Flora entrepreneur Chip Estes sent me an email with an eye-popping attachment. It was the “Incentive Report” from the Mississippi Development Authority (MDA).
The MDA, which is controlled by the governor, states its mission on the home page of its website: “The leadership team at the Mississippi Development Authority is driven by a single mission: attract and retain top businesses and people to create vibrant Mississippi communities. With experience in every industry, our team is well equipped to help companies with their expansions and new locations in Mississippi.”
I guess you would call this a “private-public” partnership. Others call it crony capitalism. To a free marketeer like me, it just makes me shake my head in disbelief that a state dominated by the Republican Party would use a government agency to pick private market winners and losers.
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I know a majority of Mississippians do not support my opinion. Emmerich News, a network of 25 Mississippi community websites and newspapers, ran a poll on this issue. About 60 percent of Mississippians favor company-specific subsidies.
Our Republican controlled state legislature, which can’t pass an initiative and referendum bill in over two years, thinks nothing about having a secret, emergency legislative session to hand some mega company hundreds of millions of dollars with few restrictions. Most of these companies never come close to living up to their lofty employment promises. Clawback is non-existent.
There are tons of studies out there that show these types of company-specific subsidies hurt growth. I asked one legislative leader about this and his response was “I haven’t seen those studies.” This is a man that influences billions in state spending. All you have to do is Google “are company-specific subsidies good public policy” and you can spend the rest of the day reading these studies.
I listened to another state leader tell a crowd, waving his hand across the room, that such subsidies are a waste. “You’re just taking money from one employer and giving it to another.” Yet come the big day of the special session, this leader was standing tall in the photo op with a big supportive smile on his face.
There’s just nothing a politician likes better than a big industrial ribbon cutting. The media (what’s left of it) eats it up. The public loves the excitement of new jobs. Everybody’s happy. Except for one thing: It doesn’t work.
Exhibit One: Our state population has stagnated over the last two decades. Exhibit Two: Our labor participation rate is one of the worst in the nation. Exhibit Three: Our job growth is one of the lowest in the nation. Yet we’re leaders in the subsidy game.
You don’t really need a study (and there are tons) to understand why it doesn’t work. Favoring one company over another helps one company but it hurts the other. If you give subsidies and tax breaks to one company, it then has a competitive advantage over other companies.
It’s all about finding the best workers. A subsidized company can pay more, causing the unsubsidized company to lose employees. This turnover also has a huge cost in terms of disruption and retraining.
Hypothetically, you could attract workers from out of state, but that’s not happening, partly because the state has refused to expand Medicaid for lower-income workers. Workers are not going to move to Mississippi and lose their medical coverage.
So what’s the solution? Simple: Treat all companies the same. Does the state want to create a more favorable business environment? Cut the corporate tax rate for everybody, not just the chosen few with political connections and big-money sway.
Emmerich Newspapers has employed thousands of people over the last 30 years. We have never gotten a tax break or a single dollar in state subsidies. In fact, we can’t even get the state legislature to adjust our public notice rate for inflation. We are by law forbidden to charge more than we did 25 years ago.
State interference with the free flow of capital distorts the free market and lowers production. It’s as simple as that.
The Mississippi Republican Party is not a free market party. It is a “public-private partnership” party. There’s a big difference, as the MDA Incentive Report, which is attached to this article on the web, will attest.
The MDA grant program alone doled out $573 million over a five-year period. The “equity investment credits” totaled over $259 million.
My all time favorite is Continental Tire which has received $261 million in “impact funding” alone since 2016. So far, they have created 695 jobs. That comes to $375,539 per job. Just stick the $375,539 in the stock market and it will generate $30,000 a year.
The most invidious aspect of all these state subsidies sloshing around is the inherent political corruption it creates. Corruption is universal in government. It’s just more sophisticated in developed countries.
In poor countries you just give political leaders cash in a suitcase. In the U. S., it’s all about lobbyists, wining and dining, special tax breaks, government loans and company-specific subsidies. C’est la vie.
