Questionable Economic Impact Claims

Wisconsin Department of Tourism claims $321 million economic impact from Republican National Convention. 

As Center Square clarified:

Economists who have studied the impact of national party conventions says a report from the marketing firm Tourism Economics does not accurately reflect the actual impact of the 2024 Republican National Convention in Milwaukee.

Economist Victor Matheson of College of the Holy Cross has studied and written on national conventions and large events, He called the release, which claims the event had a $321.5 million impact, a “promotional booklet/press release, not a serious economic impact study.”

Center Square, in other economic impact reporting, further noted:

Economists say the numbers produced by the marketing group do not follow economic study principals and are not reputable. The numbers are used by politicians and state tourism departments to justify spending.

“Viewing what ‘economic impact’ consultants do to be economics is like considering horoscopes to be astronomy,” economist J.C. Bradbury of Georgia’s Kennesaw State University recently wrote. “Newspapers are smart enough to put horoscopes next to the comics and Dear Abby, while economic impact ‘studies’ get banner headlines on the front page.”

Bradbury noted economic impact analysis is not something real economists do and there is a reason that work is not presented at conferences or published in journals.  

Economic impact is often claimed surrounding publicly funded sports stadium projects or sporting events.

The annual tourism reports are paid for by state tourism departments and national tourism agencies.

Urban Milwaukee reported:

But when the Common Council discussed the RNC in September, it wasn’t as favorable.

“It didn’t trickle into the neighborhoods,” said Ald. Marina Dimitrijevic of the economic impact.

In an email to Dimitrijevic, LuLu Cafe & Bar owner Cameryne Roberts said the RNC didn’t result in a business boom. “For what it’s worth, the RNC was a complete bust for us and most of the other Bay View business owners I spoke with, not to mention those in other parts of town.” 

Alderwoman Milele A. Coggs asked for the final report to include a geographic breakdown and diversity data. “I just want us, as a council, in case we’re asked again to sign on to anything like this, to be aware of its impact. And where things might not have been how we wanted it to be, or we might not have achieved the goals we were going to achieve, that we recognize that and that we work differently in the future to better achieve those goals,” said Coggs. The final report does not include the breakdown requested.

Reports during the convention highlighted how many businesses outside of the hard security perimeter were seeing lackluster business. Across the month of July, sales tax revenue in Milwaukee was actually down year over year. But the state, which collects the revenue, does not collect data by week.

Per usual, many of these economic-impact no-brainers (conventions, stadiums, Olympics, etc.) which are touted to be win-wins for cities and states are anything but.  

Trickling Down or Just Getting Pissed On

Socialism for the rich and capitalism for the poor. Milwaukee's new Economic Development Commissioner wants to double-down on corporate welfare.

Milwaukee officials consider higher incentives to bring businesses downtown

According to the new Commish, "The city is exploring more aggressive policies to incentivize job creation and investments in the downtown area. Those could come in the form of employment incentives using the city’s main economic development tool, tax incremental financing, for example. Or it could involve new ways the city could help growing companies recruit workers to fill new jobs."

There's no money for potholes, we can't fast-track lead pipe removal, workers can no longer have affordable health care or secure retirements, a living wage is too much to ask, we can't upgrade public infrastructure, but there's endless and increasing money to giveaway to corporations.

Improving the roads and transportation options, upgrading broadband, updating the electrical grid and sewer system, greening public buildings, along with numerous other public projects, would go much further toward growing Milwaukee's economy than simply giving "incentives" to already profitable corporations.

For Further Reading:

Open For Business?

Ticked Off About TIFs

Development Gone Astray

The Con That Is Foxconn or How Republicans Learned To Stop Worrying And Love Socialism For The Rich

Job Piracy

The Foxconn Con Update

Democrats Question State's Ability To Track Foxconn Job Creation
What Foxconn Means For Wisconsin
WEDC Won't Release Foxconn Contract Before It's Signed
The Secrets of Foxconn
Start Me Up: Wisconsin Needs More Than Foxconn To Fix Its Economy
Fox-con Secrecy And WEDC Arrogance Continues
How Legislature Is Bypassing The Courts
Foxconn Water Diversion Story Needed More Attention
How To Build Wisconsin's Economy
Why Foxconn's Wisconsin Promise Of 13,000 Quality Jobs Is An Empty One
Walker's "Wisconn Valley" Is A Con All Right
Paper Peddles Bogus Foxconn Report
Trump, Walker and The Foxconn Con
Foxconn Deal Suspends Judicial Rules
Newest Deals Shows Foxconn Flaws

Holiday Reading

For Third Straight Year, Wisconsin Ranks Last In Business Startup Activity
Data On Wisconsin Economic Development Agency Can't Show If Incentives Create Jobs
State Jobs Agency Data A Mess
State And Local Government Business Incentives: Data Tells A Story
Walker's Commission Bankrolled By Bradley Foundation
TIF Plans In St Louis Are 'Redlining And Block-Busting,' Show-Me Institute Says
Wisconsin Center Expansion Study Won't Include Cost Estimate Or Funding Sources

Job Piracy

“It’s a zero-sum game,” Nathan Jensen, a political science professor formerly at Washington University in St. Louis who recently started teaching at George Washington University, said during a recent conference held by the Kauffman Foundation. 

