Today I’ll take a break from breathless headlines and poke my journalistic nose into the mythology bandied about by the Official Press in reference to boosting local economies. This is particularly relevant to San Diego, as we (hopefully) move away from a mode of development that sacrificed neighborhoods in favor of corporate edifices downtown. Of course, we still have stuff in the pipeline and the ‘must have’ stadium scheme being promoted in Lynchesterland…
Three articles on related topics have come to my attention this week that I’d like to share: two debunk the idea that “incentives” given by government to companies are beneficial to local economies; the other pulls back the curtain on the “sports welfare” system in this country.
Here’s the deal: your tax dollars are supporting a system of kickbacks and enticements for corporations and individuals based on empty promises of employment opportunities and economic growth. Thus the rich get richer while the rest us pay more taxes.
This article is necessarily going to be a Cliff Notes version of the data that’s emerged recently to support this premise. I strongly urge you to follow the links back to the source material if you’re the least bit curious about what’s being presented here.
Not long ago the New York Times published a three part series called The United States of Subsidies that examined and correlated a massive amount of data about government subsidies given to companies in return for locating their facilities in specific areas. The articles revealed that state and local governments dole out more than $80 billion annually in tax breaks, land grants and sometimes just plain old hard cash to companies promising to add jobs and boost the economy. That works out to $9.1 million per hour.
The Times found four dozen companies that each raked in $100 million plus from taxpayers over the last five years. They tallied up more than 150,000 of these grants/incentives and created a searchable database, along with interviews with more than 100 officials in government and business organizations as well as corporate executives and consultants.
Their investigation included lots of anecdotal evidence suggesting that the recipients of this largess often failed to produce the desired results. General Motors is cited as an example of a company that abused and manipulated governmental incentives:
Moraine, Ohio, was already home to a G.M. plant in 1997 when the company pushed hard for additional incentives. G.M. said it was looking for a place to accommodate more manufacturing.
Wayne Barfels, the city manager at the time, said a G.M. representative had told officials that Moraine was competing with Shreveport, La., and Linden, N.J. After the local school board approved property tax breaks, The Dayton Daily News reported that the other towns had not been in discussions with G.M.
The school board considered rescinding the deal, but allowed G.M. to keep it after a company official apologized. In 2008, G.M. shut the Moraine facility
Utilizing the Times database and other sources, TheAtlanticCities.com and the Martin Prosperity Institute delved further into the issue of incentives. In a nutshell, they found that incentives are a waste of money.
Our biggest takeaway: there is virtually no association between economic development incentives and any measure of economic performance. We found no statistically significant association between economic development incentives per capita and average wages or incomes; none between incentives and college grads or knowledge workers; and none between incentives and the state unemployment rate.
[Snip]
A 2011 Lincoln Institute of Land Policy study found property tax incentives to be counterproductive, being all too frequently given to companies that would have chosen the same location anyway. So instead of creating new jobs or spurring employment, the main effect of incentives is simply to deplete a community’s tax base. Since poorer states and communities are more likely to use incentives in the first place, the end result is to undermine the resources and revenues of the places that can least afford it.
And, a 2012 report by the Pew Center on the States found that most states that offer incentives do not have effective mechanisms in place to gauge and evaluate them, concluding that fully half of all states do not have even the most basic provisions in place to know whether the incentives they give are in any way effective.
As the Times article points out, however, past failures haven’t weakened the allure of incentives, even if they don’t work. No politician wants to be accused of failing to bring jobs and prosperity to their turf. So government officials end up acting like crack addicts, throwing away ever increasing amounts of money and selling off the future to pay for a short term high.
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