EDITORIAL: Public, private. Where’s the line? - Beloit Daily News: Opinion

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EDITORIAL: Public, private. Where’s the line?

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Posted: Wednesday, December 5, 2012 4:00 pm

Increasingly, companies expect incentives and subsidies.

 

WHEN IT COMES to government, what businesses want is to be left alone to pursue the challenges and rewards of private enterprise without the hassle of dealing with bureaucrats and red tape.

Except, of course, when businesses have their hand out trolling for taxpayer-financed freebies.

Across America, nearly every community and every state competes against each other to dole out the money — some call it incentives, others say it’s corporate welfare — in the hunt for job creation or retention.

But does it work? Is the investment paying off for states and communities?

 

A MAJOR PROJECT by The New York Times reveals just how difficult it is to answer those questions. The eye-popping numbers found by the Times: Local governments shell out more than $9 million per hour in America in direct taxpayer-financed incentives to businesses, totaling more than $80 billion a year. The Times estimates federal and state governments provide more than $170 billion more.

Yet few officials can say definitively whether the payouts result in a net gain or a net loss, because precious little accounting takes place once the deals are done. Promises made may be promises kept. Or not. And short-term wins — having a site selected by a business — based on lucrative incentives may not translate to long-term gains.

Here in Wisconsin this is not just an academic question. It appears to be a question of competence. With great fanfare last year the former Department of Commerce — widely believed to be weak and ineffective — was transformed into a public-private hybrid called the Wisconsin Economic Development Corporation, charged with dealing directly with businesses to manage incentives for the purpose of creating expansion and jobs. But it has been documented the agency doled out at least $12 million of taxpayer money while utterly failing to track what it was used for or whether the payouts produced the agreed-upon results.

The Times report says Wisconsin provides more than $1.5 billion annually in business incentives — 10% of the state budget, and about $268 per citizen.

Obviously, the taxpayers who ante up that money deserve a return on investment. When governments can’t even keep track of the money once it’s handed out, taxpayers lose.

 

PERHAPS THE MOST SERIOUS question raised by the Times’ study is this one: Do incentives really create new American jobs, or are jobs just being shuffled from one state to another?

The first pothole on the road to answering that question is the virtual impossibility of knowing whether a given set of jobs would have been created with or without incentives. Instinctively, it seems logical to assume no company adds jobs just to get taxpayer money. The Times also interviewed top corporate leaders, who said as much. A former General Motors executive put it this way: “The management owes it to their stockholders to try to get the best economic deal that they can.” GM was good at it, scoring billions in incentives at its far-flung plants across America before going under and claiming billions more in a federal bailout. Wisconsin, for example, offered more than $150 million in the vain attempt to keep the Janesville plant operating.

 

EQUALLY CONCERNING is the practice of pitting states and communities against each other in a bidding war with taxpayer dollars. The Times cites the example of Kansas and Missouri, which have poured millions into a border war that has resulted in several companies moving just a few miles across the state line. One state or the other then claims the development “win,” but the same jobs just move from one building to another.

To some degree Beloit saw a similar example when FatWallet moved from Rockton to a downtown site here, a choice touted statewide by the Walker administration as a huge victory. Though one can celebrate that FatWallet stayed local rather than moving operations halfway across the country, it’s also true the net result was not a windfall in terms of new jobs.

Still, so long as nearly every community and every state is ponying up in aggregate billions of dollars to hand out to private enterprise, the incentive arms war will continue. Unilateral disarmament — a decision by a community or state to stop taxpayer handouts — carries the real likelihood of being bypassed for any growth whatsoever as companies speed down the highway to where the grease awaits them.

 

THERE WAS A TIME when companies didn’t expect that. They did expect — and rightly so — good roads, accessible utilities, an educated workforce and a friendly system of permitting and licensing. Then they wanted the freedom to pursue success without the burden of oppressive government oversight.

Logic suggests you can’t have one without the other. If taxpayers are expected to shell out, then taxpayers have the right to serious accounting, measurable  results and consequences for breaking promises.

And if the private sector wants government bureaucrats to step back, it should stop demanding billions of taxpayer dollars as the price of admission.

As federal, state and local governments struggle with tight budgets this is part of the philosophical question about what kind of country we want. Where is the line between public and private? What should taxpayers fund? And when should taxpayers keep their wallets in their pockets?

