GOV. ERIC HOLCOMB will host the first Indiana Global Economic Summit in Indianapolis this spring. Some are calling it the “Hoosier Davos,” after the annual global economic forum held this last year in fabulous Dubai.
They seem to be serious.
The governor and his secretary of commerce are expected to display an array of incentives, tax breaks and grants, intended to affect a company’s decisions about business location, expansion or job retention in Indiana.
The first problem with the type of economic development that Holcomb envisions is that it involves many “public-private partnerships” guided by many more “stakeholders.”
Please know that those are dangerous words that defy definition. Indeed, to paraphrase Hermann Goering, when you hear one or the other of them you should reach for your Lugar.
The “public” seems to mean the government and the “private” seems to be the economy, the two of which cannot be brought into partnership anywhere outside the pages of Karl Marx’s manifesto.
And the “stakeholders” don’t seem to actually have a stake, i.e., investment, other than their political connection to the public-private partners.
The second problem is the difficulty in measuring the cost-benefit of such development programs. The beneficiaries, politically selected, are loath to say whether they would have invested without the tax rebate, government loan, tax increment financing district, or whatever else might be in the governor’s “economic toolbox.”
Government is aware of this problem and has over the years attempting to apply “but for” clauses to what are otherwise merely corporate welfare programs. These claim to separate those companies that would not have developed or invested “but for” a public-private partnership — a sultan’s charter, some might say.
Now comes an intrepid scholar from the Upjohn Institute for Employment Research, Timothy Bartik, who thinks he has the answer, and it will not please the governor.
Based on a review of 34 estimates of “but for” percentages, from 30 different studies, Bartik’s survey of the academic literature would predict that the typical incentive offered by the governor would result in from only 2 percent to 25 percent making a decision favoring Indiana that they would not have made in any case — and at incalculable cost.
It follows that at least 75 percent of the incented firms given tax rebates or outright cash grants (or the more complex tax-guaranteed loans and bonds) would have made a similar decision location/expansion/retention decision without the incentive. Yes, as if the vision of a “Hoosier Davos” had never sprung from the governor’s crony-capitalist imagination.
Even the most junior vice-president of your neighborhood bank could break down that percentage range even further, placing those beneficiaries with obvious ties to the local community near the 2 percent mark.
The applicants falling near the top 25 percent mark would be outstate corporations unabashedly shopping for government suckers — er, partners.
— Craig Ladwig