The Outstater
Meet the New IEDC Board (Yawn)
A FRIEND, a former submarine commander now a troubleshooter for a regional manufacturer, shared a management technique: Cancel the company picnic. Please, stick with me; this will explain why Gov. Mike Braun missed a golden eco-devo opportunity.
My friend’s experience told him that nobody coming to his office to complain would be able to tell him why the picnic was essential to the plant’s productivity, which was his and their primary job. Most important, he would have a handy list of the unproductive, soft-headed whiners and troublemakers in his employ.
I think of the Indiana Economic Development Corporation (IEDC) that way. But in naming a new board of directors last week, Braun demonstrated his disagreement.
First, some background. The IEDC was formed 20 years ago as a political stunt for then Gov. Mitch Daniels. It was meant to show he was fulfilling a campaign promise to “create” jobs. To be fair, Daniels may not have realized that it would grow into the monster it is now, pushing around hundreds of millions of dollars in economic incentives, tax breaks and special deals while accumulating political clout in every corner of the state.
At the time, this foundation waived a red flag. An adjunct scholar and former deputy director of the Indiana Office of Management and Budget spelled it out: The IEDC claims of job creation are politically inflated if not economic nonsense.
Tad DeHaven, a most practical economic mind, reminded us that politicians don’t like to cut taxes, the simplest way to attract investment and create jobs. That’s because less tax revenue means less political influence. They prefer to offer incentives, grants, rebates and cash transfers to give the appearance of creating jobs and of course to take unaudited credit for themselves. DeHaven dubbed it “press-release economics.”
“Indiana doesn’t need a politicized economic-development bureaucracy to create a welcoming environment for businesses,” DeHaven wrote. “One alternative would be to eliminate the state’s corporate income tax, which has a relatively high 8.5 percent rate (now 4.9 percent). The revenue loss could be offset at least in part by shuttering the IEDC and eliminating targeted tax breaks. The governor, of course, might have to forgo some press releases. The long-term benefits to the state, though, should be worth the political sacrifice.”
We would further argue that Indiana as it stands has much to commend it to investors, beginning with strong families, Christian values, good schools and a tradition of innovation, all of which means a productive workforce. It would be an advantage to have a governor concentrating on that instead of a complicated fiscal charade.
“Most businesses already know where they are going to locate before they contact the IEDC,” DeHaven said. “Businesses consider a myriad of factors including demographics, transportation, logistics and workforce capabilities when choosing where to set up shop. Although the tax and regulatory climate is an important consideration, IEDC handouts are just that — handouts.”
After two decades, there was hope that Governor Braun understood this. His new appointments to the IEDC board, though, were sadly routine. He named some fast-talking deal makers, to be sure, and a sprinkling of solid businessmen, some people with big money and a community organizer or two — essentially the mix that made up the old board, all believers to one degree or another that the government, not the individual, creates wealth.
Most troublesome, we recognize more than one flat-out rent-seeker on the new board, defined as “an expert at gaining wealth without creating new value, typically by manipulating economic or political systems to secure benefits, subsidies or monopolistic advantages.” We can hope they will be out-voted. although that sounds like a pretty fair description of the agency itself to this point.
Missing were any of the dozen or so free-market economists around the state. On a civic plane, economic knowledge is different than business savvy. The latter works if you are forming one of those public-private “partnerships,” but the former is what Braun needs to guide his state into a competitive future.
Is it too late to cancel the IEDC picnic? — tcl
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