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Welcome to the discussion.

3 comments:

  • billtinder posted at 10:38 pm on Sun, Dec 16, 2012.

    billtinder Posts: 4699

    I'm in total agreement with Mr Data and 126337 in the observations that they make, however I would like to point out some other points

    1) we have 330 million consumers in this country and most still have decent incomes (in comparison to worldwide).
    2) We as a nation can't stop worldwide free trade, nor should we want to. But we as a nation can control how business is conducted within our borders; and we can impact wages by reinstituting tariffs so that it makes more fiscal sense to manufacture products here then it does to ship raw materials overseas, only to send it back in a finished product.
    3) As was pointed out by 126337 many corporations no longer feel the need to be loyal to communities and so by the same token that same level of consideration should be returned by our trade policies. And to the many companies that have stayed in this country, our trade laws should be showing them American loyalty and advantage.
    4) Since our political leadership only wants to skirt the issue by concentrating on lessor issues like taxes, spending and debt limits, they telegraph their own corruption. They have to know (on both sides of the isle) that our economy can have no meaningful recovery so long as our trade imbalance continues to bleed the wealth of our nation off little by little. They've been bought off by wall street and so refuse to make the changes that would reverse the trend towards poverty that the middle class faces. Instead these pirates feign agony while setting up the suckers in the middle class for the sacrificial alter, as if none of us could figure out that if we had our industry back; the revenues generated just might present a fiscal solution. But who needs that when we can throw another trillion on the ole government credit card, the freeloaders like it better that way anyhow.

     
  • 126337 posted at 9:37 am on Mon, Dec 10, 2012.

    126337 Posts: 143

    Smaller businesses,  in a local community, no longer feel loyalty to geography.   Larger businesses, in a global  community,  no longer feel allegiance to national identity, but locate where incentives of cheap labor, and lax regulation exist, and  cancel out a company's scruples about national identification.

    At one point impoverishing a community, or a country, by eliminating too many jobs was not in a company's best interest.   

    But in a global economy business can market to healthy middle classes in other places...and they do.  

    Consequently, we have a situation where a business's self interests often cancel out local and national identifications.  Wealth feels more identification with a class and methodology that has no local, or national allegiances,, and no obligations to the prosperity  of its origin.

    A local community can incentivize all it wants, but it's not only about attracting new business, it's about what new business pays its local labor.  Quality of life does not necessarily improve in a community unless business  provides a healthy  pay scale, and the incentive to pay a healthy pay scale is too often missing in our new, global economy.


     
  • Mr Data posted at 4:13 pm on Thu, Dec 6, 2012.

    Mr Data Posts: 3836

    Taxpayers started being taken advantage of when local communities, counties, and states started giving 'incentives' or other taxpayer subsidies to private corporation to lure them into their domains to do their business.

    Corporations win when they can pit community against community, state against state in order to obtain free services and tax breaks from the local, county, and state governments.

    As the BDN said, just a few decades ago business owners were proud to build / expand their businesses in the communities they were born and raised. They were proud to be a good neighbor of the community and to pay their fair share of taxes. Not any more.

    Today's business leaders feed off the greed and fantasy thinking of the imbeciles running our communities, counties, and states. They know they can get freebies to operate their business. They know they can get tax breaks from their politicians. And if they cannot make a go of it .. they'll just pack up and relocate, most likely over-seas. Professional sports teams owners have become huge taxpayer pirates .... demanding new stadiums and roads and parking lots for their teams to play or else the Baltimore Colts become the Indianapolis Colts, ect.

    It is necessary and fine for government to buy goods, and even temporary services, from those in the private sector. Even providing a private sector business financial ‘loans’ with appropriate interest rates may be proper, at times.

    But I also believe there should be laws prohibiting government from ‘giving’ or ‘providing’ any taxpayer funding to a private sector business that is not required to pay that funding back, with interest. And there should be laws prohibiting our government from ‘outsourcing’ or ‘privatizing’ programs, services, funding management, and administration of government’s public service operations and responsibilities. We’d never think of ‘outsourcing’ our elected officials duties (perhaps we should!) – Executive, Judicial, or Legislative branches. So why would we ever consider it appropriate to outsource to the private sector seeking to make a profit from those precious, taxpayer paid services our public sector has been ordered to provide to its citizens / taxpayers?

     

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