“Society and economy are not created by the state,” my old friend and George Mason University economics professor Donald J. Boudreaux reminded recently. Neither is “reality … produced by government,” he added.
How sad that such a reminder for something that should be self-evident is necessary. But as a few recent news events show, the tutorial is warranted and, no doubt, on a daily basis.
To wit:
Michael Boyd, the oft-quoted airline industry consultant who is a recidivist cheerleader for subsidized flights at Pittsburgh International Airport (PIT) had an uncharacteristically spot-on assessment of WOW Air’s failure.
The discount carrier suspended its Pittsburgh-to-Iceland route (deemed by some to be a “gateway” to Europe) in January and recently halted all operations worldwide.
But Boyd told the Tribune-Review that WOW’s business model didn’t have enough travelers to make it work. That is, he said, WOW catered to spur-of-the-moment travelers and there were insufficient impulsive people.
So, why did the Allegheny County Airport Authority pony up $800,000 of public money on such a speculative venture, a poor business model, that, now failed, has left it stiffed for more than $565,000?
Nonetheless, Boyd continues to advocate corporate wealthfare for airlines. As does authority spokesman Bob Kerlik.
Well, if an airline consultant is saying WOW’s business model was lacking, where was the Airport Authority’s due diligence in concluding the same?
And, as we’ve often noted, subsidized failure is not necessarily the exception at PIT but is becoming the rule.
Another object lesson in government attempting to create a new reality can be found less than an hour away in Wheeling, W.Va.
That’s where city leaders are defending a deal in which it purchased a pair of dilapidated buildings (two in a series of four row buildings) in the struggling downtown core for $300,000, then sold them to a private developer for what’s believed to be $1, then agreed to further subsidize the private owners with $350,000.
Taxpayers also are on the hook for a $4,800 real estate sales commission and the door has been left open for even more taxpayer subsidies.
The private owners reportedly will spend $1.29 million to rehabilitate the buildings into a coffee shop, a restaurant and upper-floor apartments.
The private beneficiaries of this sweetheart deal will have invested, as the local newspaper reminded, slightly less than double the taxpayers’ “investment.”
In defending the real estate agent’s sales commission, Wheeling Mayor Glenn Elliott unwittingly exposed the folly of such corporate wealthfare (also considered by some in the community to be crony capitalism).
Here’s what Elliott told a Wheeling newspaper:
“The bottom line here is that when you’re trying to market properties with nominal or negative value, you need to provide incentives to encourage the private real estate marketplace to participate.”
One rationale surrounding this sweetheart series of deals is that tearing down one of the buildings would compromise the structural integrity of another building and tearing down the other would result in a property so small as to be unattractive to developers.
But since when should it be the taxpayers’ responsibility to prop up, physically or monetarily, privately owned buildings of “nominal or negative value”?
“It’s a really good project for downtown Wheeling development and I’m excited about its potential,” Elliott recently told Wheeling City Council.
“I recognize it would be nice if the private sector could do these projects without any assistance,” he continued, “but we’re just not there yet for buildings this vintage and of this age.”
Well, if it’s such a good project with such exciting potential, why hasn’t the private sector rushed in to risk its own money for the total cost of the project instead of offloading a large chunk of the capital costs it alone should bear on the First City Bank of Taxpayers?
At Pittsburgh International and in the nearby City of Wheeling, to name just two places, government officials so full of hubris steadfastly believe they can command the economy and, in the process, somehow create a new and better “reality.”
But all they really do is create a market-perverting Fantasyland that, past being prologue, only leads to more and more dubious public subsidies.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
