News this morning that struggling aircraft manufacturer Hawker Beechcraft has accepted a $45 million aid package from city, county and state officials in Wichita, Kansas and closed off a move to Baton Rouge, Gov. Bobby Jindal has another source of funds available to plug his $1.6 billion budget hole for next year.
Jindal and Louisiana Economic Development head Stephen Moret had packaged some $400 million in incentives for Hawker Beechcraft in an effort to get the company to move from Wichita to Louisiana’s capitol city. That $400 million needs to be plowed back into the state’s budget rather than redirected toward another “incentive” package to an out-of-state mercenary company.
It’s true that Jindal and Moret have had some economic wins with LED of late. The Nucor Steel plant in St. James Parish was certainly an important development for the state. But that doesn’t change the philosophical problem with LED’s mission of bribing out-of-state corporations to relocate here in the first place.
Economics, on one level, might be termed a zero-sum game. There are only so many Hawker Beechcrafts out there, and when a company like Hawker is struggling with a bad union and a difficult economy, it’s an entirely reasonable temptation to take a shot at asking them to relocate to your state. They’ll bring good jobs which create upper middle class taxpayers, they’ll use a lot of local vendors which will create even more.
But the zero-sum game extends beyond stealing jobs away from a Wichita or Sacramento. Resources the state spends on bribing a Hawker are resources confiscated from Louisiana taxpayers. That money doesn’t come from thin air; “economic development” initiatives like the one Jindal was directing to the aircraft manufacturer merely represent a redistribution of wealth from the state’s current taxpayers (read: “current Louisiana businesses”) to the next set of prospective citizens.
The Louisiana Economic Development FY2011 budget has $123 million for capital outlay. Included in that figure are a number of large checks given to out-of-state companies to attract an investment here…
- $30 million to Nucor;
- $45 million to the Algiers Development District, ostensibly for the Federal City plan;
- $12.7 million to ConAgra Foods, for the chicken plant in North Louisiana; and
- $10.6 million to SNF Holding Company, which is building a chemical plant in Plaquemine.
While it’s unlikely we’ll win any brownie points for dumping on successful economic development initiatives, these are the kinds of expenditures a state with a $1.6 billion hole to fill simply can’t afford and shouldn’t be issuing.
A big part of Louisiana’s problem is that we do a terrible job of creating a winning environment for our current companies to compete in. Jindal says he’s committed to doing something about that, and some of his efforts at positive change are to be commended. LED’s workforce training program, for example, was recently ranked best in the country, and it directly addresses a key problem confronting the state – namely, a lack of skilled workers for businesses to employ.
But while we in Louisiana tout the quality of life here, and rightfully so, that quality isn’t reflected in the kinds of statistical studies think tanks do, where things like infant mortality, high school dropouts, crime, obesity, air quality and so forth get rated and the things that really matter like the Saints and LSU, boiled crawfish, deer hunting, fishing at the rigs, Hubig’s pies, Jazz Fest and Galatoire’s don’t. Generally speaking, though Jindal is probably the best ambassador and salesman Louisiana has had to sit in a boardroom and pitch a relocation to the Bayou State, the people who will be most interested in doing business in Louisiana will be Louisianians. And though Jindal is to be commended for getting rid of some of the arcane and Byzantine business taxes in the state which predated his administration – to the eternal chagrin and regret of many Democrats who call him irresponsible for having done so – we’re still not finished creating a true business-friendly environment.
More importantly, we’re nowhere near where we need to be in creating an entrepreneur-friendly environment. We’re terrible about abusing capital in this state. Businesses pay an oppressive share of the state’s property tax, our state income tax clobbers the commercial class (there is no state income tax next door in Texas, where they’ve created more than half of all the new jobs in America over the past four years) and we still regulate business to death. There is no doubt things are getting better here, but when you come from the bottom of the barrel it’s difficult not to improve.
And chasing after free-agent companies with taxpayer dollars, something Jindal didn’t invent in Louisiana or anywhere else but is mistakenly continuing to do, will not improve the business climate here. We don’t have the resources to play George Steinbrenner in building our team, so what we need to do is grow our key players through the minor leagues.
Jindal needs to focus on creating the environment for local businesses to grow and prosper. That’s not sexy and it doesn’t create a lot of photo ops, at least not right away. But it’s the key to building something that will last. Maybe, just maybe, Hawker’s decision to spurn his offer will help him adjust accordingly.