Huston: ‘Welcome’ to Indiana Eco-Devo

October 7, 2015

“A week after the Subaru incentives were announced in an Indiana Economic Development Council news release, the agency admits it has not sent the $7.9 million incentive package to the board for a vote, and that probably won’t happen for several more months.” — Bob Segal of WTHR

By Tom Huston

Back before Hoosier Republicans succumbed to shameless crony capitalism, they applied a “but for” test when considering whether to provide taxpayer incentives to private business, the question being whether the proposed development would occur but for the public investment.

This was always something of a fraud because only the guy with his hand out knew whether he was willing to proceed with the project notwithstanding the unavailability of subsidies, but at least it resulted in the application of some standard to the process other than political expediency. As long as the “but for” standard prevailed, politicians at least had to pretend that distorting markets was necessary to growing the local economy.

Another old-fashioned criterion long applied to determining the extent of the public subsidy was the number of new jobs to be created. Barack Obama introduced a new wrinkle to this standard when he justified his nine-hundred-billion-dollar economic stimulus program on the basis of the number of jobs “saved.”

Gov. Mike Pence’s team, not to be outdone by a community organizer, took the next leap: no jobs have to be created or saved in order to justify public investment. In Pence world, capital expenditures that may actually result in fewer jobs are enough to trigger taxpayer subsidies in the name of economic development.

Over the years, a cottage industry of economic-development consultants has made it easier for business to solicit handouts from governments as a price of new investment in their communities. A modern CEO would lose his job if he failed to seek public assistance for a capital project or the expansion of the firm’s payroll. Businessmen understand that there is nothing government officials love more than taking credit for “economic development,” and none of those politicians has any incentive not to give away the store in the process.

In Indiana today, the publicity machine is cranked up even before the statutory formalities for handing out public money have been complied with. The announcement of incentives routinely precedes the approval of incentives, the priority being to afford politicians the opportunity to pose as job creators by exchanging high fives with corporate officials (often flown in for the occasion) at elaborately staged announcement ceremonies.

As these things go, the $35 million in tax dollars to be paid to Rolls Royce to modernize its aging Indiana plant and equipment is at the lower end of the egregiousness scale. My negotiating assumption would have been that Rolls Royce wasn’t going to close its main plant, negotiate with its union the termination of 1,100 jobs, relocate 1,400 engineers and end up spending more money elsewhere in order to maintain its competitiveness because of the frugality of the Indiana state government.

By today’s standards, however, it would have no doubt appeared unwelcoming not to have offered millions to the British company as an expression of the high regard in which it is held by Hoosiers. And these days the last thing Indiana and its beleaguered governor can afford is to appear to be unwelcoming.

Tom Charles Huston, A.B., J.D., an adjunct scholar of the Indiana Policy Review who resides in Indianapolis, served as an officer in the United States Army assigned to the Defense Intelligence Agency and as associate counsel to the president of the United States.



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