The Starting Line— Exposing the Myth of Incentivized Economic Development; It’s Like Crack Cocaine for Politicians

by on December 14, 2012 · 4 comments

in Columns, Economy, Politics, Sports, The Starting Line

Today I’ll take a break from breathless headlines and poke my journalistic nose into the mythology bandied about by the Official Press in reference to boosting local economies. This is particularly relevant to San Diego, as we (hopefully) move away from a mode of development that sacrificed neighborhoods in favor of corporate edifices downtown. Of course, we still have stuff in the pipeline and the ‘must have’ stadium scheme being promoted in Lynchesterland…

Three articles on related topics have come to my attention this week that I’d like to share: two debunk the idea that “incentives” given by government to companies are beneficial to local economies; the other pulls back the curtain on the “sports welfare” system in this country.

Here’s the deal: your tax dollars are supporting a system of kickbacks and enticements for corporations and individuals based on empty promises of employment opportunities and economic growth. Thus the rich get richer while the rest us pay more taxes.

This article is necessarily going to be a Cliff Notes version of the data that’s emerged recently to support this premise. I strongly urge you to follow the links back to the source material if you’re the least bit curious about what’s being presented here.

Not long ago the New York Times published a three part series called The United States of Subsidies that examined and correlated a massive amount of data about government subsidies given to companies in return for locating their facilities in specific areas. The articles revealed that state and local governments dole out more than $80 billion annually in tax breaks, land grants and sometimes just plain old hard cash to companies promising to add jobs and boost the economy. That works out to $9.1 million per hour.

The Times found four dozen companies that each raked in $100 million plus from taxpayers over the last five years. They tallied up more than 150,000 of these grants/incentives and created a searchable database, along with interviews with more than 100 officials in government and business organizations as well as corporate executives and consultants.

Their investigation included lots of anecdotal evidence suggesting that the recipients of this largess often failed to produce the desired results.  General Motors is cited as an example of a company that abused and manipulated governmental incentives:

 Moraine, Ohio, was already home to a G.M. plant in 1997 when the company pushed hard for additional incentives. G.M. said it was looking for a place to accommodate more manufacturing.

 Wayne Barfels, the city manager at the time, said a G.M. representative had told officials that Moraine was competing with Shreveport, La., and Linden, N.J. After the local school board approved property tax breaks, The Dayton Daily News reported that the other towns had not been in discussions with G.M.

 The school board considered rescinding the deal, but allowed G.M. to keep it after a company official apologized. In 2008, G.M. shut the Moraine facility

 Beyond Anecdotal Evidence; Incentives Do Nothing

Utilizing the Times database and other sources, TheAtlanticCities.com and the Martin Prosperity Institute delved further into the issue of incentives. In a nutshell, they found that incentives are a waste of money.

 Our biggest takeaway: there is virtually no association between economic development incentives and any measure of economic performance. We found no statistically significant association between economic development incentives per capita and average wages or incomes; none between incentives and college grads or knowledge workers; and none between incentives and the state unemployment rate.

 [Snip]

 A 2011 Lincoln Institute of Land Policy study found property tax incentives to be counterproductive, being all too frequently given to companies that would have chosen the same location anyway. So instead of creating new jobs or spurring employment, the main effect of incentives is simply to deplete a community’s tax base. Since poorer states and communities are more likely to use incentives in the first place, the end result is to undermine the resources and revenues of the places that can least afford it.

 And, a 2012 report by the Pew Center on the States found that most states that offer incentives do not have effective mechanisms in place to gauge and evaluate them, concluding that fully half of all states do not have even the most basic provisions in place to know whether the incentives they give are in any way effective.

 As the Times article points out, however, past failures haven’t weakened the allure of incentives, even if they don’t work.  No politician wants to be accused of failing to bring jobs and prosperity to their turf. So government officials end up acting like crack addicts, throwing away ever increasing amounts of money and selling off the future to pay for a short term high.

The Sports Industrial-Welfare Complex

 If you think taxpayer largess for corporations is outrageous (and you should), then you’ll go ballistic over the data presented in Patrick Hruby’smeticulously researched tome at SportsOnEarth.com. Entitled Let’s Eliminate Sports Welfare it proceeds to shed light on dozens of sports related schemes promulgated all over the country. What they all have in common is that already wealthy enterprises make out like bandits at taxpayer’s expense.

He also shoots down the premise that sports franchises have a positive impact on local economics, going so far as to produce data suggesting that stadiums and teams may actually reduce local income. And he certainly makes the case that sports related tax increases are uniformly regressive. There’s an incredible wealth of data in the article (that you really should read!), so let’s just start with a snippet from the intro to give you a feel for the piece:

 During the recent presidential race, Mitt Romney was pilloried for his surreptitiously recorded remarks that “47 percent” of Americans are “dependent upon government,” believe that they are “entitled to … you name it” and will never be persuaded to “take personal responsibility and care for their own lives.” Romney was wrong about the 47 percent. (Disagree? Send your hate mail here before going Galt.) But he was right about the country hosting a system-gaming moocher class, an entitled, irresponsible, parasitic piglet subset, lazily suckling from the public teat, pulled up by shiny new bootstraps purchased with government giveaways, forever hiding in plain sight. 

