Business can oppose incentives and use them

In the campaign for United States Congress from the fourth district of Kansas, Democrat Raj Goyle criticizes leading opponent Republican Mike Pompeo for accepting economic development incentives while opposing their existence.

A Goyle press release reads: “Already a known outsourcer, Pompeo, in an act of hypocrisy, took government incentivized aid for three of his companies, including Sunflower, Thayer and Sentry. He did this despite repeatedly denouncing government assistance in the private sector.”

This criticism — that those who oppose government programs nonetheless hypocritically take advantage of them — is an important topic to examine, not only as a campaign issue, but because the conflict that leads to this form of criticism arises often. It’s something that libertarians struggle with daily — and I don’t think Mike Pompeo would describe himself as libertarian.

In an article examining whether presidential candidate Ron Paul should accept federal matching campaign funds, the libertarian scholar Walter Block described the pervasiveness of government and the impossibility of escaping it:

For the modern state is so involved in the lives of its citizens that it is the rare individual who does not accept some form of government largesse, whether in the form of money payments, services, or goods of one type or another.

For example, while not everyone goes to a public school or teaches there, it is the rare individual who does not: walk on statist sidewalks, drive on public roads, carry currency in his pocket, avail himself of the services of governmental libraries, museums, parks, stadiums, etc. Which of us has not entered the premises of the motor vehicle bureau, sued someone in court, posted a letter, attempted to attain a passport, or interacted with government in any of the thousand and one other ways it touches upon our lives?

This hints at part of the conflict — angst even — that libertarians digest internally as we go about our business in a world dominated by government. I, for example, firmly believe that we would be better off with private ownership of the streets and highways. Each time I drive my car from my driveway onto the government street in front of my house, I think of this. I get it. I understand the conflict that government thrusts on me. It bothers me daily.

But there’s no other way for me to get to where I want to go. I’m consoled somewhat by the fact that the motor fuel taxes I paid go to building and maintaining the roads. This doesn’t mean, however, that I agree that our system of primarily government ownership of streets and highways is the best system. But it’s the system I am forced to live with, and I try to change it.

Business firms are generally aware, although not always, of government incentives available for economic development. These incentives are part of the economic and political landscape that business firms face. They have to be recognized and dealt with, just like any other factor such as regulation. If business firm “A” decides not to accept incentives and subsidies when firm “B” does, is this wise, even if accepting subsidy is against the principles of firm “A”?

I would recommend firm “A” to apply for and accept the subsidy. For one thing, if firm “A” is a public corporation and doesn’t pursue these incentives when they are available, the company is likely to be sued by its shareholders.

Second, these subsidies are part of the competitive landscape. Even though from a libertarian and conservative view they are wrong and harmful, they still exist. It does no good for a firm to pretend they don’t exist and thereby create a competitive disadvantage for itself. This is especially the case if firms “A” and “B” are direct competitors in the same industry. But even if they are not, these two firms still compete in the same markets for land, labor, capital, and other generic factors.

Third, firm “A,” like all of us, is paying for these incentives and subsidies. While this may seem like conceding to the power of the state, firm “A” might as well get some back of what it paid for.

So yes, business firms need to use government incentives and subsidies. At the same time, we need to work for the elimination of these programs. This is difficult, as the more government becomes involved in management and direction of the economy, it becomes harder to get government to stop. We see this in play at Wichita city hall, as more and more firms ask the city council for various forms of assistance or corporate welfare.

The fight is important, too. The factors that made our country and its economy great are at peril. Gary North wrote in The Snare of Government Subsidies: “… those within the government possess an extremely potent device for expanding political power. By a comprehensive program of direct political intervention into the market, government officials can steadily reduce the opposition of businessmen to the transformation of the market into a bureaucratic, regulated, and even centrally-directed organization. Bureaucracy replaces entrepreneurship as the principal form of economic planning.”

Returning to the politics of the day: Isn’t is a little strange to hear Goyle, who favors expansion of public-private partnerships, criticize those who use them, even if they are opposed to the idea in principle? Doesn’t Goyle want everyone to be in “the snare” that North describes?


15 thoughts on “Business can oppose incentives and use them”

  1. This is a very good explanation of the conundrum that many in the business world face. If the business stands completely on principle and decides to not take the subsidy, then the costs of doing so and having to compete with the other company who did take the subsidy makes it extremely difficult to make it in the private sector.

