Monday, December 3, 2012

Crony watch: The fool's errand of rifle shot subsidy deals

The New York Times yesterday ran a great front page story on the ineffectiveness of negotiated state and local governmental subsidies to attract or retain jobs. The Times is right. Negotiated individual subsidies by state and local governments in competition with each other are a disaster, and the paper shows that with detailed reporting that could be matched by few other publications.

As good as it is, though, the story also perfectly reflects the essential biases of the Times. There are at least three points that the story might have made, but did not.

First, politicians love rifle-shot subsidies, whether via taxes or otherwise, because they can claim that they "saved or created" particular jobs, which is a very nice thing to be able to say on election day.

Second, many of these subsidies would not be needed to attract businesses if state and local politicians spent more time simply working to improve their own business climate. Develop processes for accelerated permit approvals, fast-track state litigation designed to obstruct development, foster fluid labor markets by confining individual employee rights to those defined under federal law, and keep taxes on businesses and individuals as low as humanly possible.

Third, voters are attracted to these subsidy programs because they see it in national policy and sold by national politicians. See, e.g., Jimmy Carter's bailout of Chrysler, Barack Obama's bailout of Chrysler and General Motors, Barack Obama's "green jobs" initiative, and countless specific tax breaks or direct subsidies to benefit particular industries or even individual companies. Unfortunately, there is not a shred of evidence that any of these national programs create net jobs, either. But they do "save or create" particular jobs, and that is what this is all about, right?

1 comment:

  1. I have no idea what the current numbers are, but years ago the cost of city and state approval and permits on a house in Orange County, CA was a high as 25%. The high cost of housing was one of the most common reasons as to why companies left California for other states.


Web Statistics