efficient than a true capitalist economy? Absolutely. Everybody is handling other peoples’ money. Is it less humane than a socialist system might be? Of course. When it comes to minimum wages or safer working conditions, our fascist economy is still driven by the character Gordon Gekko’s belief, in the movie "Wall Street," that “Greed is good.”

Folks, in the words Walter Cronkite used to sign off the CBS Evening News, “And that’s the way it is.” That’s the system we have. Get used to it. The beneficiaries love it. The victims don’t revolt.

What can we do? Tweak the system. Insist our governments invest our money rather than giving it away; that they take a share of the ownership – and the profits. Insist on detailed accounting of the return on our money they’re investing.

If a fascist economy is wrong, but intractable, we can at least try, as John Carver bemoans in another context, to “do the wrong thing better.”
_______________
Nicholas Johnson maintains the website www.nicholasjohnson.org and blog http://FromDC2Iowa.blogspot.com.

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Addendum: If North Dakota Can Prosper from a State-Owned Bank, Why Not Iowa?
It only makes sense, so long as we're committed to a fascist economy, that we should try -- as the last line of the op ed column suggests -- "to do the wrong thing better."

One of the most obvious positive tweaks to our fascist economic system would be for governments to enter the banking business. (a) Instead of putting such balances as cities, counties and states have into commercial banks, or credit unions, they could earn more on our money by doing the banking themselves. (b) As a part of a proposal that financial aid to business favor loans over gifts (or what would hopefully become "investments" earning a return) the governmental unit could make loans to the favored businesses from the government's own bank.

Think this is a crazy idea? Think again. It's a fascist economy that's the crazy idea. City, county and state-owned banks are a big improvement over what we have, in our effort to do this "wrong thing better."

But who would ever do such a thing? How could you ever find a government willing to take on its local, commercial bankers?

Take a look at North Dakota: Robb Manelbaum, "What North Dakota’s Public Bank Does for Small Businesses," New York Times, March 13, 2014

North Dakota uses the bank to funnel deposits from state agencies back into the state’s economy through . . . loans, teaming with local private banks that initiate the transactions with borrowers. The state-owned bank typically takes half of a business loan, and the interest rate on the state-lent portion is normally one or two percentage points below the market rate.

In January, the Bank of North Dakota played a bit part in an ideological skirmish in the blogosphere after a young activist, Jesse A. Myerson, suggested putting a public bank in every state as one of “Five Economic Reforms Millennials Should Be Fighting For.” The piece led to some interesting discussions, including this response that Mr. Myerson’s suggestions were actually conservative reforms — and that the state-owned bank was responsible for there being more small-business loans in North Dakota than in neighboring states. . . .

[P]ublic banking advocates point most hopefully to efforts in Vermont. Last week, 15 Vermont towns passed resolutions urging the state legislature to establish a public bank. It could be very beneficial to the small community banks and the state. Even big cities could do this . . ..

North Dakota, Vermont -- why not a "City of Iowa City Fascist Economy Public Bank"? How about it Councillors? # # #

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

# # #

First Step to Reducing National Debt

April 4, 2013, 7:55 a.m.

Sunlight is the Best Disinfectant

“For the second time in three days, we unseal criminal charges against a sitting member of our State Legislature. It becomes more and more difficult to avoid the sad conclusion that political corruption in New York is indeed rampant and that a show-me-the-money culture in Albany is alive and well.” -- Manhattan U.S. Attorney Preet Bharara, April 4, 2013

Benjamin Weiser and Marc Santora, "In 2nd Alleged Bribe Scheme, a Legislator Was in On the Case," New York Times, April 5, 2013, p. A1.

Congress’ first step in long journey

Nicholas Johnson

The Gazette, April 4, 2013, p. A5
Democrats and Republicans in Washington are seemingly suffering from ideological immobilization regarding the national debt.

Republicans’ Grover Norquist famously said he’d like a government small enough that he “can drown it in the bathtub.” Republicans fear that if taxes are increased, the liberal tax-and-spend Democrats will just squander the money on bigger government and more wasteful giveaways. Meanwhile, Democrats fear that free-range, feral Republicans will ultimately leave us with no solution for our surfeit of poor children other than Jonathan Swift’s suggestion that we eat them.

