Your tax money, not being spent on you: Corporate Welfare in Ohio

State lawmakers are thinking about ditching the $20 late fee on license plates now that so many have complained. Now they posture and say they don’t want to hit us with “hidden fees.”

Yet, no one is screaming loudly enough about these “Rapid Outreach Grants” which are tax dollar giveaways to private companies. This is truly CRIMINAL.

Three companies are getting nearly $850,000 in Ohio help to expand in the Dayton area.

The State Controlling Board Monday approved a $750,000 Rapid Outreach Grant for Code Blue LLC — a Wisconsin-based third-party claims administration services firm — which is looking to open a facility in Springfield and hire more than 200. The money, administered by the Ohio Department of Development, would go toward new machinery, equipment and hardware.

Other state funds are going to:

Assembly & Test Worldwide Inc., a Dayton-based provider of custom equipment assembly and testing for a variety of industries, will receive a $75,000 Rapid Outreach Grant to expand and add 45 jobs. In November, city officials approved a $150,000 development fund grant towards the project. The company will complete exterior renovations and add a production line for coating solar glass; and Quickstep Composites LLC of Dayton, which will receive a $20,000 Rapid Outreach Grant toward buying of machinery and equipment. The company has commercialized a method for the rapid curing of advanced composites used in aircraft and high performance automobiles. This $900,000 project is expected to create 20 jobs.

via Ohio doles $850K to three Dayton projects – Dayton Business Journal:.

The State of Ohio is robbing the taxpayers of Ohio (of whom over 10% are currently unemployed) and cutting services, raising fees and fines, and telling teachers and other public servants to take pay cuts, or trying to weasel out of pension commitments, while claiming poverty- yet handing our tax dollars (that’s what a grant is) to select individuals. I’ve called it corporate welfare, but- what it’s become worse than that- starting a business in Ohio is more like walking into a casino- run by the mob with a cover charge.

Here is how you play this game: Cozy up to politicians or unnecessary bureaucrats (the entire Ohio Department of Development) by paying into campaign treasuries- or even just “promising jobs” (the new crack to politicians) and make a case that you’ll take your business elsewhere if they don’t give you a handout of tax dollars.

Take the money.

Don’t deliver.

Get sold, disband, reformulate the business- repeat.

Need a poster child for this corporate welfare- read the posts on this site about Qbase. They are only one example.

Now, imagine you are an honest, hardworking, Ohio businessman who has paid his taxes, employed people for years- and happen to be a direct competitor to “Code Blue” (even the name fits- as it’s a term used by medical staff when it’s time to resuscitate a dying patient). All of a sudden, a new competitor pops up- with a three quarter of a million dollar cost advantage. They can temporarily pay more, or undercut you enough to put you out of business. Is it fair- absolutely not. Do politicians care- not unless you are one of their campaign contributors. Yep- we’ve become no different than third world countries we mock where you have to pay off the local powerbase to do business.

This is what has the tea-baggers up in arms- although they can’t enunciate it clearly. Our tax dollars are not supposed to be spent on things that make it harder for us to do business. Yet, it’s happening all over the country- so it must be the way the game is played. We do it- but, when Georgia does it better- we complain (NCR).

When local government builds a brand new office building and calls it an incubator, or “TechTown” with your tax dollars, and then offers subsidized rent- we forget that right down the street is an existing business like DHC which owns the old Woolpert building on Monument that has to rent its space. Or when we build “public housing” and offer it cheap– private landlords have to match price- or lose out.

I’m sounding like a right-winger on this, but it’s getting obvious that our political system is severely broken if these kind of deals are being done with our money- while the State can’t deliver the things it’s charged by law to do: public safety, public education, infrastructure.

The Ohio Department of Development has handed out many more dollars than these three grants. Which one in the future is going to make you lose your job, or break your business to fund someone else’s?

Level playing fields aren’t optional if we want capitalism to work. We complain about foreign workers taking our jobs and blame third world countries for our loss of manufacturing jobs. Trust me, you don’t have to look to China to see government tinkering with cost structures to tilt the playing field- we’ve got it right here in Ohio.

Go ahead and fine me $20 on the license plates to pay for the State Patrol- just stop giving away millions to my competition please.

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32 Responses

  1. J.R.Erwin February 10, 2010 / 7:40 am
    I applied for grants and stimulus for my projest. State, city & county.
    I would be creating 350 + jobs with my facility and 400 new construction jobs. My facility would bring at a minimum of $500 _ million to existing local business.
    We got…~ZILCH…..
     
     

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  2. David Lauri February 10, 2010 / 9:52 am
    David, did you actually read the article about public housing to which you linked? I did, and I don’t see mention of “building public housing” with which “private landlords” will have to compete.
     
