Detroit, corporate welfare and Wichita’s future

The following op-ed from Americans for Prosperity Foundation’s Alan Cobb appeared in today’s Wichita Eagle (the unedited version is below).

I agree with Cobb. Wichita definitely has a problem with its economic development strategies. Instead of low taxes that will benefit everyone, the Wichita city council and Wichita city hall bureaucrats insist on dishing out subsidies to companies nearly every week. I’ve shared my ideas with the council in testimony like Wichita universal tax exemption could propel growth and articles like Wichita’s economic development strategy: rent seeking.

Still, there are some council members who, along with Mayor Carl Brewer and some city staff, feel city the doesn’t have enough “tools in the toolbox” for shoveling incentives on companies for economic development purposes.

Recently The Eagle printed an article by Molly McMillin, a well-respected aviation and business reporter.

The question asked throughout the article is one that Wichita leaders and citizens have been asking for some time: What can we do to prevent Wichita from falling into the hole that is Detroit?

A simple answer is to continue throwing money and other goodies to keep the aviation companies. A better answer is we need to get rid of the notion that our elected officials and others have so much forethought to know what will or won’t be successful in 20 or 50 years. They don’t.

Detroit became the modern tragedy it is, not just because of global competition, poor products or poor management at the Big Three. Other sectors of the Michigan economy weren’t there to pick up the slack, when the auto industry floundered. Michigan put too much focus on the auto industry, to the detriment of the overall business and economic climate.

While state and local government poured incentives into the Big Three’s trough, the marginal costs of doing business for everyone else crept up.

It‘s the classic example of the seen vs. the unseen. We see the new factory Pontiac builds. We don’t see the businesses that reduce their size, close or just move. The irony is we will still see the Pontiac factory after it is closed and boarded up.

For each tax dollar given to the auto industry, one is taken one away from entrepreneurs trying to create the next GM, Ford, Google or Apple. This may not be too bad the first time or the second time, but over years and decades, the results can be significant. The “next big thing” will be created in a state with a better tax and regulatory climate.

Cessna, Spirit, Boeing, Learjet and Beechcraft are all great companies that produce great products known throughout the world. Kansans and Wichitans are rightly proud.

Who can predict with any certainty they’ll be in Wichita or even in business in 10 or 30 years? I hope so, and I think they will, but I am not willing to bet Wichita’s future on it.

We shouldn’t give other individual companies state or local funded goodies, either.

Lower the tax rates for everyone. After all, the tax breaks and other prizes handed out are recognition that the cost of doing business in a particular are is too high.

The Kansas Division of Legislative Post Audit last year reported we spent billions of dollars in “economic development” with literally nothing to show for it. Our lawmakers aren’t very good at picking winners and losers.

When Wichita’s aircraft leaders were asked about Detroit, there was a golden opportunity to ask other business leaders in Kansas and Wichita that same question.

It is just as likely and maybe more so, that they will determine if Wichita goes the way of Detroit — or does not.


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