I understand their dilemma. Being honorable men and women, they know that when you take hundreds of thousands of dollars from someone you have a moral obligation to reciprocate, to meet your donor’s expectations of reward.

Years ago, I documented their expectations. The average rate of return was 1,000-to-one or more. The official gets a $100,000 “contribution”; the donor’s repaid $100 million for his “investment.” The payback can take the form of, say, subsidies, price supports, tax breaks, government contracts, public land, bailouts or tariffs. [Political cartoon credit: Unknown; multiple sources.]

The total isn’t chump change. The International Monetary Fund says global subsidies for fossil fuels alone are $1.9 trillion a year.

Recently, 10 percent of the Fortune 500 corporations had so many tax breaks they not only owed no taxes, they actually got refund checks!

Sen. Tom Coburn, R-Oklahoma, explains what others fear to whisper: “It’s not about tax policy, it’s about benefiting the political class and the well-connected and the well-heeled in this country.”

Legislators need money to be re-elected. Can you see why it’s easier for them to cut Social Security or food stamps than their donors’ rewards programs? (The poor are notoriously miserly when it comes to large campaign contributions.)

So what’s our nation’s first step on this journey of a thousand miles?

Here’s an idea. Ask the Congressional Budget Office and IRS to, first, identify all the special interest tax breaks that lobbyists have obtained. Some benefit an individual company; others an industry, or all business. Forget the other trillions in giveaways; focus on tax breaks.

Don’t eliminate these tax breaks; just make them visible subsidies, as appropriations. Publish them online. Hold news conferences to brief journalists and bloggers, and let them run with it.

Then see what happens. If the public doesn’t respond, well, that’s democracy for you. If they do, it might provide some backbone implants for our “representatives” in Washington.

And Des Moines.

The Gazette’s Erin Jordan has skillfully brought this approach to Iowa’s sales tax. (March 23) “Report: Iowa lost $3.9 billion in sales tax breaks in 2010; Breaks up 62 percent since 2005.”

I’ve written about applying it to TIFs (tax increment financing) — the local form of handing taxpayers’ money over to for-profit businesses, as in “TIF Towers,” http://fromdc2iowa.blogspot.com/2012/04/tif-towers.html.

When it comes to federal, state and local politicians transferring taxpayers’ money to for-profit companies (often in exchange for campaign contributions), the practices and consequences are similar, whether the special treatment comes from local TIFs, state sales taxes or federal corporate income taxes.

The first step to reform is also similar: public disclosure of what’s going on.

How much money is at stake? Who’s getting it? In exchange for how much in campaign contributions?

Neither the media nor public in our democratic society can begin to redress these abuses so long as they take the form of essentially invisible tax breaks, rather than debated appropriations of giveaways, openly arrived at, and shamelessly set upon the table, under lights.

If only Congress’ journey of a thousand miles could begin with this simple, single step.
_______________
Nicholas Johnson, a former FCC Commissioner, teaches at the University of Iowa College of Law. Comments: www.nicholasjohnson.org and FromDC2Iowa.blogspot.com.
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Do you feel sometimes that your elected officials are sidestepping some of these major issues? Did you realize they've all been to dance classes? To "do a little sidestep" requires training, not to mention a good bit of talent:


[The preceding one-minute fair use clip is from the delightful 1982 R-rated full-length musical comedy, "Best Little Whorehouse in Texas," staring Burt Reynolds and Dolly Parton, among a great many other accomplished and well-known actors, and still available for rental and sale. It's based on a true story of a brothel outside LaGrange, Texas, that was ultimately closed down in 1973, following the work of investigative reporter Marvin Zindler of KTRK-TV, Houston. The writing was done by Larry King (whom I remember from Austin in the 1950s), the Governor was played by Charles Durning, and the studio was RKO Pictures. The film is copyright by, presumably, RKO. The use of this miniaturized, very brief clip is for non-commercial, educational and commentary fair use purposes only. Any other use may require the permission of the copyright owner.]

