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Economy / Energy

Turning the Page?

By Matt Simpson on Jul 1, 2008

The Post-Dispatch reports that Chrysler is closing its minivan plant in Fenton, laying off 2,400 workers. Political Fix has the responses of several prominent politicians, including this from Missouri Rep. Sam Page:

My sympathies go out to the employees who lost jobs today and their families. These men and women were hard workers, who made a good product. But they, like many Americans, have fallen victim to higher gas prices and a bad economy. They have suffered because of a government unable or unwilling to fix this problem.

We must now look forward at bringing new industry to our state. Missouri has given Chrysler $32 million in tax incentives to keep its plants operating here. After the loss of up to 2,800 good-paying, benefit-providing jobs, it is clear that that investment has not been returned. Instead, we need to be welcoming companies committed to investing in Missouri’s economy.

I have to commend Page for admitting that the government is perhaps incapable of fixing a problem. All too often, this lesson seems to be lost in political matters. In this particular case, it is very unlikely that the government can fix the problems posed by the increasing scarcity of energy. In fact, the cure is likely worse than the disease. Any incentives that the government can muster to spur innovation in energy provision are likely to be minuscule in comparison to the incentives already in the marketplace for such innovations, and the marketplace doesn’t discriminate based on politics.

Another lesson is to be learned from Page’s quote: Tax incentives for individual businesses are a bad idea. There is no guarantee that the business will stay in the area once the tax incentives are granted and no guarantee that the state will pick the best candidate for the incentive. Furthermore, a lower tax rate for everyone is a much more effective means of stimulating growth because it encourages greater productivity and attracts entrepreneurs that the state might not have even been aware of, let alone tried to pursue. Rather than handing out tax incentives, lowering taxes would be a great way to “welcome companies committed to investing in Missouri’s economy.” Hopefully, this is what Page has in mind.

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Matt Simpson

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