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.  

Little Economic Impact From Stadium Projects

Report Finds Little Economic Impact From Stadium Projects

For Further Reading:

The Legalized Bribery That Is Sport Subsidization

It's A Scandal! It's A Outrage!

The Math and Taxes of Stadium Boondoggles

Big League Confusion

Brewing Up An Inflated Impact

Big League Broke

Bonds & Bondage: Indentured To The Sports Entertainment Cabal

Keep It Simple, Stupid

Visit Milwaukee is claiming the Bucks Championship Had $58 Million Economic Impact.

That's possible. Anything is possible. But claims of such an impact are dubious at best. 

As Roy Cordato's article noted:

Economic impact studies are everywhere.

Whether it’s to support a new highway project, special tax breaks for solar energy, the building of a civic center or sports complex, or to promote subsidies for Hollywood film producers, you can find an economic impact study, often touting how great the project will be for the state or local economy.

The formula is simple, predictable, and effective. A special interest group that stands to benefit from the project funds an economic impact study that purports to provide hard numbers on the number of jobs, the increase in wages, and the additional output that will be generated by the project or subsidy, and it will do this on an industry-by-industry basis. It makes grandiose claims about how much overall economic growth will be enhanced for the state or region generally. Once the report is completed, the special interest group that paid for the study will tout these results in press releases that will be picked up by the largely uncritical media establishment, ensuring that the political decision makers and others who determine the fate of the project receive political cover.

These studies all have several things in common. First, they typically use proprietary, off-the-shelf models with acronym names like IMPLAN (Impact Analysis for Planning), CUM (Capacity Utilization Model), or REMI (Regional Economic Model, Inc.). Rights to use the models are purchased by professional consulting firms who are hired by the interest groups to do the studies. Furthermore, seldom do those who actually perform the studies have formal training in economics. Instead their expertise is in using one or more of the aforementioned proprietary models. And finally, all of these studies ignore basic principles of economics and, as a result, do not meaningfully measure what they claim to be measuring—the economic impact of the public policies and projects that they are assessing.

One big problem with economic impact studies is the idea of substitution. If money that would have been spent elsewhere was simply spent on the Bucks, growth did not occur. Spending that would have occurred in one spot was merely spent in a different spot. The project (the development, the event, etc.) hasn't catalyzed growth. They haven't made an economic impact. They've merely realigned spending.

Now, this isn't to say all projects are unable to spur growth. But unless the impact study accounts for concepts like substitution and opportunity cost, it's mostly measuring the rewards that will go to primarily absentee owners.

Milwaukee Magazine had their own questions regarding the local economic impact of the Bucks championship run.

The sparkling, shiny, loud things (sports and entertainment events) often get attention, articles and praise. Yet, as far as being supposed economic catalysts, all too often, the economic benefits and impact are ephemeral to non-existent.

Maybe it's time we stop deluding ourselves in the belief that all activities and projects can be or need to be fun and exciting. Clean water, smooth roads, public transportation, quality schools, affordable housing and health care, and maintained infrastructure provide a better return on investment and generate much more growth than any stadium or convention center could ever hope to. 

Suburban Socialism

This is a perfect example of the hypocritical capitalism Republicans preach.

New Great Lakes Water Diversion Request

They choose to live somewhere that is not sustainable. But then they whine, complain and bellow that they are entitled to <insert spoiled Republican entitlement demand here>.

When it comes to others, especially others that aren't white, others that don't believe in their god, others that don't live in their town, they need to go without. Getting things so easily makes others lazy. 

But when the SUV-crowd moves to the middle of nowhere and suddenly gas prices are high, they can't get water and/or any part of their utopia is disturbed, the know-nothing, big, bad government needs to come to their rescue.

And, is this case, the Village of Somers wants to have the State allow them to divert water to what is currently farmland so some well-connected land owner can make a killing off of future development.

As typical economics would have it, if you want a scarce resource delivered to an inconvenient location, the cost would obviously be extremely high. You know, to discourage such a ridiculous and wasteful allocation. Yet, the Wisconsin experience of those expecting their entitled water, outside of a location where it naturally occurs, is they complain and complain until the rest of us subsidize them being able to divert water. We subsidize them in that they don't have to pay the actual price the market would indicate. 

The same goes for the price of gas being subsidized below its market price. Really, the whole suburban mistake is a big subsidized wonderland for whites, where everybody else helps pay for their spoiled, wasteful, gas-guzzling lifestyle.

Convention Center Expansion Approved

Hundreds of millions for another boondoggle.

Wisconsin Center Gives Final Approval for $420 Million Expansion

There are many better ways to spend this money.

See Milwaukee's Boondoggle Twofer, The Economic Impact Mythology Of Convention Centers, The Convention Center Cabal and Beware Of The Economic Development Hucksters.