    No, what I read was that “1,360 homes will be repaired” — homes owned by lower income people who could not otherwise afford to make “emergency home repairs such as furnace replacement and roof restoration, and handicapped accessibility.”  Do you oppose this, and if so, why?
     
    I also read that “60 households will be provided down payment assistance” — presumably these families will be buying houses from private sellers.  Do you oppose this, and if so, why?
     
    I also read that “250 households will be provided home buyer counseling” — again, presumably these folks will be buying houses on the private market.  Do you oppose this, and if so, why?
     
    Perhaps I misread the article that you linked to.  Can you point to a sentence in the article that says that the grants will cover the building of public housing?

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  3. David Esrati February 10, 2010 / 10:02 am

    @David L- I did read the article- and yes, I could find a better article to link to- however, if you need down payment assistance- how will you be able to afford repairs, upkeep, taxes, or- payments if interest rates go up?

    The systemic problem of defaults- has come from mortgage holders securitizing debt. If the government wants to subsidize home purchase- let’s just take the banks out- and provide everyone with the ability to get an extremely low interest loan on all homes that fall at median or below prices, and incomes are within 25% of average for the community.

    Piecemeal solutions cause inequity. What we are doing is subsidizing banks – that we will later bail out when the loan goes bad. This makes no sense.

    Emergency home repairs- I don’t have a problem with. However, I don’t believe in making them just so the bank can repo the houses later- so maybe, if the house transfers in the next 3 years- the money is paid back into the fund?

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  4. Greg Hunter February 10, 2010 / 10:04 am
    Seek and Ye Shall Find.
    Assembly’s history – Tracking Glennon Around.
    Husted seems to be popular with Glennon (20k) but not outdone by Mathile (22k).
    Now if you search far enough quickstep is tied to the NCC in Dayton run by Louis Luedkte
    Interesting that the Republican oil is pretty well greased indicating the taxpayer is pretty well greased by these well meaning people out for the public good.  How can you question these types of transactions as all these people are god fearing christians doing right by their fellow man
    So the real question is do they bring a return on investment?
     

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  5. David Lauri February 10, 2010 / 11:49 am
    Interesting, David.
     
    On the one hand you oppose tearing down any of Dayton’s existing housing stock to be replaced with green space that would make remaining houses more marketable or to be replace with new housing that wouldn’t require extensive repairs to be livable.
     
    On the other hand you seem to be saying that helping people to buy housing–which could encourage people to move from apartments into the existing housing stock you want to keep–is not a good idea.
     
    You say building cheap public housing is a bad idea, which is certainly a defensible position although, as you admit, the article to which you linked did not provide an example of this being done (and frankly in the Dayton area, though I may be wrong, I don’t think low income housing is being built with there being instead a push to vouchers to place low income people in existing private market housing), but you seem to think that encouraging buying houses (which, though it might indeed help banks, would also help the people who own vacant houses and can’t sell them) is a bad thing.

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  6. Karri O February 10, 2010 / 1:06 pm
    Esrati points out one of the major problems I have with many subsidies and grants – the businesses get their money based on promises and projections, and not on what they actually deliver.  The state is too lazy and often too inept to follow up on the results of the grants, and they don’t have any real power to enforce the promises.  If they DO go after the businesses, then the businesses threaten to pull out of the state.  The only time you hear about the state trying to get their money back is AFTER a subsidized business pulls out (DHL, anyone?).
     
    Ideologically, I agree with Esrati that all forms of this corporate welfare should end, but as a real-world issue, I get that in today’s current global situation, it’s just not going to happen.   Credits and incentives are as much a factor in moving businesses as are lower wages for workers.
     
    Here’s my disclosure – I lobbied HARD for the new Ohio film tax credit because I know without it, I cannot bring any films here.   I also lobbied for spending caps, and salary caps on out-of-state talent, and for incentives which made it more attractive for filmmakers to hire and train Ohioans displaced from other industries.  Two out of three made it into the current legislation.
     
    I work in the film industry and as such have seen firsthand the sweeping changes that tax credits have made in my industry.    I’ve worked all over the world, and in the past 8 years have not been involved with a film that did NOT use some form of tax credit.  These are not little art house films – these are commercial projects, some with studio backing.
     
    The difference in these credits, however, and the credits Esrati mentions in this posting, is that almost every state and country  that issues film tax credits requires the money to be spent and the filmmakers to PROVE their spend and the number of jobs created BEFORE any money is handed out.
     
