There’s probably little doubt that offering incentives to companies to move to Wichita results in some that do. And, as we’ve seen, some Wichita companies are adept at inciting rumors they might move or locate new facilities somewhere else in order to gain some advantage or incentive from local or state (or sometimes both) government.
Whether these economic development policies are wise is far from settled. Last year the Kansas Legislative Division of Post Audit released a study examining economic develompent efforts at the state level. This report may be read at Economic Development: Determining the Amounts the State Has Spent on Economic Development Programs and the Economic Impacts on Kansas Counties Executive Summary.
Some conclusions of interest are these:
First: “There are a number of problems in trying to assess the effectiveness of economic development programs and activities.” The document elaborates, but the important thing is that when organizations like the GWEDC make grandiose claims, realize that many are only crude estimates formulated to produce the best possible numbers,.
Second: “Most studies of economic development incentives suggest these incentives don’t have a significant impact on economic growth. The literature we reviewed concluded that, thus far, negative and inconclusive findings are far more numerous than positive findings. Most reviews of economic development assistance find few results are achieved — a theme that audits in Kansas and other states commonly find, as well. Findings of ineffectiveness include promised jobs weren’t created, return on investment is low or negative, and incentives offered weren’t a determining factor.”
This paragraph hardly requires comment, except to note that professionals in the field of economic development, politicians, and government bureaucrats don’t believe this.
Third: “The literature also suggests that economic development incentives must be offered to remain competitive with other states.”
Because the parties identified above believe that incentives work, they want to offer them and will continue to do so. This is true, I believe, in all states.
So it’s a terrible situation to be in. We have expensive programs that don’t produce their intended goal, but because some very self-interested parties believe they do, we’re stuck with it.
If Kansas and Wichita wanted to really do something to get noticed, let’s lower taxes for everyone, not just those companies who seek political favor and happen to fit into a situation where they are eligible for one or more of the various incentive plans we have. If we could do this, all companies would benefit.
Consider the case of Steve Compton, owner of the Eaton Steakhouse in downtown Wichita, as described in my post (with video) At Wichita City Council, Why Are Some Doors Open, and Others Closed?
Here we have an established Wichita company that is, apparently, facing tough economic conditions. What could help this company? Lower taxes would, without a doubt.
There would be no need for an organization like GWEDC to tell us this. We wouldn’t need an army of bureaucrats to administer a program to deliver the benefit. There would be no need for Mr. Compton to make campaign contributions to the right politicians. There would be no need to have a debate in city council chambers over the merit of incentives offered to individual firms, one at a time.
Let’s have a simple policy of lower taxes, and, of course, lower government spending. This will provide immense economic development benefits to everyone.