Unilateral disarmament: Part 704

This is one of those recurring themes on this blog because it keeps coming up.   Here is a really well written argument against subsidizing the film industry – right up until his concluding comment.

The raw bottom line is this: Subsidy-induced film activity may have glitz and surface appeal. But nationally, it’s a washout — film production lured from one place to another is classic “robbing Peter to pay Paul.” At the end of the day the country’s no less prosperous. The net economic impact is simply to enrich the filmmakers at the expense of state taxpayers.

The problem is that the state (and local) lawmakers are not concerned with ‘nationally’.  When British Columbia ups their very lucractive incentives to attract film and new media – I suspect the ‘national’ doesn’t come into the discussion.  When Quebec and Alberta raise their incentive rates to compete with BC, ‘national’ is not part of the discussion.

Pundits and thinkers like this guy who wrote this article have the luxury of speaking in theoretical terms or looking at national impacts – state and local economic development groups do not.  If this very guy was put in charge of the film industry development organization in Louisiana, do you think he would be calling on state lawmakers to cut the tax credit programs?

I am not a big fan of direct taxpayer funded incentives to stimulate economic development.  I have written widely on this topic.  I think tax-based incentives make more sense but even those can end up generating a negative ROI for the taxpayer.

But I struggle with this idea of unilateral disarmament.  Nova Scotia just gave $60 million to Daewoo to set up a 150 person wind turbine manufacturing facility in Trenton (the government has an ownership stake which makes it different than cash but it is still a lucrative incentive).    Daewoo would have likely got more to set this up in the U.S. right now because of the huge federal and state cash designated to grow the renewable energy sector (although the Trentonworks facility was likely another important asset).

I would like people that think about these things to not take the easy way out like this guy did.  There are Governors’ associations, Premiers’ groups, etc.  If they want to get together and agree to total disarmament I say good for them.  Other than that, I would like to see a little more nuance in the analysis.

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2 Responses to Unilateral disarmament: Part 704

  1. It’s “disarmament” only if we’re defending ourselves against something. But I suspect we’re actually doing ourselves more harm than good.

    $60 million for 150 persons is $400,000 per person.

    Now if the government gave me $400,000 I could almost live off the interest. Assuming I could find a good investment counsellor, I could quit my job.

    This would have two effects. First, it would free up a good job position for someone. Ergo, one job created.

    Second, it would allow me to do something creative with my time. I’m a smart guy; with my $40K per year cushion (plus or minus) I could probably bring in that much again as income. I could even start a business (but I don’t want to promise that).

    The funny thing is – the net effect of giving *me* $400K is *exactly* the same as giving the money to Daewoo, yet we’ve been so conditioned over the years that we think the former is horrible and the latter is good business.

    So conditioned, in fact, that we read articles where the author is afraid to *not* give the money to some corporation, lest we “disarm” ourselves.

    There’s something very wrong with a logic that makes a government afraid to invest in its own people, and afraid not to give that same money to some outside investor.

  2. mikel says:

    You missed the better argument a couple paragraphs higher. Many states are at the point where the credits are worth more than the jobs. THAT is an argument against it right there.

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