And here, for a little more serious approach to the subject, is Larry Lessig and his "We The People, and the Republic We Must Reclaim":



[Photo credit for opening photo: Unknown.]

# # #

Repealing Corporate Welfare: Step One

March 25, 2013, 8:50 a.m.

The Journey of a Trillion Dollars

"A journey of a thousand miles begins with a single step." 老子 (Lao-Tsu), Tao Te Ching, ch. 64 (c 531 B.C.; numerous translations). [Photo credit: multiple sources.]

Ain't it the truth? We've all confronted the impediments to taking that "single step" as we first try all the alternatives procrastination offers. If our goal is to begin a routine that includes a daily walk, it's literally true. But it's equally true of any other undertaking, from remodeling a kitchen, to getting out of Afghanistan, to . . . reducing our national debt.

The Democrats and Republicans in Washington are seemingly suffering from ideological immobilization. Republicans fear that if taxes are increased the tax-and-spend Democrats will just squander the money on bigger government and more wasteful giveaways. Their Grover Norquist famously said he'd like a government small enough that he "can drown it in the bathtub." Meanwhile, Democrats fear that free range feral Republicans will ultimately leave us with no solution for our surfeit of poor children other than Jonathan Swift's suggestion that we eat them. ("I have been assured by a very knowing American of my acquaintance in London, that a young healthy child well nursed is at a year old a most delicious, nourishing, and wholesome food, whether stewed, roasted, baked, or boiled . . .." Jonathan Swift, "A Modest Proposal: For Preventing The Children of Poor People in Ireland From Being A Burden to Their Parents or Country, and For Making Them Beneficial to The Public" (1729).)

One is reminded of Jerry Seinfeld's experience at the rental car counter: although he had a reservation, no car had been reserved for him. (Clerk: "I know why we have reservations." Seinfeld: "I don't think you do. If you did, I'd have a car. See, you know how to take the reservation, you just don't know how to hold the reservation and that's really the most important part of the reservation, the holding. Anybody can just take them.")

Here's a video of the bit:

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That is to say, I think that when it comes to our Washington officials' consideration of the observation that "a journey of a thousand miles begins with a single step," they know how to figure the distance of their journey, they just don't know how to take that single step. And that first step is really the most important part of the journey.

I understand their dilemma. Being honorable men and women, they know that if you take hundreds of thousands of dollars in "campaign contributions" from someone in business, you have a moral obligation to reciprocate, to meet your donor's expectations of reward in the form of generous grants of taxpayers' money. Indeed, as I documented in 1996, the average rate of return they had reason to expect at that time was something between 1000-to-one and 2000-to-one. The official gets $100,000 -- to avoid prison, he calls it a "campaign contribution," the donor calls it an "investment" -- and in return the donor expects $100 million in one form or another. Nicholas Johnson, "Campaigns: You Pay $4 or $4000," Des Moines Sunday Register, July 21, 1996, p. C2. (Presumably this is a fluctuating market, and I don't know what the return on such investments is these days; but there's some current evidence coming a few paragraphs from now.)

The return can take a variety of forms: subsidies, price supports, tax breaks, government contracts, public land, bailouts, or tariffs -- among others.

Although this flood of taxpayers' dollars involves far more than anything spent on children, the elderly, the poor, and working poor -- or other programs benefiting the 99% -- for those members of Congress and senators who would like to be re-elected, it's politically easier to cut Social Security, Medicare, or Food Stamps expenditures than to welch on their bargain with major donors.

So it would be politically unrealistic to suggest Congress turn off the spigot.

What, then, should be their "Step One"?

It needs to be something that takes not one dime from America's biggest corporations and wealthiest campaign donors. It's simple, really. Just ask the Congressional Budget Office and IRS to first, identify all the special interest tax breaks throughout the Internal Revenue Code that those campaign donors have paid lobbyists to obtain for them. Some may benefit a single individual or company, others an entire industry, or perhaps all businesses. Don't worry at this point about the other systems for passing taxpayers' money to the bottom line of for-profit enterprises -- the subsidies, price supports, government contracts, public land, bailouts, or tariffs mentioned above. Just look for the specially designed tax provisions that reduce what would otherwise be the beneficiaries' tax liability.

