Gov’t “investment” – who is helped?
Our governments are now in the business of helping companies that get the ear of government. Not every company gets the ear, no. And often it seems that some companies lean one way or the other – so they only get the ear of government when their party is in power. I’ve recently seen a list of companies that give mostly Democratic or mostly Republican – and I’ve seen calls now for people to shop their politics. Yes, well, soon then we’ll know just what everyone thinks by what logos are on the bags they carry. Meanwhile, we’re helping companies in a myriad of ways. Oh, it’s quite a grab bag of gifts and loans and price supports and tariffs on imports and venture capital and capital improvement tax breaks and all manner of who knows what. It’s hard to keep track of, for sure. The various departments, like Energy, Commerce, Labor, Housing, Defense, etc, are all in on the act. So too are local governments, state governments, county governments, and many a special taxing district, too – all in advancing tax breaks to start ups, and outright gifts of cash, and politicians who write the red tape always cutting the red tape to bring in some factory for 200 jobs or something.
Yes, the headlines are always breathless when it’s “200” or “1,000” jobs brought into the community. Where those jobs came from is not often talked about. For instance, if a company relocates its factory from Peoria to Pleasanton, it’s true that the latter has “growth” – why, look, a new factory! And helped along with a tax break, by help politicians who put up barriers, and then look heroic taking them down. And yet, what of the former? It’s lost those jobs. It’s lost those taxes – a tax break indeed. Why, Peoria is out of luck, and Pleasanton is more pleasant, it’s said. But is it? We see the jobs created by the move, but we don’t quite see the jobs destroyed by the move. Nor do we see the jobs that would have been created had the company just gone out of business and the capital put to better use elsewhere.
I always think back to the candle makers. Ah, yes, good jobs they were. Millions employed. Then came the Kerosene lamp, and oil lamps. Various oils, whale & petrol of course, though no one laments the collapse of the whaling industry and the loss of all those jobs, do they? I mean, the technology invented to pursue the blubber to near extinction! And the shipbuilding jobs, and cordwainers, and the sail makers, oh my, thousands of jobs – gone. Good jobs, that sustained communities, and families galore. Yes, gone. And do we lament this? Why then lament jobs lost today by the same process? Ah, but we live today. And now we must keep things just the way they are, less we have actual “progress” and “change” while clamoring for it. If a company exists in 2010 or something, apparently it must now continue to exist for all time, and tax dollars put to good use to sustain our way of life.
So, let’s say we take federal money (pick a program, I don’t care – the concept remains the same, regardless of the point at which you give and take the money – or what department does this or that, or what two locations – the concept, folks, not the details,) to help the factory move to Pleasanton – what we have is the Department of Commerce giving a loan to the cronies at Company Butkis, who donated well in the recent election, and with a bright new idea put forth by someone who knows someone, that if only Butkis got a guaranteed loan of a measly $100,000,000 they’d make this fantastic new solar gizmo to solve all our problems – and make new jobs, and the multiplier effect too, and the new factory, and the supply line, and the new highway needed to get to the new factory on the farm land that was eaten up against the wishes of the Department of Agriculture which spends a few $100 million of their own to help keep farmland from disappearing under factory floors – still, the two agencies no doubt work in close cooperation with each other.
And then, presto, a new factory on the outskirts of Pleasanton, because the requirements of making acres of solar panels requires acres of factory not available within the city limits. Perhaps the city will extend the city in limits in a serpentine fashion down the highway to bring the factory and the new Applebee’s (there’s that multiplier effect, eh?) within the city’s sales tax jurisdiction. Yes, business booms in Pleasanton. Why, there’s a $100,000,000 payroll come to town.
Meanwhile, aw, the poor folks in Peoria – they had already used state money to lure the last generation’s next new thing to solve our problems and bring everlasting prosperity to their town – perhaps they used state money back then, a decade ago. Why, I recall reading a book lately about big box stores in some burg in Kentucky. Seems big boxes were lured in by state and city, feds not even around, then, when they got bigger had to move somewhere else. The growing bigness was complained about, for as they moved they left behind a trail of large empty boxy buildings. Yes, but, well, you lured in the biggies to create jobs – which required people – who came and had progeny – and needed more stuff – so they went to the the small-big store, which got bigger, which now needed help to get a bigger store. Yes, you reaped what you sowed, and don’t like the crop. Weird.
Meanwhile, yes, Peoria, out the jobs – those jobs are never connected to the jobs in Pleasanton of course. That would show that there’s no gain – there’s just a move of 1000 jobs from here to there. Moving from one 2 bedroom house of 1500 square feet to another doesn’t increase your living space, either. But, some of the workers move to the other city, and so now there’s more empty houses in Peoria, with no one moving into town, for there’s no jobs, thanks to the politician in the next state over who helped the connivers at Butkis get a $100 million to start all over in a new place. Would that we all got $10,000 to start over anew, eh?
