Category Archives: Blogs

Is the Export-Import Bank Profitable?

Veronique de Rugy points out that when the Export-Import Bank’s costs and risks are properly calculated, the bank might lose more money than it makes.

As I noted previously, Jason Delisle and Christopher Papagianis provided more background on how these alleged profits in 2012 were almost surely an accounting illusion. “The government’s official accounting rules effectively force budget analysts to understate the cost of loan programs . . . by excluding, or not factoring in the cost for market risk,” they write at e21.

The whole piece is worth reading, and can be found here.

It’s a Corporate Welfare Mystery

Jack Spencer, an affairs specialist for Michigan Capitol Confidential, details a mystery project that almost received $5.5 million from Michigan’s taxpayers, yet no one knows who would’ve owned the property. It’s a corporate welfare mystery:

What seems bizarre is the apparent secrecy surrounding the proposal,” said Jack McHugh, senior legislative analyst for the Mackinac Center for Public Policy. “In particular, who will become the proud new owner of a building used for the project for which taxpayers would have paid $5.5 million?

Where Is The Outrage?

Dave Brunori at Forbes asks, “Where is the outrage?” regarding the Good Jobs First report that details the level of corporate welfare in the American economy. However, Mr. Brunori says it’s not the companies’ fault, they’re simply being rational:

I don’t blame the corporations. They act rationally. If someone gives you $1 billion, you take it. The blame lies with us.

Could ‘Corporate Welfare Queens’ Kills the Supply-Side Critique of the Minimum Wage?

In this article for The Blaze, Casey Givens makes the argument that, despite good intentions, a minimum wage hike will cost some employees their jobs. Conservatives, while critical of the size of the welfare state, should remain cautious about buying into the argument of low-wage jobs forcing people into welfare:

Rather than the Cold War conservatives that originated the phrase, the tale of the welfare queen is now being trumped by liberals to describe corporations like McDonald’s that pay minimum wage and rely on government aid like food stamps to pick up the tab for their employees’ remaining living expenses.

Markets Fail and Governments Do Too

Proponents of government intervention often cite market failures to justify their goals; however, government failure is also a concern: it’s not always clear that the government will succeed where the market fails. Neighborhood Effects notes:

Of course it’s true that markets can fail. But it’s important to remember that governments often fail too. Only an approach that considers both market failure and government failure can illuminate the best course of action when addressing a serious social problem like environmental degradation.

Intersection of Federal and Local Programs

Show-Me Daily reports on an interesting program – a city run airport that’s received FAA grant money. The city wants to sell the airport, but the FAA grant assurances limit how the sale can occur. The bottom line is that the city is having a difficult time selling the airport. Hind sight’s twenty-twenty, but maybe the city shouldn’t have gotten into the airport business in the first place?

Two of the more cumbersome assurances for a city like St. Clair are Nos. 5 and 25. Assurance No. 5 obligates St. Clair to maintain it as a public airport and not dispose or sell any part of the airport without FAA approval. The FAA will only give approval if St. Clair can show that closing the airport improves aviation in the area. In addition, the dispensation to sell the airport does not free St. Clair from reimbursing the federal government all recent federal grants. This will cost the city more than $750,000.

Anticipated Development Doesn’t Always Occur

Examples of poor government planning abound – they range from over-budget, behind schedule programs to purposeless projects. And property development plans are not immune to these problems.

Consider the St. Louis land bank agency. It owns tax delinquent and donated property within the city. Instead of selling the land to all prospective buyers, it has a history of rejecting offers and instead holding property for “future development.” Unfortunately, a recent study on the agency found that it’s amassing land at a faster rate than it’s selling the land. In other words, future development rarely materializes.

Or consider the Fort Collins land bank program. It was started to make land available for future affordable housing projects. That was 13 years ago (created in 2001, first property acquired in 2002), and none of the five properties it purchased have been sold. And although the land bank has been taking the long view from the start, property holds of more than ten years weren’t considered in the city’s feasibility study. More troubling is that the baseline scenario was holding property for five years!

Uncertainty is a characteristic of the world and not just for government, but these anecdotes could be a lesson for urban planners: anticipated developments don’t always occur. 

Growing Government: 1981-2011

As part of the Fraser Institute’s Economic Freedom of North America report, the Institute scores state and local governments on the size of government. Between 1981 and 2011, the average state score declined from 7.7 to 6.2 (governments grew larger). In the .GIF below, brighter blue represents a higher score on size of government and darker blue represents a lower score. What can be observed is a slight brightening until about 1990 followed by a sputtering decline and a sudden crash between 2007 and 2011 – governments grew larger during the Great Recession.size of government

Higher Taxes Linked To Migration Out Of Michigan

Michael LaFaive at the Mackinac Center notes that tax policy is correlated with population migration out of Michigan.

Mackinac Center research focused on Michigan has found for every 10 percent increase in personal taxes an additional 4,900 people leave the Great Lake State annually. So for example, an 11.5 percent individual income tax in 2007 has driven around 29,000 of our citizens away so far – and that’s a conservative estimate.

Boudreaux is Not a Fan of [Ex-Im Bank] Cronyism

George Mason University professor and Cafe Hayek blogger, Donald Boudreaux, isn’t a big fan of the latest Ex-Im Bank cronyism deal. They’ve recently agreed to loan nearly $700 million to an Australian company to help them purchase Caterpillar’s equipment. He elaborates:

Uncle Sam – that allegedly prudent, responsible, and science-driven protector of the well-being of ordinary Americans – has just decided to transfer more treasure to large corporations (namely, Caterpillar, GE, and Atlas Copco). The transfer comes in the form of a loan of $694.4 million from the U.S. Export-Import Bank to an Australian mining company that will use the loan proceeds to buy products from these American corporations. Despicable.