    Think about that fundamental difference, and what it would mean if ALL credits and incentives were handed out that way – as a reward for bringing in work that had a measurable effect on the community as opposed to a “oh, please please please come here – we’ll give you all this money RIGHT NOW and we trust that you’ll do what we want!”
     
    For the record, the better and more established film rebate programs are rather conservative in the amount of money  they rebate – they just have better legislation,  more clearly defined rules and goals and good administration of the rebate program.   They are more user friendly, and even though they may pay out less, they attract a better level of business.
     
    The problem isn’t the credits themselves, it is the fundamental problem of giving away the farm before any benefits are established, coupled with the lack of good legislation and proper oversight at tax and revenue (the office charged with compliance).
     
    I disagree with Esrati that the solution is to end all credits – they are just too much a part of how the  global economy works these days.  I think the solution is to take a hard look at each credit, and see what can be done to ensure each does what it is designed to do.   The easiest way to do that is to have good legislation that clearly defines the goals and requirements, and require the companies to commit, come in, spend the money and hire the people BEFORE we give them our money.
     
    Would it scare away some businesses?  Sure, but it would scare away the same businesses that would be the first to use up our money then run to the next state.    This kind of “after the fact” rebate would favor either established companies looking to expand in the area or startups with solid backing.  I’m a fan of small businesses, but if they need the money upfront to get the doors open, then they don’t seem like such a great bet to me to deliver the results these kinds of credits are designed for.
     
    I can tell you firsthand that getting good legislation is not an easy thing – the state government has this idea that they can’t ask anyone who actually WORKS in the industry any questions directly – so it takes a long time to get them up to speed with how any new industry actually works and the get them to understand how quickly any loophole will be exploited.  Lots and lots of polite phone calls.
     
    There are many problems with tax credits, and lack of accountability for results is a huge part of that.  I wish I could make China stop subsidizing steel, but my Mandarin leaves a lot to be desired.   I wish US dollar would have been sucking just a little more in 2008 to make up the difference of the Canadian tax credit so I could have brought that movie to Cleveland and not Vancouver.  I can wish for a lot of things, but as a politically aware Ohioan, a better use of my time is working with the Department of Development, trying to make sure that any Ohio tax credit is well written, has clearly defined rules and regulations, and is properly administered, and being vocal if any of those things are not as they should be.
     
    We should have no reason to oppose any tax credit that does what it is supposed to do, and that has a net benefit to the people funding it.
     
    Now, if you want to get rid of all credits and incentives, then let’s get our government to start making the US competitive right here at home through higher import taxes and pulling out of some of these trade agreements.   Put the (heavily subsidized) Wal-marts right back to buying american when they can’t get everything cheap from China anymore.   Just make sure they don’t make anything I buy cost any more.
     
     
     
     

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  7. Robert Vigh February 10, 2010 / 2:05 pm
    You know what? I am just going to agree with David Esrati. I am not going to recall any other arguments or threads, contained to this article, you are simply correct.

    A quick something to think about in the “global” economic justification for tax credit. Lets assume that both India and the USA make an item. Because the USA’s production is more efficient the cost per unit is the same. OK, so we have equal basis, but now lets have the Indian government subsidize theirs. The Indian product is now less expensive than ours. So we buy it and our American firm has to find something else to make. What is the net effect of the item? Well, India paid for part of it. So we get the same product for less. Essentially, India just exported societal wealth to us by covering some of our costs. Our USA manufacturing company will have to find a less competitive market to compete in, which will probably result in a higher margin. Or they will make it better or faster to stay alive. Other countries subsidizing does not necessarily mean that we lose.

    Karri O, you are applauded for trying to make them work as they should. Of course, I am one that believes that the subsidy should not exist. The subsidy probably results in to many films. The actual supply of films is greater than it needs to be because we subsidize them. But, at least it is a more functioning subsidy. It still does not make it “correct”. Also, part of my disagreement stems from different people in power at different times getting to determine their preferred subsidy. It will constantly change and it will constantly be a competitive position to be the elected individual to make those preferred choices. Allowing it to happen is a means to breed corruption.

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  8. Greg Hunter February 10, 2010 / 3:41 pm
    The difference in these credits, however, and the credits Esrati mentions in this posting, is that almost every state and country  that issues film tax credits requires the money to be spent and the filmmakers to PROVE their spend and the number of jobs created BEFORE any money is handed out.

    Interesting that this stipulation is in place for films.  One would wonder whether this is a cultural bias against film makers as they are “considered” liberals and therefore suspicious of “wasting the tax payers money”, where as most Business Owners are Republican and therefore “job creators” so there is no need to question their integrity!  Of course they are job creators.  But if you look at the links I provided the story says that as owners of Corporations they are bailed out while the individual is not.  I wonder how the Supreme Court says says that a Corporation can be a Person for First Amendment Protection, but is not Taxed like a Person.  Must be nice to be on the “right” side of the law each time.  I wonder how that happens,  err could it be the people that fund politicians ensure that they work for whom gets them elected.  Bizarro World at its finest.

