The journey from there to here

Our community recently voted in an Economic Development Corporation, four short years after voting out a previous failed EDC. The corporation will pull an extra half cent sales tax from the pockets of shoppers in our community to give to corporations and industries to locate here, under the premise that they will bring jobs to our community.

I believe that job creation should not be the responsibility of the government, but of individuals. While such programs superficially work, they bring in only companies that are economically dependent on entitlements, and as bad as entitlements are for individuals, they are WORSE for corporations.

You see, when a corporation is publicly financed, it is not vested in its own success. The money it stands to lose is not its OWN money, and therefore fiscally sound policies are rarely, if ever, significant in the business plans. If you or I take money from our own pockets and invest in our business, however, we are vested in our own success. Failure to us means a personal loss, and knowing this causes us to work harder and more efficiently. Very few people are fiscally responsible with other people's money.

In short, corporate welfare is bad for the same reason that individual welfare is bad. It robs the corporation of incentive for success and is a pretty sure recipe for failure. A look at businesses funded by EDC's throughout the country shows a track record of few successes, but mostly of failures...and many of the successes are short term successes that terminate once their rich uncle quits ponying up for their operating expenses.


Comments
on Dec 09, 2005
What probably started out as offers for tax breaks and other perks to lure business to their area, cities are becoming (not so) silent partners in business in general. I think that the perks do well to reinvigorate blighted areas, but in areas where business is doing well, government perks to lure in other businesses do little more than create competition for existing business. Competition they can't possibly compete with... because of the perks.

Creating jobs isn't the job of local government, but city planning is. All too often it is the local government involvement in investments that lead to the blight.
on Dec 09, 2005

Creating jobs isn't the job of local government, but city planning is. All too often it is the local government involvement in investments that lead to the blight.

Nail on the head award, Ted. I'm not against tax breaks for businesses, provided those tax breaks are applied to ALL businesses in that industry, including those that already exist within the community. They can have a purpose when used responsibly. But there is a fine line between incentives for development and corporate welfare. And corporate welfare should be avoided at all costs.

on Dec 09, 2005
I agree with you in principal, but not totally.  Even tho some of the money is not theirs, the majority still is, so most are vested in the idea of suceeding.  Of course the bigger the plum, the less incentive.  Most of the Government money usually comes in tax breaks that are fazed out over time.  And that is not a bad idea actually.  It does teach local governments that the less tax, the more enterprise.  It just never translates to a national level.