Saturday, December 6, 2008

Doing Development Right

James Rowen, of the Political Environment (an excellent blog), gave kudos to John Kovari, of the Public Policy Forum for a blog he posted regarding regional development. While it's great that the Journal-Sentinel raises this issue, and that Rowen and Kovari are engaging in a discourse about such, it's seems there is much context missing from the discussion. If we really want to tackle the problems of sprawl and other urban issues we need to operate from a much bolder paradigm, rather than tinkering around the edges of a system and models that do not work.

John Kovari opines, "There has been little empirical evidence linking regional cooperation initiatives or regional governing bodies with clear economic benefits." In the Midwest region, alone, Indianapolis and Minneapolis are shining examples of regional governance done correctly. The problem isn't a lack of empirical evidence supporting regional governance, but NIMBYist parochialism and a lack of political will to put such plans into operation.

Mr. Kovari reports, "There is much economic research, based on the “public choice” theory of Charles Tiebout, that argues that local competition is more efficient than regional cooperation." Tiebout's model is based on highly restrictive assumptions, which rarely pan out in the real world. The model places much reliance on the invisible hand of the market to steer decisions, somehow, toward Pareto optimal outcomes (which are assumed the apex of outcomes, but again are based on an unreasonable framework of theoretical idealism). The model assumes that every person can move whenever and wherever they wish. It also presupposes that local government public goods provision is known and stable. All of which are highly dubious assumptions.

Kovari writes, "Strong, tangible incentives from individual municipalities (along with state tax breaks) draw the first-class corporations." This is a roundabout, and very kind way to describe our system of economic development, which is basically bribery by businesses pitting one city against another, driving up their bounty. Numerous studies by Peter Fisher, Greg LeRoy, et al have shown the inefficiency of this system.

Near the end of the posting, he states, "Regional cooperation in building specific infrastructure projects, such as public transit or intermodal freight stations, has been found consistently to raise local property values." Yet these basic infrastructure improvements, other than highways, seem to take lower priority in budgets year after year. Maintaining the public infrastructure in itself is a sound public policy for providing jobs and attracting business.

As more tax code is written which allows corporations to avoid taxes, and as more cities give exemptions and breaks to business, obviously homeowners pay more. There is a minimum standard of public goods and services people expect, this is why people (with the means to move) choose a community. If cities strangle their taxpayers pocket books to provide reduced public service provision -- due to uncollected corporate taxes, and costly and unnecessary business incentives -- this is a sure way to drive away residents.

A crucial component to solving our urban issues is federal directives ending the "war among the cities" and redistributive policies that give taxpaying homeowners a break, by removing some of the exemptions, tax breaks, and unnecessary TIFs and such littering our landscape.

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