Do not reduce the benefit -- for now. Just take that list of tax benefits out of that darkened, locked lower left hand desk drawer, and put it under the light on the table. Identify the beneficiaries. Identify as accurately as possible the dollar benefit each receives from their special tax break.

Publish a document in hard copy and online containing this information. Hold a news conference to explain it to journalists and bloggers.

That's all. You want to know what is "Step One"? That's Step One.

There's an accompanying reading assignment that goes with this lesson: Christopher Rowland, "Tax lobbyists help businesses reap windfalls; While Congress fights over ways to cut spending and the deficit, generous breaks for corporations pass with little notice," The Boston Globe, March 17, 2013.

The Gazette's Erin Jordan has already brought this approach to Iowa's sales tax. Erin Jordan, "Report: Iowa lost $3.9 billion in sales tax breaks in 2010; Breaks up 62 percent since 2005," The Gazette, March 23, 2013.

And I, among others, have written about the results of the same approach being applied locally in the form of TIFs. Nicholas Johnson, "Like Death and Taxes, TIFs and TIFing Seem Here to Stay," Iowa City Press-Citizen, February 3, 2013, p. A7, embedded in "Tough TIF Talk," February 3, 2013. For links to a sampling of many other prior TIF discussions, including the text of a column and blog entry regarding the taxpayer subsidy of a previous Moen project, along with footnote documentation, see "TIF Towers; Giving TIFs the Sniff Test," April 9, 2012 (which includes Nicholas Johnson, "Moen TIF Proposal Just Doesn't Pass the 'Sniff Test,'" Iowa City Press-Citizen, April 5, 2012, p. A7).

Illustrative excerpts from Rowland's article:

"Lobbying for special tax treatment produced a spectacular return for Whirlpool Corp., courtesy of Congress and those who pay the bills, the American taxpayers.

By investing just $1.8 million over two years in payments for Washington lobbyists, Whirlpool secured the renewal of lucrative energy tax credits for making high-efficiency appliances that it estimates will be worth a combined $120 million for 2012 and 2013. . . .

The return on that lobbying investment: about 6,700 percent.

These are the sort of returns . . . the sorts of payoffs typically reserved for gamblers and gold miners. . . .

"It’s not about tax policy, it’s about benefiting the political class and the well-connected and the well-heeled in this country," said Senator Tom Coburn of Oklahoma. . . .

A smorgasbord of 43 business and energy tax breaks, collectively worth $67 billion this year, was packed into the emergency tax legislation that avoided the so-called “fiscal cliff.’’ . . .

Whirlpool officials said the tax breaks help the company retain jobs, but in recent years, it has closed refrigerator manufacturing plants in Indiana and Arkansas. . . .

In the absence of meaningful change, corporations like Whirlpool continue to pursue the exponential returns available from tax lobbying. The number of companies disclosing lobbying activity on tax issues rose 56 percent to 1,868 in 2012, up from 1,200 in 1998 . . ..

Whirlpool had plenty of company on New Year’s, including multinational corporations with offshore investment earnings, Hollywood companies that shoot films in the United States, railroads that invest in track maintenance, sellers of energy produced by windmills and solar panels, and producers of electric motorcycles.

Their special treatment is a fraction of a broader constellation of what the federal Joint Committee on Taxation estimates will be $154 billion in special corporate tax breaks in 2013, contained in 135 individual provisions of the tax code.

Note: The two reasons the "return on investment" reported by Rowland is different from my 1996 projections are that (1) he is reporting only what the companies pay their lobbyists, not all of their political expenses (most of which, for many companies, are the campaign contributions), and (2) he is only talking about the payback in tax breaks, thereby excluding the trillions of dollars over 10 years paid to corporations through the other funnels described above.

Rowland was recently a guest on Tom Ashbrook's "On Point" program. If you'd like to listen to the two of them, and others, discuss the issues, here's access to that audio: "Big Corporations Lobbying for Big Tax Breaks," March 19, 2013.