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  9. jstults February 10, 2010 / 3:46 pm
    Karri O:

    Put the (heavily subsidized) Wal-marts right back to buying american when they can’t get everything cheap from China anymore.   Just make sure they don’t make anything I buy cost any more.

    Ha, ha, (wipes tear), ha, ha, ha.  If you can figure out how to get that done you have my vote (or investment).
     
    Robert, nice analysis about exporting wealth by subsidy.  Now what happens when you are buying the subsidized stuff with money you borrowed from the subsidizer?

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  10. Karri O February 10, 2010 / 11:43 pm
    Well, I was hoping you could get a joke without me using an emoticon:)   Of course I realize prices would go up – one of the huge reasons the US government is not going to do the things I suggested.

    I don’t know why film incentives are after the fact, but would make an educated guess that it is because film credits in the US were largely put in place to compete with Canadian ones, and that’s how the Canadian ones work. 

    As far as films go and incentives creating a glut of films, I’d certainly agree people make far more films than there is commercial space for, but I think you’d find that to be true of any business, incentivized or not.  How many freaking coffee shops do we need?  How many restaurants go out of business a day in the US?  How many empty new housing developments or apartment building bank repos do you drive past?  People will always have the dream of creating and owning a busines, but few of them are qualified to do so, and even fewer have a valid business plan and enough financial reserves to make it.

    A proper incentive, at the heart of it, should be meant to help businesses with a legitimate shot of succeeding to achieve goals that also help the state (or county, etc.).   It should create more jobs and/or more revenue that it costs in money paid out, every year, or it should be discontinued if it cannot be tweaked into a working program in a timely manner.

    Having stated goals and required results makes a credit less of a rotating political target.  If you have a program that is bringing more money that it costs (and that includes covering the opportunity cost of that money – another advantage of a pay after the fact incentive), then EVERYONE is going to want to take credit for it.   Let them, if the program is helping in the way it should be.

    Robert:  what is the cost of this “imported wealth” when not competing on a global level puts our companies out of business?   It’s not like we are swimming in new jobs – I mean, I like solar and wind power as much as the next guy but I don’t see that saving Wilmington any more than the money our elected officials threw at that airfield without ensuring the proper return on our investment.   

    We desperately need new industries and more education for our workforce, and those investments take money and time to reach fruition.  In the short-term, we need to give the businesses we do have a chance at a level playing field.

    I wish that the US and/or our businesses could be competitive right now without incentives, but I don’t believe that to be that case.  A more achievable short term goal is to make what incentive programs we chose to champion efficient and effective, with competent oversight and accountabilty from the state and the businesses benefiting from any incentive.   If the incentives are not meeting their goals, then they are not funded.  THAT I believe to be an achievable goal, especially if existing and future incentives switch to a “prove it then we’ll pay you” model.

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  11. Civil Servants Are People, Too February 11, 2010 / 2:04 am
    Every government contract for anything is arguably a giveaway to private business if it results in coporate profits.   Does that make it wrong to build highways or purchase equipment?
     
    Before you throw out the entire Department of Development, keep in mind they also help save old buildings with the Historic Preservation Tax Credit and repair the environment with the Clean Ohio fund.     The film thing is cool too.
     
    All these programs require spending the money first – much like the grant programs require the purchase of fixed assets and include reporting requirements and clawback options.
    http://www.development.ohio.gov/EconomicDevelopment.htm
    http://www.development.ohio.gov/edd/jctc/
    http://www.development.ohio.gov/OTI.htm
     
    These are not exactly secret websites.   Any business can read the information, determine if they meet the criteria, and apply for them.   Presumably, the criteria are based on best practices, state laws, and strategic objectives.      Probably not perfect, but they help Ohio be competitive with other states at least.
     
    One man’s pork is another man’s business decision.   This money is  a drop in the bucket.   But OH, how those inconvenient facts get in the way of everything.
     

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  12. David Esrati February 11, 2010 / 6:05 am

    @KarriO – incentives – isn’t that what “executive pay packages” are?

    I’d propose that during a time of war, and economic crisis- with the taxpayers taking it on both sides- both in lost wealth through pension plans and mutual funds nose diving- and then having to bail out the criminals who stole their cash with CDOs and naked shorts- that the government impose compensation limits on publicly traded companies- based on US employment and their average compensation. Any pay over $500,000 a year would have to be justified by actual job creation.  If you don’t like the limits- take the company private. The sample ladies getting fired by Sam’s club to be sent to a sub-contractor should cost the company execs- not the sample ladies.

