The bizarre economic theory of government-planned economic development is a disturbing one.  I think Craig Ladwig of The Indiana Policy Review said it best in his article titled, “Keeping the Crony Out of Capitalism.”  He explains that if you look at the annual reports from all the various economic development outfits around Indiana, you will be impressed… as long as you don’t ask too many questions.  The reports suggest thousands of jobs were created with hundreds of millions of dollars of new investment.  And whatever it was that was accomplished, was accomplished through “teamwork and collaboration.”
“Welcome to the world of economic development – where every city is above average and prosperity is just around the corner if you trust your community’s well-being to bond issues, tax-incremental financing (TIF), tax credits, carve-outs and such.”
This all sounds frighteningly familiar to us in Montgomery County.  Several local politicians are selling us on the notion that if citizens merely hand over more taxes for economic development projects “we can make Montgomery County great again.”  Without it, they tell us, we’ll face certain economic doom and gloom.  And so county taxpayers hand over $75,000 a year, and city taxpayers another $75,000 on top of that.  Oh, and if you want to know what that tax money is being spent on, tough luck.  Montgomery County Economic Development corporation (a.k.a.,“Indiana West Advantage”) says it isn’t going to tell you.
But David Penticuff, a veteran editor in Grant County who supported legislation to open the records of economic development groups to public inspection, asks why all the secrecy.  “The state and local economic-development groups are not conducting clandestine operations for national security; they are trying to lure capitalists to town.  We need to be able to follow our tax dollars with the public invited along and make a judgment on whether those dollars are used wisely by those spending them.”
Our local politicians claim secrecy is somehow more important that accountability and transparency when it comes to negotiating economic development incentives.  They claim the incoming business will get spooked away otherwise.  But can these same politicians prove that economic development incentives even work in the first place?  “How exactly can we know that the team of corporate attorneys across the table from our hometown mayor can be trusted,” says Ladwig, “How do we know that their client would not have relocated or expanded anyway?  And once the money is dispersed, how much sodium Pentothal would be needed to determine whether it actually produced any new jobs?”
Shedding light on that question is Tad DeHaven, a deputy director of the Indiana Office of Management and Budget from the Mitch Daniels administration:  “The Indiana Economic Development Commission might not admit it, but most businesses already know where they are going to locate before they contact the agency.  Businesses consider a myriad of factors, including demographics, transportation logistics and workforce capabilities when choosing where to set up shop.  Although the tax and regulatory climate is an important consideration, IEDC handouts are just that – handouts.”
DeHaven calls this “press-release economics.”  He explains that because a politician will get credit for creating jobs, businesses know they can extract taxpayer money from the community for these subsidies.  After a company reaches an agreement with the economic development corporation, the politician issues a press release and arranges a ribbon-cutting ceremony at the company’s facility.  The company then fulfills its end of the bargain by telling the press that the local government’s support sealed the deal.
Do we really want more of this in Montgomery County?  Do we really want to put our economic decisions in the hands of politicians instead of the free market?  If so, then none of us should be surprised when economic decisions are used for short-term political gain at the expense of long-term economic prosperity for our community.
Fred McCarthy, a former Indiana Chamber of Commerce official, has observed how the theory of government-directed economic development is failing, and proposes a better way.  He has put it in the form of a new economic advertising pledge:
“The State of Indiana announces a new policy for business development.  In the belief that businesses locate or expand more productively using long-term, genuine economic logic, we will no longer offer temporary tax incentives.  Instead, we pledge the efforts of government to create and maintain the best business climate for you.  Within the limits of fairness and justice, rules and regulations inhibiting such productive operations will be reduced or eliminated whenever possible.  Grants, abatements, subsidies and other tax gimmicks that depress governmental revenues and increase other taxpayers’ bills will cease.  On the other hand, be assured that tax dollars you may pay in the future will never directly finance your competitor.  All private businesses will be treated in the same way.”
Perhaps we as Montgomery County taxpayers should demand that the director of Montgomery County Economic Development corporation (Indiana West Advantage) sign this pledge as a condition of any future taxpayer funding.
John Pickerill is the chairman of the Montgomery County Republican Party.  The views expressed in this article are his own and are not necessarily intended to reflect the position of the Montgomery County Republican Central Committee.
1 Craig Ladwig, “Keeping the Crony Out of Capitalism,” The Indiana Policy Review, 28 Sep 2014.