Now that Louisiana lawmakers have convened for another session, we’d suggest that they tackle a recent Wall Street Journal piece by Barton Swaim as required reading.
Swaim, once on the staff of former South Carolina Gov. Mark Sanford, took to WSJ’s oped page to outline the dubious practice of rent-seeking. It’s the tactic through which corporate giants get states and localities to out-do each other in doling out big incentive packages for an economic development project.
There’s nothing wrong with competition, of course, but as Swaim points out, this is “not a proper bidding war. Officials are competing against offers they can’t see. But they want the deal and attendant publicity, and their own money isn’t at stake, so they give the companies just about everything they want.”
The problem is that these deals are usually cooked up out of public view, even though millions — or billions — of tax dollars are committed once the ink is signed. The deal is often fast-tracked for approval before local residents get a decent look at it.
Louisiana’s public records law carves out exceptions that shield information about prospective economic development projects from widespread view. It’s a challenge across the country, as Swaim makes clear.
“One reason incentive deals haven’t stirred more public opposition,” he writes, “is that ... they usually take place in secret. Hundreds of comparable deals are shaping up around the country from month to month, but the public knows little about them.”
In many cases, adds Swaim, the downsides of these deals don’t emerge until later. “Companies don’t always bring the promised number of jobs,” he notes, “and the incentive agreements are secretly renegotiated to reflect more modest targets. Even if the jobs targets are met, the benefits aren’t necessarily what they appear.”
The European Union has tackled rent-seeking by acting as a referee, placing a cap on incentive packages offered by member countries to keep bidding wars from going through the roof. Swaim suggests that Congress could invoke its constitutional power to regulate commerce among the states to do something similar.
We won’t hold our breath for that. In the meantime, the public has a right to be skeptical about whether the Next Big Deal in regional economic development is really all it’s cracked up to be.