Democratic presidential candidate Bernie Sanders received an avalanche of criticism when he called himself a democratic socialist. Meanwhile, the newly entrenched Mississippi Republican leadership is going full bore with its own kind of socialism.
When the government picks which industries come to Mississippi, you can’t get more socialistic than that. Russia tried that kind of centralized governmental planning. It didn’t work out so well.
Not content with the massive Yokohama tire subsidy deal, the Republicans are reaching new pinnacles of corporate welfare with their Continental tire deal.
According to “Good Jobs First,” a national organization devoted to “tracking subsidies and promoting accountability in economic development,” Mississippi is in the top 10 in company-specific subsidies per capita. A few years ago, Mississippi was number two.
So after 20 years of bribing companies to come to Mississippi, how’s it looking? With the third highest unemployment rate in the nation, not very good. That’s a typical lousy result for socialistic economic policies.
This high unemployment is worse when you consider that Mississippi is located in the middle of the fastest growing region of the country. It’s much worse considering that 25 years ago, Mississippi’s unemployment rate was consistently two percentage points better than the national average.
To put it another way, Mississippi unemployment used to be two percentage points better than the national average. Now it’s two percentage points worse. So after two decades of company subsidies, Mississippi has increased its unemployment by four percentage points. That’s 52,000 lost jobs – at least five times as many jobs lost than jobs gained by all these subsidies.
The newly subsidized companies simply steal the limited number of skilled workers away from unsubsidized companies. These lost jobs don’t make front page news but they eventually show up in our state’s terrible unemployment rate and anemic growth.
Mississippi’s case study is reinforced by academic studies showing company-specific subsidies lower overall economic growth.
Let’s take the Yokohama tire plant subsidies, which are potentially in the hundreds of millions of dollars. Yokohama promised 2,500 jobs, but when they opened their plant last year only 250 workers were hired.
Continental tire is promising 2,500 jobs by 2021, but only 1,000 initially. If history repeats itself, the big employment promises won’t pan out. The supposed “clawbacks” are rife with poorly disclosed loopholes. Basically, the corporate execs take our political leaders to the cleaners.
The result is Mississippi blows its wad on a drop in the bucket. Mississippi has 1,300,000 jobs. The Yokohama and Continental jobs won’t amount to even a fifth of one percent of our current workforce. Meanwhile, we deprive our roads, schools and basic infrastructure of critical tax revenue.
A better economic development strategy would be to repeal Mississippi’s unusual state franchise tax. That would help all businesses instead of just a few.
Most of the job growth in Mississippi comes from small businesses, which are forced to make up the difference when these mega-companies don’t pay taxes. Saddled with this unfair tax burden, smaller businesses stagnate, causing long-term economic damage to our state.
I have to shake my head when our governor repeatedly refers to these mega-deal bidding wars as a sports game. In sports, if you have a bad strategy, you lose the game or the season. In business, if you overbid, you go bankrupt in the end. But in government, the politicians can overbid and wrap themselves in victory because the consequences are long down the road after they are out of office.
A more apt sports analogy would be our state leaders playing a game of tackle football against the starting lineup of the Denver Broncos with $600 million at stake.
At $300,000 in subsidies per job, it would be better just to have a lottery and give 1,000 lucky Mississippians the cash outright.
Only one thing could possibly prevent Mississippi from foolishly overbidding: top-flight economic analysis.
I asked the Mississippi Development Authority for its Continental analysis and received a one-page document with four columns, only one of which was not derived by simple math. That column was “additions to the state general fund revenue from operations.”
Bob Neal, senior economist for the Mississippi Institutions of Higher Learning, was author of the letter. I am in e-mail contact with Neal about how he derived his numbers. He uses a respected outside economic modeling service called Regional Economic Models Inc. The models, of course, are only as accurate as the inputs.
In the past, I have been underwhelmed by the economic analysis used to justify these deals. In many cases, inputs and multipliers seemed manipulated to give a pre-ordained positive result.
I hope to get a copy of Neal’s complete model and its assumptions and report my findings to readers in later columns. I would be delighted to be convinced the state will benefit from this deal. We’ll see.
Just last month Lt. Gov. Tate Reeves said these words at the Stennis Press Forum: “I believe to grow Mississippi for the long term, our tax code should be flatter, it should be more fair to both individuals and businesses and I believe that government should not be in the business of picking winners and losers. That’s why I believe we should re-examine some of our tax credits and incentive programs.”
Great words. But when crunch time comes, everybody jumps on the bandwagon.
(Wyatt Emmerich is publisher of the Northside Sun in Jackson.)