For many years, I have worked to promote free-market solutions to a broad range of public policy issues in the state of Missouri. Indeed, Rex Sinquefield, Michael Podgursky and I founded the Show-Me Institute in 2005 because of our shared conviction that nothing would be more effective in promoting faster economic growth than a renewed appreciation of, and commitment to, free enterprise — and a concomitant rejection of the notion that our elected political officials should engage themselves in trying to pick our future economic winners and losers.
I thought that we as a state were making steady progress toward that end. As I see it, there have been a number of real pluses:
- Over the past couple years, the Missouri legislature responded to a challenging fiscal environment with responsible spending cuts, as opposed to harmful tax increases;
- Missouri is home to a robust Tea Party movement; and
- Missouri fielded a bumper crop of candidates espousing strong free-market principles during the November 2010 mid-term elections.
But now I am wondering how much progress we have really made — given what seems to me the complete abandonment of principle by some self-described conservatives in the legislature. These so-called conservatives have thrown their support behind the proposed bill to grant $360 million in tax credits for the supposed purpose of creating a “China Midwest Hub” or “Aerotropolis” at Lambert-St. Louis International Airport.
This legislation — which may be considered at a special session of the legislature in September — would spawn the largest tax credit subsidy in Missouri history.
The proposed bill is also the epitome of bad public policy. Let me count some of the ways that it fails the test of serving the public good:
- It would take from the many (basically, all Missourians who pay income taxes, as individuals or businesses owners) and give to the few (mostly to owners or developers of warehouses and real estate in designated areas near the airport, some of whom have already received or are in line to receive substantial tax credits);
- The legislation is being rushed to a vote in the absence of anything resembling a serious cost-benefit analysis — and in the absence of any proof the Chinese government or ANY major air carrier is committed to a plan to turn Lambert into a major air cargo hub;
- It therefore represents a huge (and completely misplaced) leap of faith in the ability of our legislators to outsmart and outthink the marketplace in putting taxpayers’ money at risk.
In a positive development earlier this year, top business leaders in the Kansas City metropolitan area called on the governors of Missouri and Kansas to declare an armistice in a senseless “border war” over the use of economic development incentives to poach jobs from one side of the state line to the other. The two-way traffic of companies chasing tax credits has depleted tax revenues in both states without a net increase in wealth or employment. We should all give thanks for this outbreak of common sense.
Now, however, supporters of the Aerotropolis legislation would have us believe that it will create thousands of jobs in the Saint Louis metropolitan area and generate nearly $34 billion in economic activity over a 20-year period — paying back the original investment in taxpayers’ money more than 100 times over. Why, then, is the smart money (private capital) staying on the sidelines? Why hasn’t it acted on its own — given the supposedly fabulous returns cited by supporters?
The answer is clear: The underlying economics is not there. Heavily promoted “investment opportunities” predicated on tax credits or other subsidies are almost always accidents waiting to happen.
A dozen or so years ago, we were told that subsidizing a new runway at Lambert would bring new traffic, and it didn’t. We were also told the Mid-America Airport — deeply subsidized on the Illinois side — would bring huge traffic. Now there is just one subsidized cargo flight a week out of the entire airport.
Karl Marx (not normally someone I quote) said that history repeats itself, “first as tragedy, then as farce.” Let’s hope that history is not about to repeat itself with the misconceived and hugely expensive Aerotropolis legislation.
R. Crosby Kemper III is chairman of the Show-Me Institute, an independent think tank promoting free-market solutions for Missouri public policy.