Friday, November 22, 2013

Subsidy Insanity in Western Missouri

I have written before about the gross waste of taxpayer monies on retail in the St. Louis region. According to the East-West Gateway Council of Governments (p. 18), governments in the bi-state metropolitan area pumped about $2 billion worth of subsidies into retail projects from 1990 to 2007, but only saw a net increase of 5400 jobs, meaning that each low-wage, low-benefit retail job cost the cities of the region $370,000 apiece. The price is only this low on the generous assumption that the subsidies were solely responsible for this job creation. However, given the growth of incomes in the metro area during that time period, it is likely that most if not all the jobs would have been created without the incentives provided.

It turns out something similar has been happening in the Kansas City region. As regular readers of this blog know, the border job piracy in the Kansas City metro area is probably the second-worst in the country, after metro New York City. As it turns out, there has recently been data released on the scope of job piracy there.

Less than a year after Governors Jay Nixon (D-Missouri) and Sam Brownback (R-Kansas) told New York Times reporter Louise Story, on camera, that there was no way they would back off of their wasteful poaching, a new Times story reveals that Nixon is now calling for an end to their futile battle.

Part of the reason for his change of heart probably lies with a recent study by the Hall Family Foundation showing that since 2009 alone, Missouri and Kansas City have spent $212 million on relocation subsidies to drag existing operations across the border, sometimes more than once as in the case of Applebee's. The net effect, however, has been virtually nil: 3200 jobs moved to Kansas, while 2800 move to Missouri, for a net movement of 400 jobs.

The math of course is simple: $212 million/400 equals $530,000 per net moved job. And remember, these aren't net new jobs, merely net moved jobs. As I've written on numerous occasions, job piracy is the least defensible use of development incentives, precisely because it creates no new jobs. Good Jobs First had a detailed analysis of the issue overall and the Kansas-Missouri border war in particular in January 2013.

However, if the most recent Times article is to be believed, we could be on the verge of ending this particular border war. Mind you, don't hold your breath. The two states tried before, according to Good Jobs First, and failed miserably. Indeed, there has yet to be a successful voluntary no-raiding agreement between states, even though there have been at least three attempts. But in this case, there has been a strong push for a cease-fire from a number of prominent Kansas City businesses, so there is a better-than-usual chance that this could be successful.

Really, though, there oughta be a law. A federal one.

Cross-posted at Angry Bear.


  1. You are right, of course, on your analysis.

    The potential truce amounts to...

    "If you stop poking yourself in the eye, I will stop poking myself in the eye."
    "No! I refuse to stop poking myself in the eye!"

    However, I do not think a law coming from the feral government is the answer.

    It is really sad that Adam Smith did this analysis 275-odd years ago and said that such subsidies were counter-productive. But then, the first law of politics is to ignore economics to get elected.

  2. That money didn't just "disappear." Someone has it. And I think I know who.

  3. This boarder war is not different than the north/south robbing. Fritz Hollings noted in "Making Government Work" how he specifically sold S. Carolina as a non union state in New York as he knew his state needed jobs and updating. He hates unions admittedly yet he hated and fought the outsourcing of jobs to China et al.

    By the end of his book, he still did not see that what he did to the North selling his South as non union was exactly the same as the mechanism creating his other fight, outsourcing to China.

    Not being able to see such is why we are where we are.

  4. Adam Smith also believed the rich should pay taxes in proportion to their income, and that they should pay to maintain infrastructure. Don't hear much about that.

  5. There is no way to legislate diminished stupidity where human beings are concerned and involved. We have spent thousand of years adamantly refusing to learn from past mistakes and under no circumstances will we permit any course change now.

  6. You are quite right, Unknown.

    "The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state." (Book V, Chapter II, Part II, V.2.25)

    We, however, make the dubious choice of having "progressive" taxes (although to be "progressive" there must be progress, which implies a destination, and there seems to be no admitted destination).

  7. You might also recall that, in that same section, Smith calls direct taxes on the wages of labor "absurd and destructive," doing nothing but raising the price of that labor or reducing the demand (or both). (This applied to both the wages of the common laborer and the "recompense of ingenious artists and of men of liberal professions".)