Corporate Welfare, Not Economic Development: the Waste of Government Incentives.

Recently, Gov. Martin O’Malley stuck out his chest in pride that the Maryland Economic Development Office has successfully pledged millions of dollars of incentives to attract Kaiser Headquarters to Maryland along with some 200 jobs. On the other hand, Mr. O’Malley has been harshly criticized by former governor Ehrlich for losing Northrop Grumman Headquarters and its potential 300 jobs to the state of Virginia. O’Malley, very much on the defensive, stated that we offered them everything that we could, including $22 million in incentives. Also, political mileage is being made from recent announcements that in March Maryland led the nation by creating nearly 36,000 jobs.

All this talk simply means that the public is being fed garbage about jobs and the creation of jobs. These meaningless announcements and debates signify nothing. In absolute terms, the creation of 36,000 jobs without analysis of seasonal adjustments, historical comparisons and also analysis of nature, type and duration of jobs leaves the 36,000 number meaningless from a stand point of whether or not it is good or bad news for Maryland, relatively speaking.

Between Kaiser and Northrop, the state of Maryland offered about $40 million in incentives to attract these corporate giants to locate in the state and provide about 500 new jobs ($80,000 per job created). Even though this is presented as economic development, it is really corporate welfare.

Given the severity of current economic conditions, such waste is unconscionable and cannot be sustained. We cannot afford to pay for the misconception that somehow attracting corporate giants is equivalent to economic development. The focus should be on empowering local business with incentives which will yield a multiplier effect – capital, business, jobs, income, tax income, recirculation of capital and income, basic economic empowerment etc in the Maryland economy. These corporate giants are locked into a demand-and-supply paradigm that will not multiply significant financial impacts on Maryland incomes and jobs. The revenues and expenditures of these corporate giants are fixed in existing patterns which will continue, and although they may be transacting billions of dollars per year, those funds will not necessarily multiply jobs and incomes in Maryland.

However, small and local business would be generating new supply-and-demand expenditures since it is not tied into an existing financial paradigm. Any incentives given them therefore will become multipliers of new demand-and-supply.

It should be noted that the giants were gladly given in excess of an average of over $75,000 per job created. This is ridiculous. As a builder, I could create 10 new jobs tomorrow with $75,000 of capital and keep people working for years with a million dollars. Can you imagine the multiplication that will take place if 40 builders were given a million dollars apiece?!

The same $40 million of incentives could be spent in ways that would generate over 5,000 jobs within twelve months. The type of multiplier effect that will generate 5000 jobs within the next year can be proven. This is the type of economic empowerment needed to recover the economy. Give me some incentives, and I shall prove it.

Stop feeding fat corporate giants when you should be multiplying small indigent business! Stop feeding corporate expansion and refocus on empowering the job-and-income multipliers of small, local enterprise.