The Inappropriately High Cost Of Police

This Is How Much Major Cities Prioritize Police Spending Versus Everything Else

Growing calls to “defund the police,” explained

Why Rising Police Budgets Aren’t Making Cities Safer

Cities Spend More and More on Police. Is It Working?

How Much Do U.S. Cities Spend Every Year On Policing?

City Coffers, Not Police Budgets, Hit Hard By the High Cost of Brutality

What a World Without Cops Would Look Like

NEW YORK CITY AND LOS ANGELES SLASH BUDGETS — BUT NOT FOR POLICE

POLICE BUDGETS PUT OTHER RESOURCES IN JEOPARDY

The Price of Defunding the Police

SPENDING BILLIONS ON POLICING, THEN MILLIONS ON POLICE MISCONDUCT

Federal Programs and The Real Cost of Policing

Exploitative Revenues, Law Enforcement, and the Quality of Government Service

Police Misconduct Is Increasingly a Financial Issue

No More Cop Unions

Making Policing More Affordable

Measuring the Costs of Police Services 

Police and Corrections Expenditures

How Cities Offload the Cost of Police Brutality

The Burden of Municipal Police Costs

More Wisconsin Corporate Welfare

Convention Center Moves Forward

For Further Reading:
Milwaukee's Boondoggle Twofer
The Convention Center Cabal

Talking Heads Upset Billionaire Isn't Given Billions In Corporate Welfare

Boo-fucking-hoo, you babies.  Sorry your usual status-quo shakedown didn't work.

‘Morning Joe’ Rips Alexandria Ocasio-Cortez Over Amazon Pull-Out: ‘She Only Cares About Herself’

The set of “Morning Joe” was not happy about the decision by Amazon to pull out of their new planned headquarters in New York City yesterday, laying the blame for the decision at the feet of Rep. Alexandria Ocasio-Cortez and fellow recalcitrant progressive lawmakers. 

On set there was near unanimity that Ocasio-Cortez did not understand the broader situation and was unfamiliar with basic economics. 

“The protests that we saw were to get on AOC’s bandwagon. And what’s shocking to me is yet once again she shows how little she understands, about not just economics, but even unemployment,” show mainstay Susan Del Percio said. “Just because she has a progressive agenda, which some people like, does not mean she has the city’s best interests. What she showed me today, or yesterday, is that she only cares about herself.”

Um, actually she understands the economics better than the Morning Joe corporate welfare shills.

How much was New York giving Amazon?  What was the cost-per-job?  If you're not going to discuss the details of the giveaway and actually analyze it in comparison to other possible investments, maybe you're the one who needs to shut the fuck up.

I guess, according to the Morning Joe crew, giving billions to a billionaire is good use of public dollars.  Oh, but all these rich pricks hate socialism.  Yeah, unless it's for them.

For Further Reading:
Amazon To Pay $0 In Federal Taxes In 2019
Economic Development, Tax Incentives and The Plutocracy It's Creating

The Economic Impact Mythology Of Convention Centers

Milwaukee's Boondoggle Twofer
How Can Convention Centers Be So Dumb?
The Convention Center Shell Game
Convention Center Follies
It's A Race To The Bottom
Is It Time To Stop Building Convention Centers?
Case For Bigger Convention Hall Has Familiar Ring
The Realities Of Convention Centers As Economic Development Strategy
Debunking The Conventional Wisdom About Conventions
The Dubious Economics Of Convention Centers
Do We Really Need To Keep Building Convention Centers?
A Critical Review Of Convention Center Feasibility Studies
The Skeptical Study No One Ever Talks About
Convention Centers
Economic Impact Studies: Instruments For Political Shenanigans?

Republicans No Longer Worried About Deficits, No Longer Believe In Free Market

Wisconsin Among Seven States That Competed For Foxconn

What happened to the free market? “Competing” for business? The free market is all about competitive advantage and specific strengths about specific locations for specific businesses. States “competing” for business, is not only sub-optimal for the business itself (if market theories have an ounce of credibility at all), it is unnaturally shifting "market" outcomes.

It’s one thing if we have advantages in an industry that we want to invest in or build upon; or we see, because of certain labor skill-sets, etc., we believe we can grow a specific sector quickly and we need it badly - such as when trying to get out of the Great Recession.

Sadly, none of these seem to be the case this time. And, even though this multi-billion dollar investment could end up creating jobs, spin-offs and ancillary businesses, it could still be a loser. At over $300,000 per job (best case scenario - 13,000 jobs), there is almost no way this is a smart investment. The opportunity cost is too high and the time-horizon too long.

And now we're taking money away from other developments and infrastructure projects, giving even more to Foxconn.

For Further Reading:

The Con That Is Foxconn

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

Taxpayer Investment In Sports Is A Massive Waste Of Public Dollars

Windfall For Super Bowl Hosts? Economists Say It's Overstated

Does Hosting The Olympics Actually Pay Off?

Sports, Jobs, & Taxes: Are New Stadiums Worth the Cost?

