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GCN Readers Say Taxpayers Are Being Shortchanged Over  Economic Development Programs

GCN Editor...

Readers of GulfCoastNews.com are following economic development issues with great interest and with an eye for making improvements. For months, the GCN Message Board on this site has been filled with commentary and opinions from Coast residents over economic development issues on the Gulf Coast and the Harrison County Development Commission. Posters to the Message Board believe with good reason that development programs at both the local and state level appear to be huge wastes of public money and do little to create jobs, which is the stated purpose of such programs. 

A growing number of news report indicate that taxpayer-supported economic development programs routinely fail to live up to the promises of politicians and the businesses that receive the money. At a time when state and local finances are being squeezed from every direction, the public has a right to demand that such programs be reconsidered.

Here is some of the most recent comments to the GCN Message Board....

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Posted by: Still Doing My Homework () 01/04/2005 15:48
The Sun Herald has finally carried an article by Arthur E. Foulkes, which fairly discussed Economic Development in the 1/2/05 issue. The article was aptly titled, "Economic-development programs rarely have lasting benefits." The article stated the goals of economic development are:(1)To attract new businesses and industries to communities; (2) or to keep existing businesses from emigrating. The article states, "In pursuit of these goals they offer a variety of inducements, including direct subsidies, tax breaks, grants, loans, and infrastructure improvements."

The article goes on to say, "Economic-development programs enjoy wide popularity. Yet the sad truth is: Government economic development programs rarely have lasting benefits-for the simple reason that they run counter to good business practices."

The article goes on to say, "The most glaring flaw in these programs is that they increase a behavior known to economists as 'rent seeking,' a euphemism for business efforts to secure government favors. Businesses pay lobbyists, lawyers and consultants large sums of money to help them obtain economic-development funds. Unfortunately, this makes less money available for higher priorities, such as capital investment."

Perhaps the most important point the article makes is that incentives undermine capital investment. The article states, "Besides, when a business succeeds in gaining government favor, the recipient firm gains an unfair advantage over other businesses, both direct competitors and those competing indirectly for capital and workers."

The above points are exactly the same as some of the points that the critics of HCDC, such as Commissioners Paige Gutierrez, Richard Bennett, Supervisors Marlin Ladner and Connie Rocko, joined by other Supervisors, citizens, Henry Kinney, Dr. Frank Schmidt, Royce Hignight (see Mississippi Wound article on this website), GCN and others have tried to make.

There are examples other than HCDC, which illustrates some of the points made above in government economic-development programs. One of the most notable was the big legislative fight that took place over the bonds that were authorized in the "special legislature session," called by Governor Haley Barbour. One of the local recipients of taxpayer funded bond proceeds is Northrop-Grumman which is going to receive $120 million for 2000 jobs that Northrop-Grumman is supposed to create. Now think back how this relates to the Foulkes article-lobbyists, lawyers, consultants, etc.

Also think about how the information in the Sun Herald article dated 1/4/05, titled, "Defense trims Navy funds for destroyers," bylined, "Northrop Grumman not optimistic," may impact those 2000 jobs. Has the state of Mississippi just bought a $120 million "pig in the poke?" In any case these bonds and the other expenditures authorized pursuant to the "special session," have set the stage for, potentially, one of the most contentious sessions ever, by a legislature, in the forth coming legislative session, because of the cash starved state of affairs of the State partially due to these bonds.

The Sun Herald carried an article in the 1/3/05 issue titled, "State-backed plant now deeper in debt," by-lined, "Newly disclosed expenses push tab to $51.4 million. This article details how the state through the Mississippi Development Authority guaranteed loans to the meat packing plant that was supposed to create jobs, but has now quit making payments on its debts leaving the taxpayers on the hook. (Ed: Related Clarion Ledger Story)

The Foulkes article flat out states, "Government economic-development programs, no matter how well intended, operate counter to fundamental economic principles.

