Center for Limited Government Newsletter – Jan. 12, 2012

1. Government Job ‘Creation’

By Ed Robinson

The federal government isn’t the only entity that claims to create jobs (and spends taxpayer money in the attempt). Many states make big efforts to lure companies to relocate locally, in the name of job creation for state residents. Let’s take a look at the faulty logic that is applied in federal and state discussions of these programs, often by both sides of the debate.

The federal “stimulus” in the name of preserving or creating jobs is worthy of criticism on a number of levels. But even if we take the government’s own statistics at face value, the cost per job preserved or created was in the hundreds of thousands of dollars. Is that a worthwhile expenditure of taxpayer money?

More importantly, if the money hadn’t been borrowed by the government, thus requiring repayment through increased tax dollars in the future, what would the capital markets and individuals have done instead with those dollars, and might those actions have helped job creation more directly and lastingly?

But, in spite of these legitimate criticisms, it’s not fair to say that meaningful numbers of jobs weren’t saved. A lot of the “stimulus” money went to state and municipal governments to help them meet payroll. That DID save jobs. But how many politicians or commentators have questioned whether saving those jobs was the right thing to do?

If those state and municipal governments had grown too large as a result of overspending created from boom-time tax revenues, was it really good for society that the federal government allowed them to avoid the painful downsizing that private industry underwent as a result of its similar overexpansion during the boom? Wouldn’t those political entities be better off if they quickly got to a sustainable size, rather than continuing the obligations that created the problem in the first place, only to have to face the same or a bigger problem down the road?

Another frequent state governmental effort to create jobs is persuading businesses to relocate to the state in question. These programs are hard to argue with to the extent that they simply involve the government’s extolling the state’s virtues as a place to operate, or its facilitating quick resolutions of regulatory and other legal issues.

But a lot of these programs provide tax benefits for such relocations. While never articulated in this manner, what that usually means is that the taxpayers of the state will pay more in taxes than they otherwise would if the new company were paying taxes. This may or may not be a good overall tradeoff in terms of direct and indirect jobs created, but it does have the general taxpayer indirectly subsidizing those who benefit from the job creation. And it does give the company in question a financial advantage over its competitors (some of whom may be in the same state) in the form of lower costs than those competitors. Are the benefits worth the burdens? Hard to say – but shouldn’t these questions be actively and fully discussed before such governmental programs are put in place, and before any specific grant of benefits is made?

Once again, it would be great if, on both the federal and the state levels, politicians and voters would gather and use all of the highly relevant and useful facts available, rather than inattentively accepting attractive-sounding propositions that are provably likely to fail or have bad results.

The author, Edward N. Robinson, is director of Sutherland’s Center for Limited Government. He has been a financial adviser to corporations, a senior executive, and a management consultant. Prior to retiring in 2006, he operated Robinson Partners, consulting CEOs on corporate strategy and mergers and acquisitions. Before that, he was an executive vice president of Texas Commerce Bank (later Chase Bank of Texas and now JPMorgan Chase), where he ran the investment banking business, and then created and ran The Private Bank; was an executive director at Azurix, an international water utility business, responsible for corporate strategy and M&A; and was a managing director at First Boston (now Credit Suisse), running the firm’s Los Angeles office and the regional M&A practice. Mr. Robinson has a B.A. from the University of Michigan and a J.D. from New York University School of Law.


2. Cutting Through the Red Tape

By Marc Watterson 

Has the size and intrusiveness of government got you singing the post-holiday blues? You’re not alone. Fortunately the state has seen the writing on the wall and has proposed a list of changes to regulations in order to lighten its burden on businesses.

The creeping growth of government often has a debilitating effect on business and productivity.
Governor Gary Herbert recently announced the results of a Utah Business Regulations Review intended to scour state rules and regulations in an effort to make Utah agencies and businesses more efficient. Highlighted in the report were a proposed 295 changes to business regulations. …

To read more of this post on the Sutherland Daily blog, click here.


3. Fear of Big Government Grows

By Matthew Piccolo 

The Occupy Wall Street (OWS) crowd claims to represent 99 percent of Americans in “fighting back against the corrosive power of major banks and multinational corporations.” It turns out that Americans are far less concerned about big business than OWS is; instead, they are fearful of big government.

A new Gallup poll shows that “Americans’ concerns about the threat of big government are near record-high levels.” The poll found that 64 percent of Americans consider “big government” to be the greatest future threat to the country, whereas only 26 percent fear “big business” and 8 percent “big labor” as the greatest threat. …


4. Should Government Choose Which Cab You Take?

By Alexis Young 

Should government determine how many taxicabs can operate in a city? Should it charge cabdrivers thousands of dollars for the “privilege” of offering cab service?

That’s exactly what Salt Lake City is doing, and Yellow Cab has decided to sue. Watch the following video report here to learn more.