Publicly Financed Sports Stadiums Are A Game That Taxpayers Lose

Here’s How Much Money the NFL Rakes in From Taxpayers

America's Priciest National Pastime: Sports subsidies aren't worth the cost to taxpayers.

Should the Federal Government Be Funding Private Sports Stadiums?

Stop The Subsidy-Sucking Sports Stadiums

The Hidden Costs of Stadium Subsidies

How the NFL Fleeces Taxpayers

America Has A Stadium Problem

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

Seems everyone is writing and talking about Foxconn possibly building a $10 billion factory in Wisconsin. Governor Walker has been talking up the jobs angle. Other lemmings are being good little boosters and putting slogans like "big league" and such out there to describe the situation and what it could mean for Wisconsin. 

Luckily, there has been some push-back. Hopefully we can muster enough resistance to sway opinion against this mega-corporate-welfare boondoggle.

I've written about economic development incentives many times before. To reiterate:

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.

So what do we know about this latest specimen of corporate welfare?

Well, let's back up a bit first and add some context to the discussion. 

Republicans are always droning on and on (pretending to be economists and financiers) about the "free" market, capitalism and how, if government just got out of the way, the private sector will lead us all to the promised land.

As Barry Ritholtz wrote:

America’s titans of industry and finance work hard to convince us that they are masters of their fate, unbeholden to anyone or anything aside from the profit motive and whatever serves the greater good of business and free enterprise. 

If only it were so, because the reality is that too many of them are afraid of undertaking new ventures without government holding their hand for reassurance, tax abatements, loans, subsidies or -- in some instances -- all of the above. 

Last week, was a case in point: Wisconsin, a state controlled by that patron of free markets otherwise known as the Republican Party, announced a deal with Foxconn Technology Co. to give $3 billion in incentives for the Taiwanese manufacturer of iPhones to build a flat-panel TV factory within its borders. In exchange, Wisconsin got ... well, some nice words.

Here is yet another example of their blatant, self-serving hypocrisy. Republicans (the dutiful little servants of the top 1%) love socialism for the rich, but not so much for the little guy.

As with all corporate welfare, the first question should always be, "Why is the public providing money to millionaires and billionaires?" If they are so all-knowing, efficient and bottom-line oriented, shouldn't they be making locational and company decisions based on comparative advantage, labor force needs, and other business-specific concerns? If they are simply locating in the place offering the largest welfare package, how is that efficient or good for long-term business? 

Typically companies simply put out the idea that they have a few locations in mind to get those locations to start bidding up the welfare package against each other. As some have termed, the war among the states or the war among the cities. Yet, the companies actually already know where they'd like to build - based on actual quantified site selection variables. This dangling of potential jobs really just results in leverage for the companies in their blackmailing of cities and states. 

And, for Wisconsin, why would the state spend $3 billion to attract jobs when the state's unemployment rate is, as of April 2017, at 3.2%? 

So, now, what do we know about this latest specimen of corporate welfare?

Michael J. Bologna detailed, "WEDC said Foxconn would be eligible for up to $3 billion in tax credits over 15 years. That total includes up to $1.5 billion in state income tax credits for job creation, up to $1.35 billion in state income tax credits for capital investment, and $150 million for sales and use tax exemptions."

The Wisconsin Democracy Campaign also discovered, "The bill, which is expected to be voted on by the legislature this month, includes $10 million in tax breaks intended to keep Fiserv, a Brookfield-based company that makes products for banks and credit unions, from relocating its headquarters to another state." It's just raining corporate welfare in Wisconsin.

Regarding the Foxconn boondoggle, The Wisconsin Budget Project found:

• The cost per job is somewhere between $200,000 and $500,000.
• At a minimum, the corporate welfare will cost state taxpayers over $17,000 per job, per year, for 15 years.
• The cost of tax breaks for manufacturers, with state taxpayers making a guarantee to cover up to 40 percent of local losses from spending for the project, and the unknown costs from unprecedented exemptions from environmental regulations. 

For some perspective, Timothy Bartik, of the W.E. Upjohn Institute for Employment Research, calculated the typical subsidy, in these situations, is $2,457 per year. Thus, the Wisconsin project cost ($17,000 per year) would be 567% higher than the typical subsidy. “It’s a very, very costly package, and I’m skeptical that the benefits justify such big incentives,” Mr. Bartik said. “This is well beyond the typical deal.”

Bartik also elaborated:

Any benefit-cost evaluation of tax incentives needs to take into account that even without the incentive, a considerable portion of the incentivized activity would have occurred anyway, or that other substituted business activity would occur. For example, even without incentives, vacant buildings zoned for development will help attract new business activity. Incentives can help speed up this process, and may help target new development toward business activities with a higher payoff for state economies in increasing average earnings per worker. But this requires that incentives be carefully targeted and designed to maximize benefits while minimizing costs. 