 To find them, just flip on ESPN. 

 Or better still, visit any sports stadium. 

 They’re the team owners sitting in luxury boxes built with taxpayer dollars, charging PSL fees for seats constructed with the same. They’re the athletes writing off fines for bad behavior. They’re the multimillion-dollar professional leagues, Ozymandias-shaming college athletic departments and — ahem — charitable bowl games all enjoying lucrative and dubious non-profit status.  Their ranks include Tiger Woods, whose namesake foundation once received a $100,000 federal grant; the Baseball Hall of Fame, which pocketed $1.57 million in federal funds between 2002 and 2006; and the Greater Syracuse Sports Hall of Fame, which seven years ago was given $75,000 as part of a larger appropriations bill funding the Departments of Veterans Affairs and Housing and Urban Development. (Additional point of incredulous outrage: The Greater Syracuse Sports Hall of Fame doesn’t even include Jim Brown.) They are the underserving beneficiaries of inappropriate, unnecessary public subsidy, feathering their overstuffed nests of downy-soft private profit, adding to America’s astronomical charge card bill all the while. They are the Welfare Kings (hi again, Jeffrey Loria!) and Queens (rest in peace, Georgia Frontiere!) of sports, crying poor while grifting and lifting society’s collective wallet, perpetually grabbing for more, more, more.

 And they are legion.

Wow. Let’s move on to the news….

Orange County Judge ‘Admonished’ in Rape Ruling

The LA Times and numerous other new outlets are up today with stories about Orange County Superior Court Judge Derek G. Johnson, who apologized yesterday after being admonished by the California Commission on Judicial Performance for comments made during the course of a rape trial back in 2008.

You read that right folks, it says 2008. And it’s not like this was some deep dark secret buried in testimony in some bureaucrat’s files; the OC Weekly newspaper published a story about the judge’s remarks four years ago, including his declaration that the case before him was merely a “technical” rape, not a “a real, live criminal case.”.

See if you share my sense of outrage after reading these snippets:

At sentencing in 2008, Johnson denied a prosecutor’s call to impose a 16-year prison term on Metin Gurel, who had been convicted of rape, forcible oral copulation, domestic battery, stalking and making threats against his former live-in girlfriend.

On the day he raped her, prosecutors said, Gurel had threatened to mutilate the woman’s face and vagina with a screwdriver he had heated up.

Johnson instead imposed a six-year sentence.

“I’m not a gynecologist, but I can tell you something,” the judge said, according to documents released Thursday. “If someone doesn’t want to have sexual intercourse, the body shuts down. The body will not permit that to happen unless a lot of damage in inflicted, and we heard nothing about that in this case.

This is one judge who (at a minimum) ought to be forced into retirement. Maybe he can find meaningful work as a Republican candidate somewhere.

No More Secrecy for Initiative Backers

A meeting of the Fair Political Practices Commission in San Diego yesterday resulted in several far reaching decisions that will have a big impact on future campaigns in California.

Groups spending more than $100,000 sponsoring state-wide ballot measure signature gathering efforts will henceforth be required reveal themselves in future elections. Given the confusing titles being used to market initiatives, this requirement is long overdue.  Voters will be more likely to think twice about signing petitions for a (imaginary) “gun safety amendment” allowing guns to be carried into bars if its known to be backed by the National Rifle Association.

The commission also made a step towards moving California’s election regulations into the 21st Century by requiring candidates and committees sending out mass emails to identify themselves to the recipient.  Under the old rules the identity of the sender was only required for 200 or more pieces being sent through snail mail.  In 2010 mass emails from “Nancy Drew” and “the Hardy Boys” were used to attack a candidate for State Attorney General.

Secret Report on Torture Still Secret

The Washington Post reports today that the Senate Intelligence Committee has approved a detailed report on the CIA’s past efforts to “break” dozens of detainees through physical and psychological duress during the post-9/11 period.

The six thousand page document concludes that the torture methods used failed to produce significant intelligence breakthroughs.  Most of the Senate Committee Republicans had objections to the report, which will remain classified for many years to come.

The committee chairman, Sen. Dianne Feinstein ­(D-Calif.), declined to discuss specific findings but released a written statement describing decisions to allow the CIA to build a network of secret prisons and employ harsh interrogation measures as “terrible mistakes.”

“I also believe this report will settle the debate once and for all over whether our nation should ever employ coercive interrogation techniques,” Feinstein said.

