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Posted by on Sep 4, 2013 in At TMV | 6 comments

Rick Perry Goes Poaching for Questionable Reasons

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In a somewhat more public spat over the issue of one state trying to steal jobs from another state than one typically sees, Gov. Rick Perry came to Missouri to speak to the Missouri Chamber of Commerce even as ads featuring the Texas governor were running on radio encouraging businesses to move to Texas. Governor Jay Nixon of Missouri had this response:

“Make no mistake, our businesses aren’t going to Texas and here’s why,” Nixon explained in the ad, pointing to Missouri’s low sales and property taxes, high graduation rates, low unemployment rate and better standardized test scores.

“And unlike Texas, Missouri has a perfect Triple-A credit rating,” digging at Standard & Poor’s rating Texas at AA+.

Perry’s riposte?

“That’s the easy out, to say we’re stealing jobs, poaching jobs, poaching jobs,” Perry said. “We ought to be talking about how competition is good for states. Whether you’re an athlete or a businessperson or a governor, competition is good.”

I have my doubts about the ability of a three word cliche to actually be true for all situations in all circumstances and “Competition is good.” ranks right up there when it comes to cliches that actually don’t always apply. After all, how do states compete when it comes to “recruiting” companies from other states? Huge tax breaks that all too often based on promises that aren’t kept are generally the most popular bribes. Late last year the New York Times had an article where they found out things like the following.

  • There are no accurate figures for the total spent because thousands of agencies and politicians are involved.
  • The entities and people involved often have no idea how much the incentives are actually worth.
  • They often have no idea if the incentives were worth it because they don’t always even track the jobs produced.
  • Even those that do try to track the jobs created have no way to evaluate of the jobs would have been created anyway.

Looking at those facts this quote from the article doesn’t seem too surprising.

“How can you even talk about rationalizing what you’re doing when you don’t even know what you’re doing?” said Timothy J. Bartik, a senior economist at the W.E. Upjohn Institute for Employment Research in Kalamazoo, Mich.

Some of their other findings are:

A portrait arises of mayors and governors who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them. Many of the officials said they feared that companies would move jobs overseas if they did not get subsidies in the United States.

Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors.

While some jobs have certainly migrated overseas, many companies receiving incentives were not considering leaving the country, according to interviews and incentive data.

They also point out that this should be, but isn’t, being looked at when considering the federal budget even though significant amounts go to states that are basically wasting a noticeable fraction of their budget.

Coming back to Missouri, the article notes this about the situation between Missouri and Kansas in the Kansas City metropolitan area, which is split by the state line.

One corporate executive, Donald J. Hall Jr. of Hallmark, thinks business subsidies are hurting his hometown, Kansas City, Mo., by diverting money from public education. “It’s really not creating new jobs,” Mr. Hall said. “It’s motivated by politicians who want to claim they have brought new jobs into their state.”

For Mr. Hall and others in Kansas City, the futility of free-flowing incentives has been underscored by a border war between Kansas and Missouri.

Soon after Kansas recruited AMC Entertainment with a $36 million award last year, the state cut its education budget by $104 million. AMC was moving only a few miles, across the border from Missouri. Workers saw little change other than in commuting times and office décor. A few months later, Missouri lured Applebee’s headquarters from Kansas.

“I just shake my head every time it happens, it just gives me a sick feeling in the pit of my stomach,” said Sean O’Byrne, the vice president of the Downtown Council of Kansas City. “It sounds like I’m talking myself out of a job, but there ought to be a law against what I’m doing.”

The St. Louis Post-Dispatch has a slightly more recent article on the economic “war” between Kansas and Missouri as well. They, too, note that the benefits of this kind of competition aren’t nearly as clean cut as Governor Perry proposes. All three articles I’ve linked to here also point out that there simply isn’t any real evidence that these kinds of incentives are really all that beneficial to the states doing the job poaching. Yet as a resident of the KC metro area I can’t go a day without seeing ads from Club for Growth, that same Chamber of Commerce that brought Rick Perry to Missouri and other business groups pushing an override of Governor Nixon’s veto of drastic tax cuts which never mention anything concerning the effect on the state budget. These ads run so often that I’m truly sick of them. They also run ads attacking Nixon’s withholding funds from the state’s education budget for 2014. Why did he do that? It’s part of $400 million he’s withheld because of the threatened veto override because should the bill as written be passed that money quite likely won’t be there. What do they claim in these ads? Tax cuts produce jobs. Really? Not even all business owners agree with that one.

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