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Friday, December 9, 2016

Democrat Comeback: More Corporate Welfare

In the November election, the Democrats suffered one of their biggest losses in recent memory. It was not so much the presidential and Congressional elections that hit them hard, although it really hurt them that Secretary Clinton did not become our 45th president. No, the real defeat for the Democrats took place at the state level, where Republicans expanded on their already-impressive gains from 2014: the Republican party now controls both legislative chambers and the governor's office in 25 states, up two from 2014. Democrats, on the other hand, have the same "trifecta" control in six states, down from seven in 2014.


In total, there are 31 Republican governors, which bodes well for the supply of future Republican presidential candidates. 

At the national level, the Democrats seem to be about as clueless about why they lost this election as the Republicans were after 2008. However, at the state level they are beginning to get back in the game, having realized that it is not all about the presidency. We can expect a liberal comeback strategy to be launched early in 2017, but already now the liberal State Innovation Exchange (SiX) is getting into the game. They are already putting together a strategy to retake state legislatures, and we here in Wyoming have good reasons to pay attention. Their strategy is built on the traditionally liberal idea that government can make things better by handing out money to people - only this time the recipient of the handout is not a select group of individuals.

No, this time they want to expand handouts to businesses. In other words, they want to best Republicans at corporate welfare. 

Nick Rathod, executive director of SiX, explains the plan, starting with his own analysis of the 2016 election:
If the results of the 2016 election tell us anything, it’s that working- and middle-class families are fed up. They are tired of an economy where average Americans struggle to provide for their families, while corporate CEOs and billionaires keep getting new tax breaks. They are tired of the lack of good jobs, stagnant wages, and the elimination of one benefit after another. And they are tired of the same old rhetoric coming out of Washington, while seeing those same politicians work hand-in-hand with big corporations to maintain the status quo.
Then comes the declaration of intent: 
American workers — the ones who play by the rules and work hard to make ends meet — deserve better. Families deserve a plan and a path forward to economic security, and it has to include much more than throwing federal money at each and every company that threatens to leave the country, like President-elect Trump did with Carrier.
There are two pieces in this paragraph that point to the content of a liberal comeback. First, Rathod mentions "economic security", which in liberal parlance means tax-paid entitlements and ramped-up labor market regulations such as a higher minimum wage and more rigid hire-and-fire laws. Secondly, the reference to "more than throwing federal money" at a job-loss problem is a hint of a decentralized version of President Obama's penchant for conglomerating government and big businesses (such as $4.9 billion to Tesla). Rathod continues, explaining the State Innovation Exchange's blueprint for state-level industrial policies - and pay close attention here:
That blueprint outlines a vision that not only focuses on the desperate need for higher wages and benefits, but also encourages states to foster the development of advanced manufacturing and innovative industries to create good, strong jobs that put people back to work. It’s a vision that is already being tested and proven effective in states across the country by progressive-minded state lawmakers. For example, Idaho expanded on its natural resources to be a leader in geothermal energy. Ohio used its industrial base to become an energy mecca, creating jobs that made it the center for wind turbine manufacturing. Oregon and neighboring states found a way to capitalize on the region’s existing agriculture sector by creating a food processing cluster. In states like Michigan and Pennsylvania, we know that advances in renewable energy and efficiency investments could create an estimated 50,000 high-wage jobs per year. And states have more than natural resources to leverage — whether it’s commercializing university research on biomedical advances, incubating technology start-ups, or maximizing the economic impact of the emerging electric vehicle industry supply chain, we can and must continue to carry this innovative work forward in states throughout the nation.
 In a nutshell, what the State Innovation Exchange has in mind for a Democrat state-level strategy is what we traditionally know as "economic development" - or "corporate welfare". Put simply, yet accurately, this liberal outfit wants more of taxpayers' money to sponsor and subsidize jobs in industries that they believe are worth supporting. 

This habit of picking winners and losers is not monopolized by liberals. This very mindset has already set roots here in Wyoming, and we are just one little state with a few examples. The practice of giving tax-paid handouts to corporations to bring them is now deeply rooted in the American economy. Corporations have learned to play the game, increasingly looking for the biggest handout when making investment decisions. And who can blame them? There is at least $80 billion in subsidies from state and local governments to tap into, and an additional $100 billion or so from the federal government.

If the State Innovation Exchange is serious about its arguments for more handouts to businesses, then we can expect the next few elections to be about who - Democrats or Republicans - can hand out the most of taxpayers' money to corporations. This is exactly the wrong way to go forward. We do not need more entitlements, grants, subsidies or handouts on behalf of taxpayers. We need fewer of them, and as far as corporate welfare goes, we need none of it. 

What does all this mean for Wyoming? Well, we are in desperate need of industrial diversification, and we have a governor that mixes good policies with a troubling belief in corporate welfare. The legislature is not exactly his strongest critic on the corporate-welfare idea, opening for a rather nightmarish scenario for the next couple of election cycles: a race between Republicans and Democrats to outbid each other in promising handouts to businesses who promise to build some plant, warehouse or other facility in the state. 

Corporate welfare is inherently bad. It is a practice that we should get rid of, not expand. It reduces the competitiveness of a business, making its subsidized investment perennially in need for outside support to prevail. 

As we expand the use of corporate welfare to diversify our economy, we will find that more and more of the tax-sponsored investments also become a reliable forecast of the lifespan of the subsidized activity. My all-time favorite example is actually not from the United States, but from Sweden. In 1989 the Swedish government promised lavish corporate-welfare checks to SAAB, the car manufacturer, if they built a manufacturing plant in the city of Malmo. The subsidies, which were generous enough to pay the full production cost of every car that rolled out of the plant, were going to last for exactly two years. During that time, SAAB, again, got so much corporate welfare that they could have given away every single car they manufactured in Malmo, without losing a dime. 

Now for the $64,000 question: how long did SAAB keep the plant in Malmo open?


We have not yet sunken to the sleazy Swedish level of corporate welfare, and hopefully we never will. However, if the Democrats are going to compete with Republicans in giving handouts to businesses, we could very soon find our elected official racing to the bottom of the state's treasure trove, drilling holes into the ground and digging like moles for every last piece of give-away'able penny that they can separate from the lint in taxpayers' pockets.

There are better ways to get businesses to invest in Wyoming.

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