Other GOP lawmakers voiced support for the report’s conclusions. Sen. John McCain (Ariz.), who was a prisoner of war in Vietnam, issued a statement saying that the committee’s work shows that “cruel” treatment of prisoners “is not only wrong in principle and a stain on our country’s conscience, but also an ineffective and unreliable means of gathering intelligence.”

On This Day: 1903 - Orville Wright made the first attempt at powered flight. The engine stalled during take-off and the plane was damaged in the attempt. Three days later, after repairs were made, the modern aviation age was born when the plane stayed aloft for 12 seconds and flew 102 feet. 1988 - The first transatlantic underwater fiber-optic cable went into service. 1995 - Classified documents from the White House were released that revealed the FBI had spied on John Lennon and his anti-war activities during the early ’70s in a possible attempt to have Lennon deported.

Eat Fresh! Today’s Farmers’ Markets: Fallbrook (102 S. Main, at Alvarado) 10 am – 2 pm, Imperial Beach  (Seacoast Dr. at Pier Plaza) 2 – 7:30 pm, Kearny Mesa (No. Island Credit Union pkg lot  5898 Copley) 10:30 am – 1:30 pm, La Mesa Village  (Corner of Spring St. and University) 2 – 6 pm, Rancho Bernardo (Bernardo Winery parking lot 13330 Paseo del Verano Norte) 9 am – noon, Southeast San Diego(4981 Market St. West of Euclid Ave. Trolley Station) 2 – 6 pm

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Doug Porter

Doug Porter was active in the early days of the alternative press in San Diego, contributing to the OB Liberator, the print version of the OB Rag, the San Diego Door, and the San Diego Street Journal. He went on to have a 35 year career in the Hospitality business and decided to go back into raising hell when he retired. He won awards for 'Daily Reporting and Writing: Opinion/Editorial' from the Society of Professional Journalists in 2013 and 2014. Doug is a cancer survivor (sans vocal chords) and lives in North Park.
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{ 4 comments… read them below or add one }

avatar John Anderson December 14, 2012 at 10:14 am

Great column today Doug – I’d echo the kudos for the Sports on Earth column. Especially with a potential taxpayer funded stadium in San Diego it’s good to read about other cities and how the investment has panned out.

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avatar Anna Daniels December 14, 2012 at 10:50 am

Good stuff Doug. When we talk about cutting “entitlements” we should be talking about the taxpayer “incentives” that you have noted, not Social Security, Medicaid and Medicare and the social safety net.
The private sector, when it wants us to subsidize their enterprises, provides an extensive report to municipalities detailing the economic benefits that will accrue to the rest of us. Our municipalities have never invested in studies to 1) show the benefits of public investment in public infrastructure (roads, libraries, parks, water, etc) upon communities. What are the impacts on real estate, schools, crime, quality of life? Then those public investments should be compared to the actual benefits/problems that occur when our tax dollars are funneled into private incentives. We need to get smart about this.

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avatar norma damashek December 14, 2012 at 4:15 pm

Crack cocaine for politicians? That’s quite a headline! But it’s true that you can sense the heightened exhilaration permeating Council chambers each time our City Councilmembers exercise their legislative powers to award a city contract… modify the underlying zoning on a piece of property… grant a variance to a development project… create or extend a lease agreement to a hotelier… engage in a Memorandum of Understanding… create a private corporation to conduct public business or even collect and spend public taxes…

It’s all in a day’s work for the City Council. But think about it: their decisions have the intoxicating effect of making certain people rich — and others richer. Of course these same city officials have the opportunity (responsibility??) for exacting substantial public benefits in exchange for these lucrative deals to private interests. But that’s a trip they rarely agree to take.

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avatar John Lawrence December 15, 2012 at 7:20 am

Great minds must think alike, Doug. I just submitted an article on the tax giveaways to private corporations with the resulting underfunding of schools and public services. I also included a semi-exhaustive listing of San Diego corporations and the amounts of largesse that they have taken from the taxpayers mainly for free services.
Instead of the city outsourcing services like street sweeping etc to private corporations, why don’t we charge the corporations for city services and keep the provision of them inhouse, that is with public employees?

My list of San Diego corporations that take money from the taxpayers came from a search of the New York Times database. The game plan here promoted by ALEC and as exemplified by Governors Rick Perry and Scott Walker among others is to give away taxpayer money to provide “incentives” for corporations, and then to claim that there is not enough money for schools, parks, fire and police services. Then they cry, “We need to cut spending!” Spending on what? They are spending huge sums on giveaways to corporations on a race to the bottom for public services.

The only thing that will stop this is a national economic policy. The cutthroat competition among states and municipalities that results in underfunding schools, primarily, to locate companies within their jurisdictions should stop. Instead of giving billions as incentives to corporations, the same money could be paying teachers’ salaries.

I’ve outed San Diego corporations on this. Now we should take it to City Hall. Insstead of paying corporations, City Council, why don’t you use the money to pay for schools?

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