If you’re wondering where so many Americans got the idea that government can and should micro-manage the economy, look no further than your state or local economic development agency and their “sidewalk-level socialism” corporate welfare programs.
The word “socialism” gets used in a lot of different ways, but traditionally it means government having a financial stake in factories and other “means of production” and using that leverage to plan and manage the economy. Today, that’s a perfect description of America’s economic development agencies and the way they put millions and billions of taxpayer dollars into selected companies in an ongoing effort to micro-manage the economy and shape it toward their preferred outcome.
This has been called “sidewalk-level socialism” for the way it’s infiltrated central planning into the heart of communities across America. Unlike most economic policies, however, it’s not a right-versus-left issue. Rather, it’s insiders versus the rest of us, where Democrat and Republican politicians set aside their differences and work together to keep the money and votes flowing.
None of the insiders have any incentive to tell voters and taxpayers the truth, which is why these programs are regularly exempted from FOIA and other transparency rules. Politicians get to treat economic development agencies as publicly funded adjuncts to their reelection campaigns, bureaucrats stay employed while setting themselves up for lucrative consulting careers down the road and businesses get to keep cashing the subsidy checks.
With all the players in the game cheering for subsidies, the average American rarely hears a dissenting voice. As a result, voters’ trust in the power of politicians and bureaucrats to run the economy has grown to the point where it’s now hard to find Americans who recognize the problems with building an economy on corporate welfare – or even that they’re being sold on socialism-lite central planning at all.
We see this in new polling from the State Policy Network, which found that more than 70 percent of American voters believe these subsidies bring jobs to local communities, attract new businesses and promote growth. In other words, almost three quarters of American voters have bought into the fundamentally socialist narrative that prosperity comes from central planning and government funding, not free markets and entrepreneurship.
Again, this isn’t a partisan issue. While Democrats are slightly more likely to believe that these programs work (55% versus 48% for Republicans), there’s still more than twice as many GOP voters who’ve bought into this central-planning narrative than those that haven’t.
Even supposedly conservative Republican elected officials reinforce this narrative when they use the common excuse that they are personally opposed to subsidies, but that they can’t afford to “unilaterally disarm” when neighbors are competing with their own subsidy programs.
First off, that’s an American elected official who isn’t Bernie Sanders making the argument that a free-market economy will automatically do worse than a centrally planned, government-run economy. That’s like saying you’d take North Korea over South Korea, East Germany over West Germany or the People’s Republic of China over Taiwan or Hong Kong.
More importantly, if you’re shooting yourself in the foot then yes, unilateral disarmament is a great idea. The real-world evidence is clear that “economic development” subsidies don’t really develop economies. Economists from across the political spectrum may not agree on much, but they agree that most subsidies don’t do much to change businesses’ decisions, meaning they don’t create more jobs or economic growth than would have existed otherwise. Even worse, there’s powerful evidence that these deals increase the burden on other taxpayers, harm states’ long-term fiscal stability, make it harder for governments to fund basic public services, stifle entrepreneurship and cause a whole host of other harms to communities.
It’s not just economists saying these subsidies don’t do much to change corporate decisions, either: The people employed to make those decisions say so as well. For 37 years, Area Development Magazine has surveyed corporate site selectors on what factors have the most influence over decisions on where to build factories, office buildings, warehouses and other facilities. Year after year, they say subsidies are far less important than basic business factors like workforce availability and cost, construction costs and infrastructure quality.
In this year’s survey, “state and local incentives” were only the 13th most important factor in business site selection decisions. That’s not the kind of thing taxpayers should be spending billions of dollars to try to influence.
Americans are being sold a steady stream of taxpayer-funded misinformation, promoting the false narrative that central planning and corporate welfare are more powerful than real-world business factors and the power of the marketplace to reward good decisions and punish bad ones. It’s long past time to call out this sidewalk-level socialism narrative for what it truly is, and for voters to hold the people who’re making those deals accountable for the damage they’ve done to our nation in the process.
John C. Mozena is the president of the Center for Economic Accountability.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.