Dennis Cauchon reports in USA Today on a massive program of business subsidies in Ohio, started by Republican governor Bob Taft and expanded by new Republican governor John Kasich:
Ohio has launched what appears to be the biggest intervention in the private economy by a state government since at least the Great Depression, according to a USA TODAY review of historical data. The state is preparing new industrial parks and high-tech office buildings, loaning money and giving grants to businesses, and subsidizing clean energy, websites, nanotechnology and warehouses, among other things.
The state will spend $1.4 billion on economic development this year. Indiana, by contrast, will spend $37 million; Florida $11 million. California has 25 people working full-time on economic development. Ohio: more than 400.
Ohio’s attempt to revive its economy is a real-life case of how states act as a laboratory of democracy. This industrial state is testing a provocative economic question: Can government direct the economy into the future, or is that best done by a free market?…
It’s unclear whether Ohio’s gamble will pay off.
A USA TODAY review of two dozen of Ohio’s state-funded projects found many behind schedule or failing to deliver the jobs or investment returns promised.
Economists are skeptical of such projects:
Ohio State University economist Mark Partridge says government efforts to plan an economic revival seldom work.
“Politicians and economic development officials overestimate their ability to forecast the future — to predict the next Silicon Valley or even to know beforehand that a Silicon Valley is going to occur,” Partridge says.
Government’s poor record of picking winners and losers means that even well-intentioned programs can hurt more than help, he says.
“A tax incentive for one firm means I have to raise taxes on everyone else or cut services,” Partridge says.
But the businesses looking for subsidies are more enthusiastic:
“We’re looking to get industry up and moving again,” says Andrew Doehrel, president of the Ohio Chamber of Commerce. “We’re not saying pick Company XYZ because it has a chance of success. We’re saying pick Company XYZ because they’re into plastics and Akron is successful in that field. It’s targeting that is necessary and useful.”
And what of Governor Kasich, once a budget-cutting House Budget Committee chairman and opponent of corporate welfare, who was once pictured on 60 Minutes with the Cato Handbook for Congress sitting on his desk? Kasich would stop this nonsense, right? Well, not quite:
Kasich, the new governor, has moved some programs into a quasi-private operation called JobsOhio that he hopes will be faster and more effective.
This new approach positions the government to act more like a risk-taking investor, [Kasich’s economic development director Mark] Kvamme says…. [More here.]
Kasich is expanding Ohio’s tradition of large-scale, government-directed development programs. His new budget proposes spending an extra $100 million a year in liquor profits on economic development. That amount alone dwarfs economic development spending in almost every other state.
What have you done with John Kasich, Ohio? Is this like the movie Dave, where you’ve found an actor to stand in for the actual governor? If not, then I hope Governor Kasich will decide to add government-directed economic development to his list of needed budget cuts.