    I’d also impose restrictions on pay for non-profit companies- including the same payroll restrictions- because I’m getting sick of seeing nurses taking pay cuts- while hospital execs roll in the cash.

    @CSAPT- sure, you can say that giving out a government contract to build a road is a giveaway  to private business- but we then have a road. The project is bid- the goods or services are delivered.

    They don’t get paid until completion- and must post a bond to get the work.

    If they want handouts – grants- where we, the general public get nothing back except the promise of jobs or “investment”- I want to see a bond in place. Deliver or the money back.

    The examples you use- like preservation- and keeping Ohio clean- have tangible payback to all- old buildings give us a sense of place, character- and they don’t fill up landfills- etc. Promise of jobs in return for political contributions- hmmmm….

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  13. Robert Vigh February 11, 2010 / 8:41 am
    Karri O: The correct question is how many MORE restaruants and coffee shops would go out of business and would we have if we subsidized them? These markets are driven by demand, whereas a certain portion of the film industry is going to only be driven by subsidy.

    Looking at the cost of imported wealth. Well, it means 2 things. We as consumers have cheaper subsidized goods and require smaller wages to maintain the same standard of living. It also means there is probably a demand for import and logistics from India and the US workers are going to have to do something else. If on a large scale we assume everything is made in India and we make nothing….what then? Well, no American goods means no demand for the American dollar to buy those goods? No demand for the dollar decreases the value of the dollar. What then???? Making stuff here becomes cheap again, manufacturing returns and we compete and export until the value of the dollar equalizes. But, we are still buying subsidized goods and importing wealth. Taking your statement to its logical extreme is saying we have to be socialist to compete with socialists. I disagree.

    Also, keep in mind that every dollar the state takes in taxes is from a wage earner / business owner. These are all people that could invest and save their money as opposed to giving it to the state. Savings means more money to lend. Reinvesting by businesses means job creation. The state is limiting savings and job creation by taking money to try and create ……job creation! It is bad logic, the fact that they are really bad at it is just icing on the cake.

    @David: Limiting executive pay is not a good idea nor just. Public pools of money are created via the government through use of “force”. Companies are compensating executives at the market level. Each and every investor has the decision at anytime to buy into these companies or sell their stock and get out of the companies based on the whether or not they like the executive pay package. Their is no reason to legislate this, since each individual is already empowered to invest elsewhere.

    @CSAPT: Don’t go roads. Everybody always goes roads. “Well, there are roads, so we might as well build spaceships too!” Roads are no justification. Also, your inconvenient fact scares me a little. “its a drop in the bucket”. Soo…….waste and forced inefficiency are ok at small levels? Or this current level? Or the level that “you” find small which could be 10 drops in the bucket?

    Side note: Historic preservation is a terrible idea. The other things you listed are other forms of government subsidy, each has an argument against it and each could creat its own thread. AND each is NOT a justification for more subsidy. That is what the premise of your post seemed to be.

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  14. jstults February 11, 2010 / 8:56 am
    Robert, I hate to pick nits since that was such a clearly thought-out response, and you probably have wealth-creating things to do as opposed to commenting on this site, but what about the leverage (borrowing from the foreign subsidizer to fund the importing)?

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  15. Robert Vigh February 11, 2010 / 9:22 am
    Lets work on the premise or help me narrow the scope of the question. What about borrowing from China to buy from China? I can assume you are asking in regards to our governments sale of treasury bonds to foreign countries? In this case do you think there is a direct correlation between borrowing and buying or do we have alot of welfare programs that siphon off the borrowing distorting the direct relationship between borrowing and buying? Happy to discuss,  my brain is everywhere on this one, help me narrow it down please.

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  16. jstults February 11, 2010 / 9:43 am
    Lets work on the premise or help me narrow the scope of the question. What about borrowing from China to buy from China?

    That sounds like a good example.

    I can assume you are asking in regards to our governments sale of treasury bonds to foreign countries?

    Yes.

    In this case do you think there is a direct correlation between borrowing and buying or do we have alot of welfare programs that siphon off the borrowing distorting the direct relationship between borrowing and buying?

    Either way, eventually that money gets into the economy and used, so I think there’s a correlation whether you include the inefficient operation of gov or not, I didn’t think those sorts of distortions would be the important part, but if you do then run with it.

