The government subsidy game

The government subsidy game

After reading an Allegheny Institute commentary (at pennlive.com) on the dichotomy that is this nation’s notable manufacturing gains but Pennsylvania’s continuing manufacturing losses, an engaged commentator noted:

“(I)t would be nice if you could explain in specific terms what other ways may be used to make Pennsylvania more competitive to draw manufacturing into the state.”

From think tank president Jake Haulk:

“I don’t believe Pennsylvania should put money into attracting any business. Lower the corporate tax rate, enact right to work (and) reduce the regulations that inhibit manufacturing startups or expansion.

“Adopt a business-friendly environment for all types of business, not just manufacturing,” the Ph.D. economist says

And that said, Haulk adds “a new mind-set by Democrats will be needed” as well as “more backbone in Republicans.”

That is, the same-old, same-old economic policies of the past simply don’t work; it is way past time for the failure to be called out, with the facts, not replicated ad infinitum.

Another commentator also believes Pennsylvania should not put resources into attracting manufacturing jobs. But he employs a different rationale:

“Manufacturing is returning to the U.S. from offshore because of robotics. More stuff is being made by machines, so if you eliminate the labor costs from the equation, the next largest expense is logistics.

“Thus, you move production closer to the point of sale, which is what is happening. Any job growth is for the people who build and program the robotics, or those responsible for the logistics stream.”

The writer also sees “the biggest impediment” to economic growth in the commonwealth as being “systemic corruption” in state government:

“Market forces aren’t allowed to move freely because both business and labor are greasing the wheels with campaign contributions, and government keeps pouring money into businesses via grants and tax abatements that could not survive otherwise.”

Whether mutually exclusive or not, the courts have ruled that the former is free speech. And whether the quid pro quo alleged is perceived or actual long has been elusive to prove.

But what is easily proved is the fallacy of government attempting to pick economic winners and typically losing, with public money. And in a realm in which it has no business doing business – other than, that is, as Haulk reminds, to keep the tax and regulatory burdens as low as possible for all so as to facilitate real economic growth.

Consider this passage from “Man, Economy and State” by late, great economist Murray Rothbard:

“(T)he more government intervenes and subsidizes, the more caste conflict will be created in society, for individuals and groups will benefit only at one another’s expense.

“The more widespread the tax-and-subsidy process, the more people will be induced to abandon production and join the army of those who live coercively off production.

“Production and living standards will be progressively lowered as energy is diverted from production to politics and as government saddles a dwindling base of production with a growing and more-top-heavy burden of the State-privileged.

“This process will be all the more accelerated because those who succeed in any activity will invariably tend to be those who are best at performing it.

“Those who particularly flourish on the free market, therefore, will be those most adept at production and at serving their fellow men; those who succeed in the political struggle for subsidies, on the other hand, will be those most adept at wielding coercion or at winning favors from wielders of coercion.

“Generally, different people will be in the different categories of the successful, in accordance with the universal specialization of skills. Furthermore, for those who are skilled at both, the tax-and-subsidy system will encourage and promote their predatory skills and penalize their productive ones.”

Sadly illuminating, is it not? That so many of our public officials refuse to engage the light, and continue to practice such dark economics, is anathema to sound public policy.

Colin McNickle is a senior fellow and media specialist at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org)