Economics

Government-Subsidized Job Creation Preservation Elimination in Massachusetts

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A Boston Globe investigation finds that Massachusetts' Economic Development Incentive Program, which during the last 16 years has dispensed hundreds of millions of dollars in state and local tax breaks to businesses that promised to create jobs, often has little or nothing to show for its efforts:

Hundreds of the projects delivered fewer jobs than promised, and some companies actually slashed employment. Many firms won subsidies for projects they were set to build without state assistance; in some cases, incentives were approved long after the projects were underway or complete. And many got generous packages though they agreed to create only a handful of low-paying jobs.

A review of state records found that more than 40 percent of the companies that received tax breaks pledged to create 10 full-time jobs or fewer, including nearly four dozen that promised only to add one full-time job. Often, the companies planned to pay new workers little more than minimum wage.

The Globe's examples of questionable projects range from a tiny pizzeria in Ware that got tax breaks when it relocated, even though the owner had already settled on a new site and no jobs were created as a result of the subsidy, to a telecommunications equipment manufacturer that promised to add 800 jobs at its campus in Billerica, for a total of 3,000, but actually whittled its work force there down to 145. Its tax breaks continue through 2014. Although the article allows that "often the incentives work and new jobs result," even companies that follow through on plans to hire more people in a particular jurisdiction might have done so without the tax breaks. Since the government is not very good at foreseeing the future, let alone peering into alternate universes where it chose not to grant tax breaks, creating a tax and regulatory environment that is hospitable to businesses in general seems like a better economic development strategy than picking favorites, many of which will turn out to be duds.

[Thanks to Michael Graham for the tip.]

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  1. I linked to this in an earlier thread but this thread is much more appropriate.

    Embezzler, on stage with Granholm, gets tax credit

    A convicted embezzler has snagged a $9.1-million tax credit from the state for a company it says will use renewable energy to provide electricity, clean drinking water, sanitation and Internet service to developing countries.

    State police and Department of Corrections records show Short was convicted in 2002 of embezzling money from Harding Energy Inc. of Norton Shores. The company fired Short after discovering he had fraud convictions in Oakland and Genesee counties.

    He remains on parole and “owes $96,000 in restitution from prior fraud activities,” state corrections spokesman Russ Marlan said today.

    1. Good catch.

      You get 1 up!

  2. Even if the program -had- created jobs, it doesn’t follow that those jobs would have been worth doing or contributed anything to society. In many scenarios, for example, it would be much less harmful to take hundreds of millions and bury it rather than pay a bureaucrat, solider, etc., to do terrible things.

  3. So that telecom manufacturer got tax breaks to eliminate over 2,000 jobs?

    Genius.

    The company fired Short after discovering he had fraud convictions in Oakland and Genesee counties.

    So he’s committed, make that been caught committing fraud, three times? How can somebody with that record even be eligible for state assistance? Oh, that’s right – he’s a big campaign contributor.

  4. the government is not very good at foreseeing the future

    No worries. It’s not their money. It takes two to tango. For every helpful bureaucrat there’s a willing pig at the trough. How’s about we reserve a rope at the scaffold for the eager recipients of federal largesse?

  5. And … this is a surprise?

  6. How can somebody with that record even be eligible for state assistance?

    Sometimes I think it’s a requirement.

  7. Fack you, Reason! You sack! Owah ecawnamy is wicked lahge! You must be fackin retahded! Go Sawx!

    1. That’s actually pretty good.

    2. That was wicked awesome. Oh, and the Pats suck.

      1. Don’t make them cry on their special day.

      2. Favorite encounter with Boston sports fans: watching last year’s ALDS game 3 in a crowded bar. In Boston.

        Sometimes silence really is golden.

        1. My boss when the Rays beat Boston to go to the World Series was a Bostonian. I laughed and laughed.

          1. And laughed.

          2. Text from a friend of mine the moment the Rays won that game 7: “Every time a Boston team loses in the playoffs, an angel gets its wings.”

