Chamber of Commerce argues for more government less growth

Dispatch has the details:

The 2,500-member Columbus Chamber gave its blessing yesterday to the city’s proposed income-tax increase.

The group’s board of directors voted to endorse the Aug. 4 ballot measure, which would raise the city’s tax rate from 2 percent to 2.5 percent. Everyone who works in Columbus pays the tax.

But instead of the tax question, the chamber focused its enthusiasm on city leaders’ vows to intensify efforts to attract new jobs to Columbus. The tax increase is part of a bigger plan to shore up city finances that includes more tax-generating jobs and less general-fund spending.

“The city of Columbus must continue an aggressive focus on economic development and job growth, which is part one of this three-point plan,” said Ty Marsh, the Columbus Chamber’s president and CEO and a former chief of staff for Mayor Michael B. Coleman.

This will comes as no surprise to many – those who like to talk about the Chamber of Compromise, etc. – but while disappointing it is illustrative of a bad mindset.  Forget for a moment the fact that the mayor’s former chief of staff is the one leading the organization, and focus on what they sited as important: more economic development money.

This is what is known in economic theory as “corporate welfare.” I kid, I kid.  In all seriousness, however, this is one area where business is often interested in growing government.

This is the wrong strategy.

The problem is this economic development funding is not very efficient.  You have taxpayer money going to government bureaucracies that hire staff and set up programs that supposedly seek out qualified businesses and hand out money.  But in addition to the expensive nature of these state employees, the programs have to track jobs that are created, the flow of money, insure that all applicable laws are followed, etc.

In an ideal world jurisdictions would simply create attractive and low cost places to locate and create businesses.  Tax and regulatory systems would be simple and businesses would thrive thus in turn funding basic services.

There are two problems that get in the way: 1) perceived pressure as a result of competition amongst jurisdictions 2) pressure from businesses and politicians because of high tax rates.

In the first instance, government and politicians feel pressure to create economic dvelopment programs, and go after companies with tax incentives, because other states and jurisdictions do it.  The media plays a big roll in this.  If a company leaves it makes the papers and the news even if the job losses involved are small and likely to be insignificant given the size of the economy in question (100 jobs in a city with a million people).

This zero sum game mentality pushes people to assume that they have to offer these programs and handouts or they will lose out to others.  Soon the midnset sets in that these programs are what grows the economy and creates jobs rather than the companies themselves.  And of course, you soon have companies angling to get as much of the pot of money as they can.

Although conservatives often fall prey to the first problem, they are much more likely to fall to the second: the desire to give businesses a break via tax incentives and special packages.  The argument goes something like this.  Yes, these economic development packages are less than ideal but the tax and regulatory structure is stacked against business so until we can reform the larger structure these programs are needed to help business.  And of course the business community often makes this argument.

The problem is that this system just isn’t very effective.  Think about it.  If economic development programs were the way to growth Ohio should be doing much better.  Ohio has lots of economic development programs.  The Lt. Gov. was head of that department until just recently.  The state has passed bond issues and spent serious money on economic and high technology development and yet the economy is in the tank.

Real growth comes from providing goods and services that people want and need; and doing in an efficent and effective manner.  Much of this growth comes from small business owners and entrepreneurs who strike out on their own.  As they succeed they add workers and increase the tax base.  Large corporations frequently don’t grow but find ways to shrink their work force through technology and efficiency.

These entrepreneurs often don’t have the time or the focus to go seeking government handouts or to jump through the hoops these programs require.  They are trying to stay afloat and build their dreams.

What you need to attract these type of people are low cost and attractive communities.  Good schools, safe neighborhoods, low cost of living and doing business.  The trick is trying to hit that sweet spot.

The problem with the Chambers focus is that it will not contribute to any of the foundational goals.  It won’t make Columbus a cheaper place to do business – quite the opposite – and it is unlikely to improve the quality of living.

I know city advocates are arguing it will, but given the city’s track record I am cynical.  As I have noted before, I simply can’t believe that the bloated city government has only two options: raise taxes or cut critical firefighters and policeman. There are a host of programs and offices that are not connected to basic services.

What the Chamber has essentially said is “We will agree to higher taxes if you agree to hand out more money to our companies.”  Keep the government pie big but promise to increase our slice.  Nice work if you can get it, I guess.

But it is not in the best intereste of the larger business community nor will it bring dynamism and innovation to Columbus.  It is a vote for the status quo.  It is a vote for more government and less growth.

Sad that this is what the Chamber of Commerce has come to.