When it comes to politicians transferring taxpayers' money to for-profit companies (much of the time in exchange for campaign contributions), the practices and consequences are similar, whether it's local TIFs, state sales taxes, or federal corporate income tax special treatment. The first steps to reform are also similar: public disclosure of what's going on. How much money is at stake? Who's getting it? Why; based on what rationale? And ideally, in exchange for what (in the form of campaign contributions and lobbying activities)? Once all of that is well known, by the public, the media -- and the legislators themselves -- if the public finds it acceptable, well, that's democracy for you. But the public cannot even address the question so long as it's in the form of essentially invisible tax breaks rather than debated appropriations of giveaways openly arrived at.

If only Congress' journey of a thousand miles could begin with this single step.

# # #

Governor Branstad's 'Transparency'

January 5, 2011, 7:00 a.m.

Making "Transparency" in Government Meaningful
(bought to you by FromDC2Iowa.blogspot.com*)
The Press-Citizen has requested and run a series of 500-word op ed columns on "Issues to Watch: State Government." Here's mine from this morning's paper on Governor Terry Branstad's promises of "transparency."

Branstad and Public Transparency
Nicholas Johnson
Iowa City Press-Citizen
January 5, 2011, p. A7
Governor-elect Terry Branstad thinks transparency in government is a good idea.

As a general proposition, most agree. Indeed, to borrow from the bumper sticker: "It's not just a good idea; it's the law."

The difficulties come, not from the generalization, but from the specific applications and exceptions. Moreover, many public officials are unaware of their obligations.

It's called the Freedom of "Information" Act. However, as communications scholars remind us, there are dramatic differences between data, information, knowledge and wisdom. Without raw data nothing more is possible. Wisdom may be too much to hope for, let alone legislate. But it's knowledge that we need.

Few citizens rummage through the yellowing paper records in all of Iowa's 99 county courthouses. We depend on the media to tell us what our public officials are up to -- from Congress in Washington, to agencies in Des Moines, to the local school board.

Too often, public records, even with the media's reporting, provide us little more than data.

Do Iowans really want government transparency, a "government in the sunshine"? If so, we need to follow the advice "Deep Throat" gave Bob Woodward and Carl Bernstein, the Washington Post's Watergate break-in reporters: "Follow the money."

Much of what governments do is transfer taxpayers' money to the bottom line of for-profit corporations. Indeed, my research indicates the payback on large campaign contributions can run 1,000-to-one, or more. In Washington that means, "Give a million, get a billion." What's the ratio in Des Moines?

Paybacks can take the form of government contracts, price supports, direct subsidies and earmarks, and fraudulently named "jobs" and "economic development" programs. One of the most invisible and invidious forms of payback are "tax breaks."

There are serious issues of political ideology, public policy and finance when officials hand over taxes to for-profit corporations. One would hope those who think "socialism" is a swear word, and insist a deregulated marketplace solves all social ills, would oppose such giveaways. One would hope in vain.

So let's put those issues aside, recognize the corruption will continue, and address what improvements might help.

• First, recognize that $100,000 not paid in taxes has the same private benefit and public cost as a $100,000 corporate subsidy.

• Second, without cutting a single dollar from the taxpayers' largess put all the money on the table. Start with the worst problem: the virtually invisible and untraceable tax breaks.

• Third, identify those that exist, however deeply buried in the Iowa tax code, and repeal them.

• Fourth, make the money available, to the same recipient in the same amount, but as an identifiable appropriation for a named corporation or individual.

• Fifth, require reports, and encourage media presentation of them, that associate those appropriations with the legislators who voted for them, and how much those legislators received in campaign contributions and lobbying expenses from the recipient of the appropriation.

That's how you turn data and information into knowledge.

It remains to be seen if that's what Branstad means by "transparency."

_______________
Nicholas Johnson, a former FCC commissioner, teaches at the University of Iowa College of Law and maintains www.nicholasjohnson.org and FromDC2Iowa.blogspot.com.

# # #
_______________

* 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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