            1. And boy, did they show those Phillies and thing or two.

              1. I’ll take going to the Series when we’ve sucked from the beginning and have a ridiculously low payroll. Besides, Tampa crushed Philadelphia’s dreams on the way to NHL and NFL championships.

            2. Anything that makes the Massholes cry–especially Beantowners–is a gift from Cthulu.

  8. Although the article allows that “often the incentives work and new different jobs result,” …

    Fix that for the article.

  9. The big difference between government projects and private ones is that government projects thrive on people just liking the idea of the project whether it accomplishes its stated objectives or not.

    Programs like welfare or job training don’t actually have to improve peoples lives in order to succeed in the political marketplace, they just have to give voters a warm fuzzy feeling.

    We often forget who an institution’s customer really are. The customers for advertisement supported TV, for example, are not the viewers but the advertisers. The attention of the viewers is the product. Likewise, the customers for these types of government programs are not the unemployed but the voters who give a warm fuzzy feeling for having voted for politicians who advocate that program.

    There is absolutely no direct connection between a program’s efficacy and the warm fuzzy feeling it generates in supporters. Most people have no idea how effective the programs they support are and most do not seem to even care. This is why supporters of such programs always default to attacks on detractors morality and compassion. They detractors threaten the warm fuzzy feeling with ugly facts.

    So, these travesties can go on year after year after year often doing active harm to those they are nominally supposed to help. I think the only way to stop them is to attack the warm fuzzy feeling. Make people who support these programs socially stigmatized for hurting those in need.

    1. Why do you hate America, Shannon?

      1. Apparently you are ok with people dying due to the draconian budget cuts you advocate. And also from lack of health care.

        1. Lack of budget cuts are the thing that’s killing people. How many people have to die while the state grows fatter?

          1. Where would we be without the government destroying wealth? I have no doubt that we’d be far more technologically and scientifically advanced, with all the good that would bring to our lifestyle–i.e., flying cars and medical technology that would allow us to survive flying cars.

            1. Vacation homes on the moon, even, and cheap travel to get me there.

              1. A terraformed Moon.

        2. Thanks for proving my point.

  10. This is fucking freaky!

    “Why is there a picture of Karl Marx hidden on this apple in the latest Newsweek cover of our fashion icon First Lady?”

    http://hillbuzz.org/2010/03/16…..irst-lady/

    1. I thought it looked like god in all of the Monty Python animations.

      But thats just me.

    2. Sounds like a Photoshop. I just looked at that cover, and there’s no Marx visible in print. Maybe it was just online?

      Given some of their previous covers (like “The Confidence Game”, or “We’re All Socialists Now”, it sounds like they have a conservative or libertarian mole somewhere.

    3. Checked the print cover, it’s not there. Definitely a photoshop.

      Given some of their other covers — “We’re All Socialists Now!”, “The Confidence Game” (Jonathan Alter (!) explicitly called Obama a “confidence man”), I’m pretty sure they have a conservative or libertarian mole with a subversive sense of humor.

  11. “The Globe’s examples of questionable projects range from a tiny pizzeria in Ware that got tax breaks when it relocated”

    Doesn’t MA know that pizza is teh Satan?

    1. They do NOW! But they’ll be raising the tax on pizza 43%, instead of the proposed 18%, just to make up for lost time.

  12. They should just tax the economy until it does what they want.

  13. So another slush fund comes in to question. They’re laughing about it right now…

    1. They’re laughing about it at us right now…

  14. http://www.csmonitor.com/Comme…..uperbubble

    Very interesting article. Shockingly, government planning and control doesn’t work in China either no matter what Thomas Friedman tells you.

    1. I’ve been saying that China is due for an implosion for a while. It’s not just monkeying with their growth; it’s also the internal politics.

      Moving manufacture not-so-slowly to India and other cheapish alternatives is a good idea. Naturally, we’ll wait for the chaos before doing anything that sensible.

    2. It’s funny how people are freaked about how much the US owes China. I mentioned something here a few months ago that the article brings up: China’s been keeping their currency artificially undervalued to keep their exports cheap, while buying US debt. This is exactly what Japan did in the 1980’s.