Bartik has also argued that economic development incentives that are delivered in the form of customized services, such as customized job training and manufacturing extension services, are likely to be more cost-effective than most business tax incentives.

As Ben Lovejoy enlightens, "The state would be paying for 30% of Foxconn’s total investment in the plant, and this wouldn’t be the end of it. In addition, like other manufacturers in Wisconsin, Foxconn would pay no corporate taxes on profits from sales on products made here. The incentives would cost the state about $200 million a year."

Patrick Marley and Jason Stein found, "The memo signed by Walker and Foxconn executives would: Lift caps on TIF deals and extend them for longer durations. Expedite government permit reviews for the project. Expand a tax credit program known as enterprise zones that the state uses for its biggest jobs deals."

Bruce Murphy revealed:

But the Foxconn deal will give away tax money in a style that makes the WEDC look like a piker. Rather than a tax credit for seven percent of payroll, Foxconn will get 17 percent, and for 15 years, not nine. In short, the state will get less than 30 percent of the tax credit back in income taxes paid by workers, losing a huge amount of money for 15 straight years.

But the Foxconn deal offers much more than this. The company also gets a 15 percent tax credit on all capital expenditures it makes for seven years. Since Foxconn, due to Walker’s Manufacturing and Agriculture Tax Credit, will pay little or no corporate tax, probably none of this giveaway will be recovered. Indeed, the company is being given “refundable tax credits,” meaning these are cash giveaways, not tax reductions. 

But the deal offers much more than this. Foxconn will get a state and local sales tax exemption on the cost of all building materials, supplies, and equipment and landscaping and lawn maintenance services, estimated to be worth $139 million.
But the deal offers still more. Local governments will be pressured to create special Tax Incremental Financing districts, and the subsidy is expected to be so massive that the Foxconn bill provides an exemption from the state law limiting the size of such districts and lengthens the statutory payback period from 20 to 30 years. 

But the deal offers still more. The bill would exempt Foxconn from some state requirements on: (1)discharging dredged or fill material into a wetland; (2)water quality certification related to discharges into wetlands; (3)construction, placement, or maintenance of bridges or culverts in or over navigable waters; (4)construction, dredging, or enlargement of an artificial water body that connects with an existing navigable waterway; (5)grading or removal of topsoil from the bank of a navigable waterway; (6) public utility projects consisting of high-voltage transmission line relocations.

In short, Foxconn will be able to operate as a kind of outlaw company that can simply ignore laws that regulate every other business or individual in the state. And that is because it promises to create up to 13,000 jobs in return for accepting $3 billion in tax subsidies or $585 per person for every adult resident in this state, not including the additional TIF subsidies, which have yet to be tallied. 

And what guarantee is there that Foxconn will create 13,000 jobs? None. The company could collect $345 million of the maximum $1.5 billion payroll credit for just the 3,000 jobs it promises to start with and grab the sales tax exemptions and TIF subsidies while using the $1.35 billion tax credit on capital expenditures to automate the factory and gradually lower the employment even further. With no penalty. And given the company’s reputation for embracing robotics at ever opportunity, that is surely the most likely result.

Murphy concludes, "But for every other legislator in the state, Republican or Democrat, there is no reason to vote for this unprecedented giveaway for a few thousand jobs, following a game plan that if applied to all businesses, would bankrupt the state and destroy its environment. This isn’t a sound conservative solution to economic development, it is fiscal liberalism run rampant."

David Haynes, of the Milwaukee Journal Sentinel, spoke with Kenneth Thomas about Foxconn and Wisconsin's subsidy package:

Kenneth Thomas, of the University of Missouri-St. Louis, has studied state and local subsidies for business and believes Wisconsin and other states hold more cards than might be evident at first glance. “Foxconn's fear of protectionism (probably well-placed) makes it want to be here, and the U.S. unemployment rate is finally well down, though we could certainly use wage growth. So my recommendation to Wisconsin would be, ‘Just say no,’ " he wrote me in an email. "There is no reason Foxconn should get a free facility plus whatever else it wants; what it wants most of all is to be in the United States. Moreover, a 3.1% unemployment rate is another reason for the state not to throw a lot of money at new jobs. ... If the state does yield to temptation, it should compare the proposed cost per job and percentage of investment paid by the subsidy package to packages given for other large manufacturing facilities, and try to spend less, given Foxconn's weak bargaining position.” And if the bidding gets too rich, the state should be willing to walk away.

Foxconn has done this song-and-dance before. They've gotten promises of millions of dollars and then failed to deliver the projects and the jobs. As Marjorie Kelly wrote, "Foxconn also has failed to deliver on similar deals in India, Vietnam and Pennsylvania." In 2013, Foxconn promised to invest $30 million and hire 500 workers in Pennsylvania, yet this has not materialized.