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  17. David Esrati February 11, 2010 / 9:45 am

    Robert Vigh: @David: Limiting executive pay is not a good idea nor just. Public pools of money are created via the government through use of “force”. Companies are compensating executives at the market level. Each and every investor has the decision at anytime to buy into these companies or sell their stock and get out of the companies based on the whether or not they like the executive pay package. Their is no reason to legislate this, since each individual is already empowered to invest elsewhere.

    Then we’d have to do away with mutual funds and place limits on anything that allows pools to be created to buy stock- because, frankly- the small investor has zero choice in how executive compensation is worked- and with public money invested by pension funds-

    and our insurance premiums invested- etc- there is no reason for the people who are playing the shell game with OUR money- and moving it in such large quantities- so often- that our entire economy moves with it.

    There needs to be personal risk taken by CEOs to get personal return. The system is borked-

    how can someone get paid millions for losing billions. Please- rethink your argument and come back with something rational.

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  18. jstults February 11, 2010 / 9:51 am
    David:

    how can someone get paid millions for losing billions

    Principal-agent problem, that’s how.

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  19. Greg Hunter February 11, 2010 / 10:13 am
     (borrowing from the foreign subsidizer to fund the importing)? JstultsSo we buy it and our American firm has to find something else to make. Robert Vigh

    Well Robert I have really not seen this kind of nimble behavior as it is like turning the Titanic.  Interesting that you have a perception that all that investment in tooling for a certain product line can be thrown overboard and then as if by magic produce something else.  I think that people forget what it took to grow these industries and obviously these rising countries have seen the success of America and have attempted to emulate it.  The problem that I see is that to turn an old phrase “The Love of Money is the Root of All Evil”.  With that said I would suggest that Wall Streets insidious rant on Free Markets and co-opting the Professional Class into this belief set has set about ruining American Manufacturing so that it may reap the skim (increased profit) off the lower cost to the Corporation without that much lowering of the price of product in question.  Americans have been conditioned by Corporate owned Media that this process is beneficial or efficient.  The erosion has happened so slowly and at a time when spouses entered the work space to take up the slack as purchasing power reduced.  (Now I will admit that the typical American has a lot more stuff today, but what it gained in efficiency it lost resiliency a very important distinction)  Combine that with Wall Streets elevation of Economists as Scientists while denigrating Scientific or Critical Thinking the populace has been dumbed down to the point that in general they do not understand the importance of Natural Constraints versus Technological Innovation.  Economists have convinced people that these transitions are smooth, natural and unavoidable and maybe that is so, but only if you believe we are no smarter than yeast.  Which I contend is the case at this point.  So if we look at who benefits from this system follow the MONEY.  Wall Street benefits and sells it as We are lifting these people out of Poverty, while it pays a pittance to DC masters and the Chinese Bureaucrats that orchestrate this process.   Wall Street makes money by destroying the rise of the Middle Class by rapid movement of manufacturing to the lowest cost and then makes money by laundering it from the Bond Sales for China or helping the Leaders of Corrupt Pro Western Governments Launder the loot that should be enable the rest of their societies benefit.  Nigeria, Haiti, Equatorial Guinea along with many others come to mind.  America is now the Cop for the Elites in Business and has no interest in America as a Country.

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  20. jstults February 11, 2010 / 11:17 am
    Greg:

    Well Robert I have really not seen this kind of nimble behavior as it is like turning the Titanic.  Interesting that you have a perception that all that investment in tooling for a certain product line can be thrown overboard and then as if by magic produce something else.

    If we want manufacturing to come back to these united states, then we’ll need to figure out some way to be more nimble.  The ‘top’ of the value chain is really nimble, a man with a computer can turn on a dime, hence the very competitive nature of that ‘professional class’.  We’ve got to figure out how to push that same technology enabled nimbleness down the chain.  I know vertical integration aint sexy no more, but if you want manufacturing, you’ve got to figure out a way to make it pay.
     
    Don’t get me wrong, I used to be a very ‘devil take the hindmost’ sort of guy, and so I’m still uninterested in tariffs and subsidies.  But I also realized, the devil isn’t actually there to take them, so they build up.  And then eventually the ‘devil’ is actually that mob of ‘hindmost’ with pitch-forks and torches howling at your gate.  At some point (and we haven’t gotten to the point of real pain yet), we have to consider the effects on the stability of our society of lots of unemployable people.

    America is now the Cop for the Elites in Business and has no interest in America as a Country.

    Smedly got some of it right, but I still think that’s a caricature.

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  21. Karri O February 11, 2010 / 12:38 pm
    David:  No, I wouldn’t call executive pay packages an incentive, I’d call them a great example of what an incentive is not.    A true incentive would have guidelines on how money could be allocated, a goal other than “Oh, sh*t, you’ve been doing what???  Take this money, just don’t go under!”, and would not be granted in a state of panic

    Robert:  In the world right NOW, politically and practically the kind of market system you descibe is not going to fly.    America cannot sit through years of record unemployment and job loss waiting for the global marketplace to lower the price of goods enough so that we can afford them again.