Foulkes rendered an opinion on what leads to real economic development that he admitted the proponents of economic development programs would not like, and that advice is that, "government can best promote economic growth and prosperity by sticking to the basics: (1)Protect private-property rights: (2)Enforce the law;(3)Provide basic services;(4)Keep taxes and regulations to a minimum;(5)Government should get out of the way and let the economy work.

The following of Foulkes advice will not only lead to economic growth and prosperity, but will also be a gigantic step in the taking of favoritism, cronyism, and corruption out of government, which will, in turn, attract the kind of economic development that contributes to the community rather than just taking from the community. WHAT DO YOU ALL THINK???

Posted by: Thinking () 01/04/2005 19:21
Excellent comments by Still Doing My Homework. Keep up the studying. If Navy cuts back on shipbuilding,
Northrop-Grumman may not be able to create the jobs it promised in return for the millions in bond money from the state of Mississippi. No matter, though--the lobbyists who helped them get the bonds will have been paid, as will the bond lawyers. Isn't this what economic development is REALLY all about?

Posted by: Good Grief! () 01/05/2005 03:55
"Still Doing" has made a very persuasive argument and I will reconsider my position. I still have trouble balancing the success of the more aggressive E.D. states, such as North Carolina, to not only Mississippi, but also its neighbors.

Posted by: Racism a Factor () 01/05/2005 08:14
Those other more successful states are more successful than Mississippi for lots of reasons that have nothing to do with their "more aggressive" economic development. For example, when a major Carolina textile company was interested in putting a mill in/near Mississippi Delta (1950's--early '60's) it was rebuffed. Seems the local powers that be didn't want anything that might change the existing social order, which was one step from slavery.

Posted by: Doing My Homework () 01/05/2005 09:29
TO: Good Grief
If you will read the full Foulkes article you will see that North Carolina is actually one of the states that has actually uncovered just how phony economic development is. Further if you will read Royce Hignight's Mississippi Wound article on this website, you will learn more about the North Carolina experience. Fortunately for North Carolina, there is a non-profit foundation known as the John Locke Foundation that studied and reported the true facts about the economic development industry and it is not flattering of ED.

Posted by: Good Grief! () 01/06/2005 04:11
Difficult to argue with their success. It seems that the more aggressive states are economically at the front of the pack. Have you ever been to North Carolina? I will cede to you that Mississippi has historically fought development- and for the same reason you cited- our "leaders" preferred to reign in hell rather than serve in heaven.

Still, you make a persuasive argument. I may need more selling but I am reconsidering my position. Your view if executed would work.

Posted by: Northrup cut backs () 01/06/2005 11:09
Everyone agrees that Haley Barbour is closely wired-in to the national powers-that-be, including President Bush
and his top advisors. So, when did Governor Barbour know about the Navy shipbuilding cut-backs that will cause layoffs at Northrup-Grummon? Before or after he called the special legislative session that pushed through the money for Northrup-Grummon? And when did Northrup-Grummon's lawyers and lobbyists know about
the pending cut-backs? Were there rumblings of this at the time that Northrup-Grummon was asiking the taxpayers of the poorest state for more money? They were also asking and getting many millions from Louisiana (see Times Picayune article posted on this site.)

Posted by: Legislators Should Ask () 01/06/2005 12:22
Our Mississippi legislators should find out the answer the question, when did the governor know about the Navy
cutbacks and likely job losses at Northrup-Grummn. Was it before the special session?

Posted by: Incentives? () 01/07/2005 07:33
Today's Sun Herald there is photo of Governor Barbour with Mr. Topazi, head of Mississippi Power, announcing new "incentive" programs for economic development in Mississippi. Mr. Dur, the head of Northrup Grummon, is quoted. On another page of same Sun Herald, Northrup Grummon announces layoffs, after receiving many many millions in public money as economic development "incentives." This money was pushed through at a special legislative session called by Governor Barbour, not long before news broke that
Northrup Grummon would be eliminating thousands of jobs, not creating them. When will we ever learn?

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