Luz Sosa listed the many broken promises of Foxconn, "In 2013, the company signed a letter of intent to invest up to $1 billion in Indonesia. Nothing came of it. Foxconn announced it would invest $5 billion and create 50,000 jobs over five years in India as part of an ambitious expansion in 2014. The investment amounted to a small fraction of that, according to The Washington Post’s Todd Frankel. Foxconn committed to a $5 billion investment in Vietnam in 2007, and $10 billion in Brazil in 2011. The company made its first major foray in Vietnam only last year. In Brazil, Foxconn has an iPhone factory, but its investment has fallen far short of promises. Foxconn recently laid off 60,000 workers, more than 50 percent of its workforce at its IPhone 6 factory in Kushan, China, replacing them with robots that Foxconn produces."

Sosa makes another great point, "Cyber component manufacturing with large numbers of employees has mainly occurred in low-wage, marginally regulated countries. Wisconsin can’t and shouldn’t compete with Vietnam and China for the lowest wages and intolerable working conditions."

The working conditions at Foxconn's factories are another cause for concern. As detailed by Jay Greene in Riots, suicides, and other issues in Foxconn's iPhone factories. "There have been employee suicides, explosions at two plants that make Apple gadgets, and reports of harsh working conditions."

As the New York Times reported, regarding Foxconn's Zhengzhou China plant, "The local government doles out more than $1.5 billion to Foxconn to build large sections of the factory and nearby employee housing. It paved roads and built power plants. It helps cover continuing energy and transportation costs for the operation. It recruits workers for the assembly line. It pays bonuses to the factory for meeting export targets."

Another big concern, for those questioning this giveaway, are the possible environmental issues. Air and water quality, and solid and hazardous waste standards, and wetland regulations should not be relaxed. Tourism is an important part of the Wisconsin economy. Wisconsin's lakes, rivers and woods are big business. To not only subsidize a company, but to then also allow them to degrade Wisconsin's environment is inexcusable. Foxconn should not be allowed to bypass an environmental impact statement (this is an analysis describing the positive and/or negative effects of a proposed project).  

As Rick Barrett notes, "The electronics industry has been called a major source of environmental pollution, and its large presence in China and South Korea has raised concerns about the environment and the health of workers there. The industry uses dozens of chemicals and heavy metals, including lead, in its processes."

Greg LeRoy remarked, “The states are orchestrating a process that benefits large, politically connected corporations and harms small employers, which form the backbone of the economy … President Trump is also blessing the ‘buffalo hunting’ school of economic development, in which a few companies get huge ‘megadeals’ while programs that benefit many employers suffer budget cuts, and small businesses and entrepreneurs get shortchanged … the ‘war among states’ way in which the United States allows even foreign corporations to extract huge taxpayer subsidies is a troubling reminder of how federalism undermines economic development in America.”

“We can only describe this as a gift from Wisconsin taxpayers to Foxconn shareholders,” Mr. LeRoy said. “This is a guaranteed loser for the state.” LeRoy continued, "At that price, the deal is a sure loser for Wisconsin taxpayers. That’s because there is no way the typical Foxconn worker will pay $230,000 more in state and local taxes than she and her family will consume in public services over her work time there. At that price, the deal can only be accurately described as a transfer of wealth from Wisconsin taxpayers to Foxconn shareholders."

Wisconsin lawmakers have said the incentive package will be pro-rated on how many jobs the company creates and how much it spends. This sound like an admirable claw-back provision. But the devil is in the details, and unless the public knows the details, we can't really be sure there are any teeth in those provisions.

Scott Walker said, “We are calling this development ‘Wisconn Valley,’ because we believe this will have a transformational effect on Wisconsin just as Silicon Valley transformed the San Francisco Bay area.”

Another glaring miscalculation from our inept governor. If Silicon Valleys could be reproduced in state after state, it would have already been done. The idea that you can subsidize and bribe your way to a competitive advantage and establish a long-term business and growth model is ludicrous. Also, manufacturing doesn't pay what it used to, employment is declining, much of the work is being automated, and manufacturing operates practically tax-free in Wisconsin. So it doesn't make sense to pile subsidies upon tax breaks to a dwindling sector that doesn't even pay its fair share of taxes.

To paraphrase a University of Wisconsin-Milwaukee Center for Economic Development research paper:

The subsidization/tax-incentive contribution to local economic development has been wildly exaggerated. Although it has become almost a cliché to boast of becoming “the next Silicon Valley,” a review of the historical record reveals that the celebrated success stories of economic development are more the exception than the rule. Far more typically, the investments have had little discernible impact in reshaping the economic trajectory of cities or regions. Nor have they produced the internal returns envisioned by proponents. The case for the tax incentives as a “game changer” or “driver” of local economic development is more chimerical than compelling.