    I am never too upset at the developers at city hall with their hands out, but my anger is usually directed at those filling those outstretched palms.

  2. Sneed hit a hole in one! Raj IS the one handing out our taxes with such largesse! And he is anti small businesses who don’t come begging for handouts. FORE!

  3. Even “Free Market” folks like myself need to remember that the market is demanding tax credits and cash incentives for businesses development.

  4. Bob, you are a hypocrite. You go to the city counsel and tell them there should be no tax incentives given for businesses and to compete for jobs, arguing that the same low rate should appy for everyone. You ignore the fact that other jurisdictions give these incentives, and dismiss the argument that you have to act and work within the system you have to obtain change. But in this circumstance you justify the system that exists because it serves your preferred candidate. That’s just like the time you were on puyblic television. PUBLIC TELEVISION. Yeah, all of those ideas about limited government and individual responsibility just kind of fly out the window when you have to pay for it. A handout from the government is always a bad thing, EXCEPT when it ways for you and your prefered people.

    Incidentally, Bob, I look forward to reading your posts about the new well you are going to have to dig to get off of the city’s public water system. Your private well will, of course, be so much better then a public system.

    Why don’t you live by your principles for a change?

  5. Anyone can post on Wichitaliberty.org’s site and Chuck shows that even those with minimal knowledge of the world does so. In Wichita, the city provides potable water. They have restrictions on drilling new wells. The city has tons of restrictions and thousands of ordinances of what one must or must do.

    Chuck needs to spend some time down at city hall and catching up on the municipal mandates onto the citizens so he will be less likely to display his ignorance in future posts.

    I commend Bob for providing an alternative viewpoint to government media programs. This may violate some “purists” position, but I believe that getting the message out supersedes the medium. Keep up the good work Bob!

  6. “So yes, business firms need to use government incentives and subsidies.”

    Nah, I think you missed Chuckie’s point.

  7. What kind of a businessman would deny his business the ability to compete in today’s harsh business environment by denying it the same advantages (incentives) available to others?

    Businesses need to compete on a level playing field.

    Mike Pompeo made the right choice for his company, and the employees who benefited from his sound judgment.

    Goyle has never held a private sector job. He has never been responsible for a payroll. He has never created any jobs. His ignorance on this topic is obvious.

    Pompeo has created at least 400 jobs. ‘Nuff said.

  8. Bob should indeed have a well and/or a very good water filter. Then he wouldn’t be poisoned or medicated by the fluoridated Wichita water.

  9. I’m reminded of that leftist Noam Chomsky’s response when asked why he had a large amount of money in a private investment accounts while at the same time condemning capitalist systems. He simple referenced the soviet otkazniks, internal protesters of the soviet system, and that although they disagreed with the system they lived under, they still had to live, and that meant partaking of that system until change happened.

  10. Hi, I think that any person with a little common sense will believe Pompeo on this one. He was building a company and had to take $ that was available to other similar companies to remain competitive with those companies. If given free reign to do as he thought best, taxpayer money wouldn’t be available to any of those companies.

    Later

    Mike

  11. The point is that if one is going to stand on principle, then stand on principle. Can’t have it both ways. A person can’t say, “we should stop government subsidies” then turn around and use them regardless of the circumstances or to justify them somehow because, “well that’s the game and I might as well play the game even though I’m against it”. It’s moral corruption. Its not okay to commit murder unless of course it’s justifiable for my circumstances.

    Government subsidies exist. That’s reality and should be used judiciously and prudently. Too often that’s not the case.

    Pompeo is the best candidate as he is dealing with real world issues and I look forward to his tenure as our next Congressman from the 4th District.

  12. I don’t belove in taxes; does that mean I shouldn’t pay my taxes? No, this is the system we live under now so we have to be a part of it.

    Pompeo wants to eliminate subsidies, but the reality is subsidies are a part of the American system now. Lets change it and then Pompeo or any other business person won’t have to take subsidies to stay competitive.

  13. You are dreaming if you think Pompeo is going to end business subsidies, if fact he will try real hard to reward his campaign contributors with more of them! Fiscal Conservative? I bet he never votes down and increase in the defense budget!

  14. I can be certain the Democrat will vote to increase all areas of spending, with the possible exception of defense, on the other hand the Republicans and Pompeo will vote down more spending then they will increase. A net win for fiscal conservatives.

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