    And think about that for a minute – having driven the US out of the manufacturing business and having made us dependent on their products, do you really think that these countries are going to continue to sell us goods at a lower rate?   Hello, oil anyone?  We’re a huge market, yes, but not the only market, and decades of our “in your face” American foreign policy has set us up as a target to more than just terrorists.

    The long term solution – education and new industries – won’t happen overnight.  Our aging manufacturing workforce is heading to retirement (often forcibly) and our days as a manufacturing powerhouse are over without a massive policy shift in the government and a shift in values in the average American.  We’re so used to being on top that we’ve neglected business and workforce development for decades.    I believe the short term use of smart incentives will speed up the development of the kind of industries and workforce we need to keep up with global competiton.

    Americans are amazingly wrapped up in having to be right all the time and we’ve been shifting our priorities and approaches to business with every regime change.  It’s not working, but it is easier to get the people to rally behind someone to blame than it is to get them to look to what the real issues are, and come up with some real solutions.

    No matter who is in power, and no matter what the ideology is, if you look at any legislation, regulation, incentive, whatever with the mindset of  “what is this intended to do, what are the required payoffs, how can we make this streamlined and efficient, is it cost effective, and how do we make both the government and the corporations (or individuals) accountable in a real way if this doesn’t deliver?”  you are going to be in a better place than just panicky pork project spending meant to hold one side in power a bit longer. 

    Good government and good business must be able to withstand transparency and public scrutiny.      Both should be in the regular habit of self review to remain current, effective and streamlined, and be accountable (to shareholders or the public) when they are not.    

    It may be a little “Hope-y, change-y” I admit, but my personal life got a lot better when I realized the value of good credit, saving a little money, and being accountable for my own decisions.     Maybe the rest of the country will dig themselves out payday loan debt and mortgages they should never have taken out, and realize their government needs to be fiscally responsible as well.

    Fiscally responsible does not equal uninvolved or uninvested, however.   It just means making sure our money is working for us.

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  22. Robert Vigh February 11, 2010 / 2:00 pm
    KarriO: The world I described is today’s world. I gave a small example of of an isolated event, but we have currency fluctuations as well as manufacturing fluctuations. Neither of these is reason to increase the size of the state by flowing subsidy through them. Again, taking money from people who are already creating jobs in an effort to create jobs via the government is some bad logic.
    Greg: Titanic? The markets move equally as slow, do does information about the new price of goods. It is an ebb and flow and companies have time to react.
    KarriO: Fiscally responsible is not possible when applied to the government.
    Jstults: Will work through that other question soon.

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  23. jstults February 11, 2010 / 2:30 pm
    panicky pork project

    That was a British progressive rock band right?  I know I’ve got that album around here somewhere…

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  24. Karri O February 11, 2010 / 4:27 pm
    – Fiscally responsible is not possible when applied to the government.

    How sad if you really believe that is the case with all government.

    – Again, taking money from people who are already creating jobs in an effort to create jobs via the government is some bad logic.

    Not if it is more cost effective per dollar of spend to create jobs or revenue in that way.  Even when companies have been given tax breaks, it did not always lead to the end result of anything but lining executives’ pockets, just like many incentives have not be administered in a way that produced anything but a good re-election talking point for the legislators that championed them.

    Basic human nature means any business or government will be imperfect and to some degree self-serving.  Just got to try to make it as good as it can be.

    And I’m pretty long-winded, so I’m probably good for a few band names :)

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  25. Gene February 11, 2010 / 5:20 pm
    That IS THE CASE with most government. It never ends with them… why don’t they buy everyone trash bags who have trash in their yard, or clothes for those who have little fashion sense. The government is the biggest waste of a middle man in the history of any world. We get taxed so they create jobs from people who are not insentived to do anything correct or quick. They move at their own pace, which is more often than not slow. They spend anything that is put on their table. They lick their chops at seeing the tax dollars role in… they just want to spend spend spend. Like a drunk in a bar with unlimited funds.

    Not if it is more cost effective per dollar of spend to create jobs or revenue in that way.

    What? So it is ok to take earned profits and give it to the lazy fat government in hopes of not only  creating jobs but creating jobs that are needed, productive and cost effective? My gut tells me about 40-50% of current government jobs could be done away with, and they will not create needed jobs. Sure, we could hire a bunch of people to build a road to no where, but is it needed? NEEDED? Government backers don’t understand the word NEED.