Jon Talton explained, "These are all reasons to be skeptical of subsidies that pick winners - typically multinationals with huge profits - at the expense of existing tax-paying companies... Wisconsin doesn’t have a world-class flat-screen cluster supporting tens of thousands of jobs that it needs to protect from poachers...The Wisconsin paradox is that Walker refused $810 million in federal help for a higher-speed rail line between Milwaukee and Madison. Why? Because it came from Obama and because Republicans have a strange anti-rail fetish (Florida’s and Ohio’s governors did the same). In addition to offering more transportation options - including one with far fewer greenhouse gas emissions - the rail project would have provided large numbers of construction jobs, as well as good operating and maintenance jobs. The trains would have been assembled there, too, with the potential of billions in contracts to build trains for other states."

But, of course, Scott Walker's dutifully endless ass-kisser, Christian Schneider can't see anything wrong with the deal. As usual, his article in the Milwaukee Journal Sentinel simply dug into Democrats and anyone else who would dare question this "great" deal. According to Schneider anyone that would raise concerns over this massive corporate welfare is a "member of the deranged lefty echo chamber rooting against the state's economic success."

Here again we can see the gigantic hypocrisy of Republicans. When Republicans are the ones doling out public dollars, it's warranted, needed, proper and, of course, it will be a huge success. But when Democrats want money for infrastructure, health care, education, poverty, Social Security, etc., they're just wasting taxpayers hard-earned dollars. Just imagine if Jim Doyle (Democratic governor before Scott Walker) had proposed giving billions of dollars to not only a private company, but a Taiwanese one at that. Republicans would have gotten out their pitchforks and torches and hailed Doyle as a pinko-commie, socialist, another tax-and-spend liberal, giving away taxpayer money.

Schneider seems to be of the economic development school which believes that any development is good development. He mocks those who question if these are good jobs or if they pay a living wage. I guess Schneider's message is, "A job is a job, so just take it, be happy and shut up!"  

In passing, Schneider mentions, "The state has had a spotty record in providing tax subsidies to business." He doesn't go any further in his analysis. For Schneider, Walker, Republicans and their willing corporate welfare recipients, there is no need to analyze this deal - just get it done! Never mind this would be one of the biggest corporate giveaways in the history of the United States ... nothing to see here. As Walker has said, critics can "suck lemons." Now that's diplomacy!

In another Orwellian fever dream, Republican Party spokesman Alec Zimmerman said, "Governor Walker's reforms have taxpayers back in charge while liberals like Dana Wachs would take us back to the days of special interest control in Madison." Dana Wachs is a Democrat planning on challenging Scott Walker in the next gubernatorial election. Yet, how the Republicans can make the claim that Walker is putting taxpayers in charge and cutting off special interests all while hoping to give away one of the largest corporate welfare packages in our nation's history is dumbfounding.

As the New York Times informed: 

Big companies like Foxconn possess leverage to extract concessions from state governments that smaller firms cannot, said Carl Davis, research director at the nonpartisan Institute on Taxation and Economic Policy in Washington. “This is not a comprehensive strategy for economic development,” he said. “If Wisconsin were going to offer this kind of subsidy for every employer within its borders, the state would be bankrupt.”

John McCormick, of Bloomberg, highlighted Walker's barefaced hypocrisy:

Walker’s embrace of taxpayer money for Foxconn is in conflict with his limited-government philosophy. He’s also previously backed public subsidies for a Milwaukee professional basketball arena and for Wisconsin-based companies such as Kohl’s, subsidies that would be described as "corporate welfare" by some in his party. “I believe people create jobs, not the government,” the governor said in an April 2015 speech in New Hampshire as he explored a presidential bid.

The New York Times also picked up on Walker's duplicity:

“It doesn’t fit with a governor that said we can’t spend much money,” said Martin Baily, a senior fellow at the Brookings Institution and a member of President Bill Clinton’s Council of Economic Advisers. “This is a guy who decimated the University of Wisconsin by budget cuts. On the one hand, he’s saying we can spend billions to pay Foxconn, but what about our own prized educational institution?”

Steve Deller, a University of Wisconsin-Madison professor of agriculture and applied economics, said in addition to the cost to state taxpayers, schools and local governments could also be pinched because deals to large companies often allow them to escape paying property taxes, which pay for some local services. This deal could not only increase the state's indebtedness, but it could also put schools and other services at risk.

Investments in transportation, greening of public buildings, upgrading energy and water infrastructure, critical environmental areas remediation, to name a few, are much better investments for cities and states looking for the best return on investment. We surely can do better than backroom deals, bribery and blackmail as our modus operandi for economic development policy.

