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Business Observer Friday, Oct. 24, 2003 18 years ago

Review and Comment: Corporate Subsidies Ignore the Unseen

It's welfare. Welfare of the worst kind - corporate welfare.It's yet another form of our munificent government redistributing your/our hard-earned wealth for one of their pet causes, which they disguise as economic boons to us all.

Review and Comment

Corporate Subsidies Ignore the 'Unseen'

They just can't help themselves.

Whether they're local, state or federal politicians, they can't resist the overwhelming urge to hand out other people's money for do-gooder projects touted to be in the public's interest � or, as they say, for "economic development."

Oh, please.

It's welfare. Welfare of the worst kind - corporate welfare.

It's yet another form of our munificent government redistributing your/our hard-earned wealth for one of their pet causes, which they disguise as economic boons to us all.

In this week's edition of the Review, for instance, Senior Editor Kendall Jones details how Sarasota city officials - eager to force downtown to be shaped the way they want it, not the way the market would take it - disregarded their own rules and protocols that apply to everyone else and are handing out more than $6 million in subsidies to Casto Southeast, an Ohio-based developer, to attract a trendy health-food grocery downtown.

But that's gum money compared to what the brainiacs in Tallahassee were working on this past week. Up there, the governor and Legislature were writing laws so the federal government and state could provide a $310 million subsidy to California-based Scripps Research so it would locate a laboratory in Palm Beach County. Meanwhile, elected looters in Palm Beach County have declared on behalf of their county's taxpayers that they would provide $140 million in additional subsidies to Scripps.

Accompanying both of these projects are the usual economic multipliers and projections of how much new tax revenue would be produced over the next 20 years, how many new jobs would be created, how many new spinoff companies will be spawned, and how we'll all live happily ever after as a result of this wise use of your money.

You had to love the one projection out of Tallahassee that said Scripps would create more than 50,000 jobs over 15 years. And then the economist who wrote that said that number wasn't really a projection. He told The Tampa Tribune it was a "what-if scenario."

This stuff almost makes you giggle.

But here's the sad thing: It never ends.

And they never get it.

Economic subsidies are like all government programs - they benefit a few at the expense of the many. What's more, never, ever, do you hear any of the politicians address the "unseen."

The "unseen" is what will happen in the absence of the subsidies. The promoters of subsidies, for instance, argue as if the marketplace and economy will remain static if we don't give the subsidies. Or the subsidy promoters frame their arguments in a way that makes us all believe the marketplace and economy will perform better because of the subsidies than without the subsidies.

But they don't know that. They assume that Adam Smith's free hand is incapable of, or not as good, creating more and better value than they, the politicians. They assume that, left to themselves, individuals are not likely to create new ventures and new jobs of equal or greater value than the Scripps or Casto Southeast projects. That's arrogant, if not dimwitted.

That's the "unseen."

Ask yourself this question: In whose hands would you rather place that $450 million designated for Scripps or that $6 million-plus designated for Casto Southeast - politicians' or private individuals'? Who is smarter - the millions of creative Floridians who fuel this state's economic engine or the 200 lawmakers in Tallahassee? On whom would you bet?

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More random thoughts, comments on subsidies�

� When the state of Alabama blew the lid off of the subsidy game by awarding more than $300 million in tax breaks and other goodies to woo Daimler-Chrysler to Tuscaloosa about eight years ago, Nobel Prize winner Milton Friedman put it in perspective. He said, "Ask the retired widow on a fixed income in Mobile if she would rather keep her share of the subsidy and spend it on her needs or donate it to the executives who run Daimler-Chrysler."

� As state lawmakers and Sarasota commissioners award their subsidies, we can't help but think about the $1 million or more in subsidies given to Arthur Andersen in Sarasota nearly eight years ago. Money well spent?

� Wonder what the executives and stockholders of such Florida-based grocers (and amazingly generous corporate citizens) as Publix Super Markets and Winn-Dixie are thinking as they watch a competitor come in on the receiving end of a subsidy? You can hear them: "And this is the thanks we get?"

� Or maybe ask the owners of Sarasota's Granary Natural Foods Supermarket or perhaps the owners of Morton's Gourmet Market what they think about giving a subsidy to a competitor?

� While Tallahassee lawmakers spent much of last week crafting laws to hold Scripps Research accountable for its subsidy, you'd have to think that Scripps's president, Dr. Richard Lerner, who earned more than $1 million last year, was smart enough to be saying to himself: "Do I really want that $450 million so badly that I'm willing have all those Florida politicians poking their noses into our affairs?"

� Indeed, watch out what you take. Harvey Vengroff, whose Vengroff, Williams & Associates has created nearly 300 jobs in Sarasota has done so without a nickel of government handouts. Vengroff says his company - which has offices all over the world - frequently has been offered government freebies. But he never takes them. "We don't want anyone telling us what to do." And, obviously, his company doesn't need them. In fact, no company needs them � or should get them. Let the free hand ride.

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