    My friend said the other day that his sister does not need another kid, afterall she had two. NEED? She did not need the first or second. Need means need, not “want ” or “desire” or any other wrong definition. We don’t need the government as big as they are, on a  local, state and federal level.

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  26. Robert Vigh February 11, 2010 / 5:40 pm
    KarriO: It is not an emotional matter, simply a statistical one. When was the last time the federal government has a surplus? How many times in the last 100 years has it had a surplus? What is the history of government run facilities .vs privately run facilities? All these answers lend themselves to my conclusion on the federal level. (Hint: Clinton borrowed from other funds to have a surplus on the general fund, but the total budget for the year was a net deficit. Clinton did not have a net surplus during any year in his presidency.)

    Regarding taxes. Lets assume executives put more money in their pockets. They do not stash it in the mattress, they save it. Saving it in any financial institution means that money is put to work in the form of loans or investment. It continues to add to the economy. Since the government has a long track record of inaccurate accounting and inefficiency, what exactly makes you believe that government can possibly put the money to better use? 

    My overall point is why can these companies not raise money through investors? If they have a business plan and a means to produce jobs and profits, then why does the state fund them? It is simply a competitive tool the state uses to attract the work to Ohio away from another state. They could just as easily attract them by lowering taxes on everyone and being more fiscally responsible with the taxes they collect. Ohio buy the way, is above the national average (9.7%) in state+local tax burden on people, ranking 7th in nation at an estimated 10.4%. So every time I see a drop in the bucket subsidy, I simply have to ask myself……..”Why am I paying for this? And when do I get paid back?” ……..I recommend you never ask yourself these questions if you want to live an aggravation free life.  

    Anyway, I agree with you on make the best of what you have. I just wish I had more individual freedom to make decisions with my earnings. I would choose not to subsidize these particular companies.

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  27. Civil Servants Are People, Too February 12, 2010 / 4:21 pm
    @ My overall point is why can these companies not raise money through investors? If they have a business plan and a means to produce jobs and profits, then why does the state fund them? It is simply a competitive tool the state uses to attract the work to Ohio away from another state.

    Investors are great for Fortune 500 and the  Silicon Valley.   They do very little for Main Street, USA.   Small businesses have to depend on banks.   Banks require equity – and a LOT of it these days.
     
    Incentive programs are typically designed to work with traditional banks to reduce the out-of-pocket cost for companies with good cash flows and pro formas.    If they company can’t get a loan, they  won’t get an incentive either.
     
    Look at Dayton for example – most of the incentives go to local companies that are trying to grow.  Growing companies create jobs.    Cash flow is usually the biggest problem.   Help the cash flow equation, and you help your local  company expand.
     
    For most companies relocation is the exception, not the rule.
     
     
     

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  28. Robert Vigh February 12, 2010 / 5:04 pm
    CSAPT: I guess I just dont buy it. I own a small business and we have a bank loan. We also had access to individual investors that would have lent us money. We could have advertised for investors. We could have gone to Prosper and pitched ourselves. We could have gone to venture capitalist or banks with a tendency to review and work with smaller businesses.

    I think subsidy is unnecessary and creates distortion in the market. If a company does not have the cash flow to expand and cannot attract investors………..then that probably means they are the worst current investment and do not represent acceptable risk. Believe me, the greatest impediment to my companies growth is the government.

    Furthermore, the government cannot isolate or determine who is doing the best job in a given industry. Their subsidy to one company may very well give it the competitive edge to drive a more efficient, more conservative company out of the market. It is a distortion. Any subsidy in a market that already exists, is taking profits from a group of competitors and giving it their competition.

    Oh well, we can disagree.

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  29. Karri O February 12, 2010 / 10:23 pm
    Well, the point of the film incentive anyway is to draw in money that would otherwise assuredly go to other states.  With no incentive, the local share of the multi-billion dollar industry would be very negligible.    With it, we could get over $100 million in new business over the next 18 months, and put many people to work.
     
    Good or bad, incentives are so prevalent in the film industry that it not a matter of can you get a rebate, but which rebate should you chose.   Just like Wal-Marts and Targets – you’d have a hard time finding one where incentives were not in play to some degree.
     
    I’m clearly biased, but there are many reasons why the film industry is so heavily courted that make it a better bet for states looking to foster new types of industries.   Happy to expand, but it seems off topic – too bad I was working in Iowa (great example of a bad incentive, but we still shot there) during the July discussion of the new film incentive.
     
    Incentives, good, well thought out ones, put more money into the community funding them than they cost.    I’ve seen the enormous boost good rebates have given cities like Albuquerque and Shreveport.
     
    Plenty of very well thought out arguments against them here though.

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