For Further Reading:
Foxconn Bill Contains Another Big Potential Obligation For Wisconsin Taxpayers
Wisconsin Foxconn Deal Could Include $1 Billion To $3 Billion In Taxpayer-Backed Incentives
Foxconn Could Be Environmental Disaster
Show Us The Local Subsidies
Will Amazon Fool Us Twice?
Smart Skills Versus Mindless Megadeals
Shortchanging Small Business
Evaluating State Tax Incentives For Jobs And Growth
The Foxconn Con
Will Foxconn's Manufacturing Promises In Wisconsin Prove To Be A Con?
Wisconsin's Corporate Welfare
Site Selection Shenanigans
WEDC Not A Good Model For Deploying Scarce Resources
Tax Incentives: Costly For States, Drag On The Nation
One Take On How Tax Incentives Work
State By State Incentives Guide
Why Have So Many Cities And Towns Given Away So Much Money To Bass Pro Shops And Cabela's?
As Companies Seek Tax Deals, Governments Pay High Price
Foxconn, Wisconsin's Manufacturing Future?

The Math and Taxes of Stadium Boondoggles

Jim Owczarski over at OnMilwaukee feels Milwaukee should "Stop whining and pay the arena freight."

He's talked to a few people about the Miller Park tax, it wasn't a big deal to them, so a new basketball arena shouldn't be a big deal for anyone else either. 

Owczarski then uses an example of buying a car to clarify his point, "People get all worked up over the idea of a tax, than the actual number itself. Let's be real. If you're buying a $30,000 car, an extra $200 or whatever it comes out to isn't a big deal in the scheme of it."

So we can see why Jim doesn't have a big problem with taxes or paying them - he doesn't understand them and he's not very good at math. If you're buying a new car in Milwaukee County, your paying a 5.6% sales and use tax on it, which is a $1,680 tax on a $30,000 car. 

Most people probably do have a difference of opinion if you're talking $200 or $1,680. To which, Jim says, "Do a better job negotiating that [the tax] out of your final [car] price if you're that upset by it." Just as we can negotiate with team owners - making them pay the majority of costs for their team. 

I find it unbelievable that in a state with such a strong labor history, prudent social investments, and an aversion to boondoggles, so many are suddenly reverse Robin Hoods, wanting the many to subsidize the few. [Yet, when calls are made for the rich to feed the hungry, employ the jobless, house the homeless, or pay more taxes, those people are labeled parasites, moochers, and communists.] Bribery is now an accepted form of negotiation. Taxpayers must fund private team owners' cost of doing business. 

Sports are a great diversion and entertainment option, but they are not economic catalysts. They typically represent less than 1 percent of a local economy. Often, much, much less.

Jim then moves forward with the Major League City argument, "If the new ownership group winds up having to sell the team back to the NBA in 2017, the people of Wisconsin will relegate their marquee city a second-class citizen on the national landscape." Even with the Brewers still here, by not having the Bucks - who haven't competed for over a decade and have had among the worst attendance among NBA teams - suddenly Milwaukee will fall off the map.

Austin, El Paso, Louisville, Las Vegas, Albuquerque, Rochester, Birmingham, Hartford, Richmond, Providence, Virginia Beach, Riverside and Tucson are just a few larger U.S. cities that have no major league sports team. 25 of the states have no professional sport team. All second-class cities and states, no doubt.

Owczarski closes with a flourish of gobbledygook, "If the Brewers are left alone, Milwaukee becomes … what? San Antonio? Oklahoma City? Jacksonville? Ugh. I'm sure some would like it to become Portland, but the city won't allow for strip clubs Downtown and, frankly, we don't have an ocean about two hours away. Name every important city in this country. Professional sports are an integral part of its culture, and its economy. It is here in Milwaukee, too. I'm a taxpayer and I won't mind keeping it that way."

San Antonio, Oklahoma City and Jacksonville are all faster-growing and larger cities, Yeah, we'd hate to be like that, not to mention their warmer weather. Portland's success is due to downtown strip clubs? We may not have an ocean, but we have the two largest Great Lakes nearby (one within minutes for most citizens). See two paragraphs above for important cities without professional teams. Also, most wouldn't consider a less-than-1% economic-impact an "integral" part of the economy.  

It seems taxpayers are again hurtling toward more corporate welfare in the form of another stadium subsidy. The boosters' regurgitated arguments have been dubious, at best, and have often been proven false. There may be a place for the public in helping to finance local sport facilities or site preparation. But it's a minimal one. Taxpayers should not be footing 70%, or more, of facility cost, which has been the typical amount over the past few decades.

For Further Reading:

Buck The System
Buck You
Big League Confusion
Stadium Swindle
More Bradley Center Bull
The Time Is Now?
Is There Anything A Stadium Can't Solve?
The Legalized Bribery That Is Sports Subsidization
It's A Scandal! It's A Outrage!
Bradley Center Boosters Keep Pounding That Drum
Overblown Bradley Center Impacts

Opportunity Cost

How can it be that increasing our deficit for Iraq (which will cost approximately $3 trillion) is good policy - even though it has worsened national security and weakened our standing in the world - when it has not won over any hearts or minds?

Yet, deficit spending as proposed in the recently passed stimulus bill - with increased unemployment insurance, infrastructure construction projects, among other initiatives - which actually puts people who otherwise would not be working back to work, while addressing needed repairs and improvements all over the country, is bad debt.

