American Elephants

The Blue Model Doesn’t Work: Going Out of Business! by The Elephant's Child

What is it that the Liberals just don’t understand? Free Markets and Free People. So the people are picking up and moving out — heading to where they can be free. Businesses are moving out — heading where there are free markets. There’s a point at which promising more goodies just doesn’t work.


4 Comments so far
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This whole red-blue designation is confusing. I grew up during a period when blue was part of “true, blue conservatism” and red stood for the left. Somewhere along the lines the colors got reversed. At least green has never changed.

Interesting that a conservative pundit would be so enthusiastic about relocation subsidies, like those offered by Midland, Texas. Maybe it was a good investment in that particular case, but there are many, many cases of such deals ending in tears — e.g., because another municipality, in another state, offers the company something better. This arms race via targetted subsidies (rather than via general policies, such as lower corporate tax rates) is a major factor in starving public coffers of funds needed for essential services, such as schools and road maintenance.


Comment by Subsidy Eye

I saw something on the red/blue thing a few days ago, and didn’t save it, consequently forgotten. It was quite deliberate, and by the time Republican woke up to what was going on, too late. You might listen again. The relocation subsidy helped, but was not decisive — the long term benefits clearly outweighed it, and Midland would be repaid in a very short time through advantages the company brought. Good deal for all concerned.

I would also question the idea that public coffers are starved of funds needed for essential services. The schools are awash in money, but oversupplied with teachers, and very much oversupplied with administrators— which is where the money is going. Road maintenance is just something governments aren’t much interested in — there are more fun things to do with the money like high speed rail and light rail.

Here’s a link you should enjoy:


Comment by The Elephant's Child

No, it is clear that in this case there is likely that more important than the relocation subsidy is all the other stuff. Still, Bill Whittle seems to be quite happy about the use of the subsidy. Hardly an example of the free market.

On an individual basis, many relocation subsidies seem to make sense for the municipalities offering them. However, collectively, they end up pitting immobile (and often unsavvy) local governments against footloose corporations aided by sophisticated relocation sonsultants.

When I say that local governments often end up losing money, thereby essential services (take your pick), I’m talking about governments all over the country, not just in California. Sure, just about any school system or police department can no doubt find economies. But at the end of the day all require some expenditure.

The litany of economic-development subsidies is not pretty. For a good introduction, see this web page.

It is always a mystery to me why so many conservatives, while lambasting federal government attempts to stimulate business through subsidies turn around and applaud the same kind of policies when applied by local and state governments.


Comment by Subsidy Eye

Each example is more or less unique. Moving a business and all, or most, of its people is an expensive proposition. A little help in making the move, by either state or community, can make sense. In the case of Midland, according to Whittle, it makes a lot of sense. The increase to the economy in the short run would make good business sense from either side. Dealing with a Democrat legislature or city council might well be an entirely different kettle of fish. California is a poster child for the blue model, with cities going bankrupt right and left, and office holders supporting the stupidest boondoggles anywhere. Not that Republicans are always right, but their general philosophy leans in the right direction.


Comment by The Elephant's Child

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