Bribing Paul with Peter’s money

The NY Times this week ran a fantastic — and I hope ground breaking — series that covered the fallacy and fraud of economic development policy in America. On Day 1 they honed right in on the way cities and states routinely make ridiculous and uninformed decisions for handing out money. On Day 2 they actually focused on Texas — a state with rabid rhetoric for markets and a penchant for cooking the books Enron-style with lots of debt and business subsidies — to make a larger point that ties in absolutely with our entire ponzi scheme narrative. The state by state breakdown was also stunning. Check it out.

(Chuck Marohn)

I agree that that the series is stunning. It’s too big for me to have digested yet. There’s a third part about poor Michigan – as if GM wasn’t enough – deciding that helping us amuse ourselves to death through movies is the economic wave of the future.

The state-by-state breakdown map helped me drill down to my community, where some of the recipients were surprising.

I acknowledge coming late the the realization that incentivizing companies to locate here rather than there adds nothing to the nation’s wealth:

Soon after Kansas recruited AMC Entertainment with a $36 million award last year, the state cut its education budget by $104 million. AMC was moving only a few miles, across the border from Missouri. Workers saw little change other than in commuting times and office décor. A few months later, Missouri lured Applebee’s headquarters from Kansas.

“I just shake my head every time it happens, it just gives me a sick feeling in the pit of my stomach,” said Sean O’Byrne, the vice president of the Downtown Council of Kansas City. “It sounds like I’m talking myself out of a job, but there ought to be a law against what I’m doing.”

(Day 1)

I’ll say it before anyone else does: the building in which I work and of which I’m part owner likely would not have happened without tax abatements, from which I benefitted. That third of a city block would probably be sitting vacant still. But someone else paid for police, fire, schools and every other state-or-local funded amenity for several years in gratitude to a group of already well-off guys who hoped to make money eventually.

Maybe there’s a principled difference between our project and the ones the New York Times highlights. Maybe not. On balance, I still think our project was a good one – maybe even worthy of tax abatements – because we were local established businesses fixing local blight and building a strong, increasingly walkable (if still less than ideal) city center. I’ll neither glower nor smirk if you disagree. I wasn’t a hypocrite in my involvement, if only because my consciousness hadn’t yet been raised. Today, I’m not so sure. That’s why I’m bringing the subject up.

One diagonal block to our northeast, at the opposite corner of the courthouse square, would be a blighted block were it not for incentives, I suspect (I don’t know the details on that big project, though some of my professional colleague were instrumental in it).

There’s another project proposed for about 4-5 blocks north of us, outside the downtown core, to cure blight (a full block of abandoned Rental Center – you know, floor sanders, big tools you only need once, table service for 100, etc.; it moved out to the periphery) with new townhomes. Private enterprise won’t do it, apparently, without incentives. I think it’s a good project, and will promote human-scaled population density, not automobile-scaled sprawl. I have no financial interest in saying that.

I’ll grant you this, too. Our city center feels a bit overbuilt at the moment. Occupancy is far from 100%. Maybe that’s just the recession. Maybe it will get better with whatever recovery we manage to simulate or stimulate. Or maybe it will get better because we don’t recover, and demand rises for dwellings and businesses near bus routes and within walking distance of locally-owned amenities.

Or maybe downtown revitalization, even without boondoggle convention centers and sports complexes, is  a failed experiment from which we need to learn what doesn’t work.


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Some succinct standing advice on recurring themes.