We are coming upon the silly season once again. As the summer wanes and autumn beckons, elected officials’ fancies all too regularly turn to matters of “economic development” and how deeply they can dive into taxpayers’ pockets, supposedly for taxpayers’ own good, if not the weal of the public at large.
Government knows best, these officials will insist. “Tut-tut, son,” this scrivener has been told countless times, “you don’t know how the system works: We must prime the pump of economic development or that pump will run dry and seize.”
But such idiocy in pursuit of political legacies is lunacy.
As Veronique de Rugy, a political economy scholar at George Mason University’s Mercatus Center, testified before Congress in 2015, “When the government subsidizes businesses, it weakens profit-and-loss signals in the economy and undermines market-based entrepreneurship.”
She reminded that most of America’s technological and industrial advances have come from innovative private businesses in competitive markets.
“Indeed, it is likely that most of our long-term economic growth has come not from existing large corporations or governments but from entrepreneurs creating new businesses and pioneering new industries.
“Such entrepreneurs have often had to overcome barriers put in place by governments and dominant businesses receiving special treatment,” de Rugy told members of a House committee.
Back in 2009, in a Cato Institute white paper, scholar Chris Edwards offered a succinct rundown of the deleterious effects of government (i.e. taxpayers) subsidizing private businesses:
“1. Creates an uneven playing field. By aiding some businesses, corporate welfare puts other businesses at a disadvantage, which distorts markets. That distortion causes resources to flow from higher-valued to lower-valued uses in the economy, which reduces the nation’s output.”
“2. Duplicates private activities. Many federal programs duplicate activities that are routinely provided in private markets, such as insurance, loans, and marketing. If such commercial-oriented activities are useful, then private markets should be able to perform them without government help.”
“3. Harms businesses and consumers. Government support for some businesses damages other businesses and consumers. For example, federal import quotas on sugar push up U.S. sugar prices and hurt U.S. candy manufacturers.
“4. Picking winners is a losing game. Nobody knows where the economy is headed in the future, especially not politicians in Washington [or in Harrisburg, Pittsburgh, the Allegheny County Courthouse and the county Airport Authority, for that matter]. Thus, when the government starts choosing industries and technologies [or retail and entertainment outlets and airlines] to subsidize, it will likely bet on the wrong horses at taxpayer expense.
“5. Fosters corruption. Corporate welfare generates an unhealthy relationship between businesses and the government.”
“6. Weakens the private sector. Corporate welfare draws talented people into wasteful subsidy activities, and away from more productive market-based pursuits. Furthermore, companies that receive subsidies often become weaker and less efficient, and they often take on riskier projects.”
It’s a damaging bill of particulars that corporate wealthfare aficionados constantly dismiss in their braggadocious hubris.
And finally, writing in the Fall 2014 University of Baltimore Journal of Land and Development, research scholar Marc Knapp stated what every pol who seeks to transfer taxpayer dollars to private developers knows but is loath to admit:
“When it comes to public subsidies of private development, the tax-paying public has not gotten, nor is it likely to get, the return on investment it was led to expect.
“It has been, and likely will continue to be, misled by unsubstantiated ‘motherhood and apple pie’ promises of jobs and lower taxes,” he wrote.
“Too many inside interests benefit when projects are subsidized – the developers who shepherd the projects through, the organized labor that builds them, and, most of all, the elected officials and bureaucrats who use these projects to further their careers,” Knapp wrote.
“If the taxpayers that provide the subsidies were to get fair value for their money, it will be by happenstance and not by design.”
Yet time and time again this clique continues to pull the wool over taxpayers’ eyes. But with all due apologies to Shakespeare, the fault, dear taxpayers, is not only in our pols but in the sheeple we have become.
Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).