      Japan couldn’t keep that going, the yen rose in value, and all that US debt (and other dollar denominated investments) they’d bought declined in value by 40% – 60%. Oops. And all the while, they were subsidizing the US consumer by paying for a portion of the crap we were buying. Now China’s doing the same thing.

      All I have to say is that it’s amazing as stupid as our politicians are, they’re even dumber elsewhere.

  15. I don’t like these corporate welfare programs, but I would caution you against looking at the data in this way.

    Often, a project will open, secure the tax break, and employ people for a while – but then the market will continue to change, and the company will fail, or will make future cuts, or there will be management changes, etc.

    One thing about employment that the statists always forget is that it’s a highly contingent thing. Jobs can spring into existence, flourish, and die within a 5-10 year period – not because people are being scammed, but because that’s the nature of employment in a free market.

    The statists looked at the employment pattern enjoyed by the UAW, and thought it was normal. And it’s not.

    We don’t want to be like they are, so we shouldn’t act like this is a “job destruction” program because at some point in time after some telecom company got the tax break, events continued to move on and they ended up closing their plant. Jobs aren’t eternal. Most of the worst abuses of the statists arise from the fact that, fundamentally, they think that jobs ARE eternal, or should be.

    1. You mean there are people who hold a static model of the world and think that nothing should change, ever? And this throws them into conflict with people who think a certain amount of dynamic change is healthy and necessary? Interesting idea. somebody should write a book.

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  17. Again, the libertarians waste their time trying to count pin-head dancing angels….

    When are you guys going to realize that you can’t effectively count jobs created, saved, or lost, because you never ever ever ever ever ever never ever will know what would have happened in the counterfactual, and never ever ever ever ever ever never ever will be able to track the horde of secondary and tertiary effects of a policy?

    1. Great argument against taxpayer dollars going toward such efforts. Thanks.

    2. Chad, which season of The X-Files would you say was the best? For my money, it’s the season where that hick family had their limbless mom hidden under the bed. I think that was also the season where they had the carnival episode.

      1. Seriously, I’ll never hear Johnny Mathis’ “Wonderful” the same way again!

      2. Freaky assed episode. I’ve always heard Dueling Banjos whenever I think of that episode for some reason 😉

        1. Carnival episode was great (“Must have been something I ate…”), but one of my favorites was the one with the science fiction writer interviewing everybody. “I’m not saying it was Alex Trebek, I’m saying it looked like Alex Trebek.”

    3. But hasn’t Obama been counting just those things, Chony?

    4. If jobs “saved” is the measure, and if saved means not lost, then there have been about 100,000,000 jobs saved (and they’re still being saved) every day.

    5. We’ll also never know what jobs would have been created if the people who pay for all this waste got to keep the money in the first place. Because over a lifetime, who knows what a prospective small business owner could have done with the extra tax dollars he may have used to open a business. Who knows what needless govt regulation expenditures have done to keep potential employers out of the economy. Who knows how many people opt to work for as opposed to employ others because of taxes, regulation, and red tape. It’s sad you choose to focus on abstracts that use tax and spend as their basis for enactment. Given the two choices, I’d much rather see what individuals with more private capitol can do rather than a bloated bureaucracy giving handouts to selected entities.

    6. Again, the libertarians waste their time trying to count pin-head dancing angels….

      When are you guys going to realize that you can’t effectively count jobs created, saved, or lost, because you never ever ever ever ever ever never ever will know what would have happened in the counterfactual, and never ever ever ever ever ever never ever will be able to track the horde of secondary and tertiary effects of a policy?

      And you’re going to keep on using this inappropriately-applied, obfuscating metaphor. The federal government sure seems to be trying hard to count them. The count was the focus of the sales pitch, in fact. Not saying we were lied to, are you?

      How exactly is stealing wealth from some people (many of whom are not even alive yet) and giving it to others a net benefit to the economy, society, or individual liberty? Are you claiming ‘Teh Multiplier’ or ‘Teh Externalities’ here? Either way, Fail!

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