Even when Republicans are not in power they still seem to have the ability to frame the debate and to have all the parrots on TV and radio regurgitating their nonsense.

Which would you prefer we be spending money on: Iraq or investing in long-term infrastructure projects that put people back to work now and also prepare our country for future growth?

Miller Pork

Don Walker’s April 3, 2008 article, from the Journal-Sentinel, “Miller Park: Economic promises got it built. Has it paid?” implies there is a debate among economists about whether communities benefit from stadiums or not. There is about as much a debate among economists on this subject as there is among climate scientists about global warming.

But lets not get bogged down in nuance and fact.

First, we'll start with this corporate welfare defender. In this corner - the number one advocate, expert witness, and stadium-subsidy supporter - why, none other than Bud Selig. (Which is like asking Bill Gates if he thinks one should buy Microsoft.)

Walker states, “Selig believes passionately that such revenue growth did occur in the metropolitan area and commissioned a study released in October 2006 that showed the financial impact.” Amazing! Commissioning a study to show an impact and, low and behold, it does.

Selig then went on to use the well-worn contention about the intangible benefit of a sports stadium to a community. The problem with this type of implied, quasi-analysis is that, through taxation for this stadium, taxpayers felt a tangible deduction in their income. The hopes of everyone gathered at the ballpark to watch the game (direct use), or everyone getting together at the local pub to root on the Brewers (spillover) is all very quaint and well, but it’s not an economic impact analysis and it isn’t an economic development policy. Hoping and wishing should not be public policy.

Most studies show decreased activity in correlated economic sectors and the money being spent is merely a realignment of existing spending patterns. Growth is not occurring. Stadium subsidization is corporate welfare and a zero-sum game. Study after study has been done -- just because you build it, there’s no guarantee anyone is going to come. And, more likely, because you've built it, you now have less dollars in your city for schools, roads, parks, public transportation, etc.

Another hilarious declaration was Selig saying, “It [the stadium] saved baseball for Milwaukee and Wisconsin.” This equivocation reveals the real intent of the whole stadium-booster cabal: use public dollars for private playgrounds or else they will move to another city that will succumb to their bribe. And because this type of extortion is common in so-called economic development practices, it’s happening in every city. If people want to see the biggest welfare mothers driving around in their Cadillac's look no further than the corporate community, whom receive millions of dollars of giveaways, like stadium subsidies, every year.

The numbers the article's proponents cite from the 2006 study also seem to have been pulled from thin air. The talk of increased activity at hotels, restaurants and retail stores is mostly that – talk. Marc Levine of UW-Milwaukee Center for Economic Development [a former employer], the opposing view in the article, states that the actual total employment in the county and employment for hotels is down since the opening of the stadium. When we evaluate a stadium’s impact with measurable indicators we see no such gains in areas such as retail and hotels from having a stadium, as claimed by the boosters. So, I guess we're back to those intangible benefits.

If ifs and buts were candy and nuts, we'd all have a merry Christmas.

Vouchers & Private Sector Accountability

As stated in the Journal-Sentinel's February 27, 2008 article, "Researchers based at the University of Arkansas said that city property taxes go up for each student who uses a voucher, compared to what would be the case if that student went to MPS, while state income taxes go down, as do property taxes in most of the rest of the state."

The voucher program doesn't produce better educational results, and it also increases homeowners' property taxes. Somebody tell me what voucher schools are good for again?

As we drive around the City avoiding potholes on roads we wish were maintained better, remember - money spent in one place is money that cannot be spent somewhere else.

Do we want better plowing? We better be prepared to hire more plow drivers and buy more equipment. Do we want the potholes fixed? We better be prepared to pay the costs. Nothing in life is free. OR ... We could cut off the voucher program since it achieves nothing better than the public schools, yet costs us more in increased property taxes, and put those savings toward potholes, snow-plowing, and much-needed infrastructure improvements.

The amenities we so often take for granted are the same ones we complain about when they are not perfectly done. We must remember all the areas that our taxes support. If each of us had to individually contract out for our own services, our individual cost would skyrocket. Although, I also understand the tax burden has been placed too heavily on individual homeowners. It's not a matter of taxes being too high. They're not. The services we want and the standard of living we expect in this community cost money. The problem is that the corporate community is shirking their responsibility and not paying their fair share.

Governments are forced to operate on shoestring budgets as it is. And one of the most ironic things is that one of the largest portions of local, city and state budget costs is private contracts. (Not to mention the tax deferments, exemptions, depreciation schedules, and a host of other tax avoidance schemes that corporations use.) Jobs that used to be public (government run) have, for the sake of "competition" and "the market," been outsourced to private firms. And this too is costing us more than it would have if we'd just kept the jobs publicly run.

For further reading:
Privatizing in the Dark
Stop Wasting America's Money on Privatization
Taking The High Road
Highway Privatization
Tax Hell Hoax
Privatize Equals Redistribute