Simply shifting companies from one state to the next does nothing, at least not right away, to create new openings for the millions of still unemployed Americans, Jensen added while presenting some of his latest economic development research. Nevertheless, nearly every municipality across the country offers some type of tax incentives to encourage existing companies to relocate, costing taxpayers around $70 billion annually. 

Often, the hope is that those incentives will not only prompt employers to bring their existing jobs to this state or that city, but that it will also accelerate the company’s future growth and generate additional jobs for residents down the road. [source]

Ending Job Piracy, Building Regional Prosperity

Local job piracy – the use of subsidies to attract businesses from nearby communities in the same metro area – generates heavy costs for regions in terms of both lost tax revenues and externalities associated with sprawl while failing to create new jobs. But anti-piracy agreements used by the Denver, Colorado and Dayton, Ohio regions have cultivated an economic development ethos that is focused on shared regional prosperity.

Evaluating Firm-Specific Location Decisions

The use of financial incentives to attract and retain companies has become one of the most common economic development strategies of U.S. states and municipalities. Despite the widespread debate on the effectiveness of these programs, few systematic academic studies have examined how incentives affect job creation and local economic development. The result is that policymakers often lack objective data from which to draw conclusions about the benefits of these programs...

... Incentives recipients are statistically not more likely to generate new jobs than similar firms not receiving incentives.

Wasteful Corporate Welfare

More corporate welfare is shown to be ineffective...

The Lincoln Institute of Land Policy's latest report, Rethinking Property Tax Incentives For Business, finds:

The use of property tax incentives for business by local governments throughout the United States has escalated over the last 50 years. While there is little evidence that these tax incentives are an effective instrument to promote economic development, they cost state and local governments $5 to $10 billion each year in forgone revenue. 

Three major obstacles can impede the success of property tax incentives as an economic development tool. First, incentives are unlikely to have a significant impact on a firm’s profitability since property taxes are a small part of the total costs for most businesses—averaging much less than 1 percent of total costs for the U.S. manufacturing sector. Second, tax breaks are sometimes given to businesses that would have chosen the same location even without the incentives. When this happens, property tax incentives merely deplete the tax base without promoting economic development. Third, widespread use of incentives within a metropolitan area reduces their effectiveness, because when firms can obtain similar tax breaks in most jurisdictions, incentives are less likely to affect business location decisions.  

Despite a generally poor record in promoting economic development, property tax incentives continue to be used. The goal is laudable: attracting new businesses to a jurisdiction can increase income or employment, expand the tax base, and revitalize distressed urban areas. In a best case scenario, attracting a large facility can increase worker productivity and draw related firms to the area, creating a positive feedback loop. This report offers recommendations to improve the odds of achieving these economic development goals.

Banning Development Incentives

Kenneth Thomas, associate professor of political science at the University of Missouri-St. Louis, wrote a telling op-ed for the St. Louis Post Dispatch on development incentives.

I just commented on this subject a few days ago.

One can only hope President Obama's Urban Czar moves forward on this issue.

Legalized Bribery

Rocky Marcoux, commissioner of the City of Milwaukee's Department of City Development, couldn't be more wrong in his Milwaukee Business Journal op-ed, City Should Offer Incentives.

"In the past, developers have criticized Milwaukee officials for being reluctant to provide incentives to get a development to occur in the city," states Marcoux.

So what? This whole incentive game is blackmail and is terribly inefficient. It makes cities bid-up giveaways to corporations dangling jobs in front of city leaders. It leads to less-than-optimal locational decisions, and often cities never recoup the subsidies. Local leaders, legislators, and public servants should be cooperating with national leaders to enact federal legislation banning such zero-sum games.

$5 million to Astronautics? $1 to $20 million to Boston-Power? What is the cost-per-job? How much does the subsidy offset the supposed tax-base maintenance? Are there any clawbacks in the agreements? Is there a minority or prevailing wage clause in any construction agreement? Are there any provisions that protect the taxpayers?

Marcoux declares, "Milwaukee must make sure it is offering whatever makes sense to retain and lure new business." Now there's a concrete development policy to get behind.

During the last presidential campaign all the candidates talked about small business being the incubators, the place where job growth occurs. Yet, for development policy we are supposed to subsidize large companies to lure and retain jobs, no matter what the cost? Why not just make more funding available for small businesses and small business entrepreneurs? [Although it must also be noted, small businesses aren't quite the job machines politicos make them out to be.]

The more large companies we base our economy on, the greater chance for catastrophic consequences when the economy experiences downturns and these large companies layoff workers, offshore jobs, or go out of business. Just as we've seen with the "too big to fail" problems of the present.

These policies are blackmail and bribery. Often the only ones benefiting are the company executives receiving the subsidy and the city development cadre strengthening their private sector connections.

For Further Reading:
Corporate Blackmail
Doing Development Right
Foreign-Owned: Yes. American-Owned: No.
Great American Jobs Scam
Investment Incentives
Miller Pork
Pabst Farms Mirage
Public-Sector Economic Development
This Is Economic Development
Walmart Propaganda