But why did Butkis need the $100 million? Supposedly to grow, to make better things, to research, to upgrade, who knows – they always have a reason. Why did they not go to their venture capital sources, or their banker, or Wall Street and raise the money? Oh, they probably did – alas, their business model is um, difficult – i.e. won’t work – and so, they get a government boost – for the idea is good – and if only people saw this they would buy the product at the actual cost, and the company earn its way. But the product is too expensive, so needs a boost, to get started, for the good of the people. So it goes with solar.
We are told solar is wondrous – yet, it doesn’t seem to be cost effective. I mean, if some company came along with a panel a yard square for $50 that could power a house I’m sure it would sell like hot cakes. But they can’t – for the law of reality – the mechanics of solar power as we understand it today – makes this impossible. What we get are acres of solar panels that provide a dash of energy to the entirety such that even a house roof paved over, and the yard and the neighbor’s house and yard, and even to the corner, too, with the things can’t power the place. And because the cost is prohibitive – that is – the $10,000 to acquire and install the panels doesn’t justify the cost – we give a tax break or a subsidy to the proud new owner of the things. And where does this money come from? From the pockets of some middle class folks paying more in taxes, or higher prices to corporations taxed more (makes no difference if you get it before or after the product is bought, income or sales, it’s the same buck,) now needing a boost to pay their electric bill, or wear some warmer clothes, which they have to go buy too. But this will help us, for we’ll get solar power – though at what cost not a thought seems to be given.
And if you bring it down to a manageable experiment size we can see it’s just tomfoolery – let’s look at Peoria and Pleasanton – both with 100,000 people. So we take a $100,000,000 out of taxes both, or $50 million from each, to put this into Pleasanton for the new plant. That means that there’s $50 million less to spend in Peoria – though, admittedly, the Pleasantonians are spending their own money. But they get a gift of $50 million from Peoria. Then, because the 1000 workers are out of a jobs in Peoria they need some help; that’s a $100,000,000 less in payroll after all, yes? And all the multiplying that was previously done in Peoria is now mere division of which stores will make do with the less purchasing. So we tax both cities another $100,000,000 to make sure the heat stays on and there’s food in the fridge, and fine government help is delivered (no one ever seems to figure in the cost of the bureaucrats either, in all this.) So now we take $50 million from Pleasanton, which it loses. So, it gained $50, and it lost $50. It’s a wash. And Peoria – it’s still out $50. How? Oh, but wait, what of the $100,000,000 in new payroll? Ah, ½ of that went to the taxes for the $50 million – and the other half is the original $50 million taken for Pleasanton’s contribution to the $100,000,000 to get the factory. You took $50 million from the 99,000 who don’t get the new jobs, to give to the 1,000 with the new jobs – it’s the same buck.
Ah, but Peoria, suckers;
Well, it gave $50 million to Pleasanton in taxes to get rid of its factory.
Then it gained $50 million from the taxes on Pleasanton for the benefice.
So it would seem a wash, no? No.
It lost $100,000 million in the payroll of a 1000.
Yes, but, the $50 million in largesse from Pleasanton covers that.
No, $50 doesn’t cover a $100.
No, – for 100 million is needed for Peoria new poor –
and that extra $50 million for the 1000 must come from the 99,000 left in Peoria –
they have to put up the other $50 million.
Which means it’s the same buck, just moved over a house.
So they are out $50 million that could have been used for other purposes. And it is dastardly true for those who think like me that it is very easy to point to that which is done and exists — but I cannot show you that which might have existed had you not gotten your way. This I freely admit, your point is inarguable — jobs are created in this process — but I cannot easily show you which jobs are directly and indirectly lost by this process, but lost they are.
And you see, it seems like a good idea, for we only want to look at the growth, the new, the shiny, the thing with a big price tag and 1000 jobs. But we don’t ever seem to see the loss, the old, the dull, the things with tiny prices, and the 1000 jobs lost or not created by the subsidy of one group of people to another. And subsidies from one person to another always work like this. Think of a family. Parents have X amount of dollars. If they have kids, they subsidize them, in the way government programs subsidize people and companies. But for each dollar spent on the kids, good money no doubt, that’s one dollar less for the parents’ use. Sure, it’s a good thing to do – but the parents always have to bring in more than goes out. Sure, they can borrow from time to time – but not forever. And sure, they can carry some debt, but manageable. But if you start taking money from one set of parents to help another set of parents, it’s impossible not to harm the first set.
It’s one thing to take $20 from each to build a road that each enjoys. It’s quite another to take the $20 from one so that the other has $40. And that’s what our government is doing – at every level, in every party, in a grand consensus. It’s taking $20s from some without the ear of government and giving it to those with the ear of government – that’s the concept I rail against.
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