The Barbershop has re-located

The proprietor has moved the shop to ChicagoNow, a Chicago Tribune site that showcases some of the best bloggers in the Chicago area. You can logo on to the Barbershop home page here. The ChicagoNow home page is here.

You'll still be able to post comments with the same ease as in this location. The proprietor also will keep this web site alive if you wish to review old posts.

Monday, January 22, 2007

Kick the habit, subsidy junkies

By Dennis Byrne
Chicago Tribune

Now here's a news flash: Government subsidies help the rich more than the poor.

This latest bulletin is from a new study concluding that 15 years of Illinois subsidies to companies in the six-county Chicago area have benefited wealthier communities more than the poor ones that the assistance was supposed to help.

Who should be surprised?

Consider farm subsidies. They began as a safety net in the 1930s for family farms, but have ballooned into one of the government's fattest handouts, dispensing billions of dollars, not so much to family farmers but to big corporations and others that don't even live on the farms. A few years ago, Congress passed the Freedom to Farm law that was supposed to correct these problems but only made them worse.

Likewise, the business subsidies. They were meant to help attract jobs and businesses to impoverished neighborhoods and communities, but actually ended up doing the opposite, according to the new study by Good Jobs First, a Washington-based non-profit group that keeps track of such things and promotes metropolitan "smart growth."

The three-year study of $1.2 billion ladled out by Illinois in 780 subsidies as part of 10 programs (most in Illinois industrial revenue bonds, but not in tax-increment-financing aid) found that a disproportionate share went to job-rich areas such as the northwest suburbs, the O'Hare International Airport corridor and booming communities, such as Naperville, which don't need any help growing.

The 43-page report begins with a quote noting how the explosion of such suburbs "at the expense of the city increases pollution, drains jobs from Chicago, isolates the poorest of its residents from employment, adds to infrastructure costs, kills inner-city property values and tax base," etc., etc.

Whoa. That's from something I wrote 12 years ago, prompting brief shock that anyone would save my column for that long. My view since then of suburban growth has become a bit more "nuanced," as they say, and free market. But the underlying thought is still correct. The column was in response to a new Motorola manufacturing plant up near Wisconsin that got $43 million in Illinois subsidies and a mere eight years later was shut down, leaving jobless the hundreds of workers the subsidies were supposed to help.

So, what to do? The report recommends more strictly "targeting" subsidies to areas of high unemployment or low income; requiring companies to locate near mass transit or otherwise increase job access; and a new law requiring subsidized companies to file impact reports and justifications for relocating within the state.

In other words, more of the same. More reports; more oversight; renewed commitments; bigger bureaucracy to receive, analyze and file compulsory data; more regulation. When will we learn? Such business subsidies, although they no doubt have scored some meaningful successes, are a perfect example of how government's good intentions often are overtaken by the shoddy, defective and ineffectual. Subsidies not working? Then pour on some more. Subsidies going to the wrong people? Then create a squad of traffic cops to make sure that the bureaucrats send the money in the right direction. Pretty soon, it's layer upon layer of futility. Without ever speaking to the basic flaws.

Here's a thought. Get rid of the subsidies. Live without them. I'm sure this isn't what the Good Jobs First folks had in mind when it issued its study. But, you can bet that in another 15 years, another group will come along and report how the new "cure" has been maladministered.

We've seen it time and again. How the creation decades ago of a welfare safety net to provide the help that families needed to get back on their feet turned into an addiction, chaining generations to a life of dependence. The only solution was subsidy weaning.

Of course, I'm ingenuous. It can never happen, because of the special interests that demand them: companies that play communities and states off each other by leveraging ever-bigger subsidies. Organized labor that seeks to "create" and "preserve" jobs. Local taxpayers who believe they're ultimately getting relief from the "additional revenues" that a big plant in town will bring. Politicians who put "constituent services" (pork) above principle. Utopians who believe that government giveaways will work if we'd just fine-tune the bureaucracy.

Just about the only ones standing against the subsidies are us naifs, who will watch helplessly as yet another public sector scheme is concocted to alleviate the harm that the last scheme brought us.

Copyright © 2007, Chicago Tribune

1 comment:

Anonymous said...

I studied tax increment financing in connection with book on the response to the Kelo eminent domain decision. It might interest your readers:

John Ryskamp, The Eminent Domain Revolt: Changing Perceptions in a New Constitutional Epoch (New York:Algora Publishing 2006)