Modern stimulus trickles down, not up
In our editorial in the Year in Review special section, inserted in Friday’s Enterprise, we said 2013 was a year in which our government gave much of the public tax treasury to the private sector and took much of it away from public services.
There’s more to it than that, though.
Our current government’s tendency to give public funds to private businesses in the form of grants and tax breaks, supposedly priming the pump to stimulate economic growth, probably would have surprised past generations of Americans. In the past, tax money was more restricted to public works and services. Not entirely, of course – look at military contractors – but during the Great Depression of the 1930s, the government’s economic stimulus was to build great public works, whatever the expense, and thereby employ the masses.
It was “trickle-up” economics, starting with the people in need and going from there.
By contrast, the U.S. government’s stimulus plan in the “Great Recession” that began in 2008 was pure “trickle down”: Offer incentives for businesses to build stuff, with the expectation that they’d do the employing.
It seems to be based on the concept that the private sector is a more efficient employer than the public sector. In many ways that’s true; we’ve all certainly seen plenty of waste and over-cushy government jobs that most private companies would quickly weed out. But with the modern stimulus, it’s also hard to gauge how much of the money goes into working people’s pockets and how much goes into those of the company leaders.
Politicians love to tout economic development and the grants they’re giving to “create jobs” or “sustain jobs,” but how much measurable good does it do? I think we haven’t seen that answer play out yet.
Would it be better to keep that money with our public schools and hospitals, creating and sustaining jobs in essential services, where year after year of cuts have sunk beyond the fat into the meat and bone, making our education and health care worse than before?
Would it be better to invest in a single-payer national health insurance system than to bend over backward to make the Affordable Care Act work – a system which is designed to achieve a few of Democrats’ goals but without hurting the insurance industry?
It’s hard to say.
Maybe it’s too soon to say. Our nation is trying out this path, seeing how it works. No system will be perfect anyway. Every generation has to fix the flaws in the last one’s designs. We’ll leave plenty for our kids to do.
It’s also worth noting that the money our state government spends on economic development isn’t as much of the budget as politicians often play it up to be.
The state’s Regional Economic Development Councils are the part of the state’s stimulus plans getting the most attention. These grants aren’t new – just redirected. The state spent this money every year prior the REDCs, but not all in one place. It was in the form of various grants issued by various state departments, agencies and politicians. Now there’s a statewide competition, and each region’s business and political leaders get to select that region’s application priorities.
And the numbers shrink every year. In 2011, the first year, the state shared $1 billion between the seven regions, but the next year it only gave out $738 million, and $715 million this year. The North Country has been among the top money-getters each of those years, but in 2011 it got $103.2 million, followed by $90.2 million in 2012 and $81.3 million this year. This year’s top-grossing region won $83 million.
So despite the hurrahs, the state is reducing its stimulus.
It will be interesting to look back on this and see what good it did. We can see that the REDC grants to be spent in Saranac Lake – $7 million for two hotel projects, $35 million for a partnership between Trudeau Institute and Clarkson University, and $700,000 to help expand Bionique’s lab in Lake Clear – will almost certainly transform this place for the better. As for the rest, time will tell.
Now a commission appointed by Gov. Cuomo has recommended $2 billion worth of tax cuts, including $1 billion property tax freeze, plus expiring the $2 billion “millionaire’s tax.” That’s big-time trickle-down.
It’s interesting to see this particular blend of Keynsian and supply-side economics which is so popular with business Democrats like Gov. Cuomo and President Obama. It sure helps business. It’s not so good for those who work in or need public services.
We’re living in a time when those sectors are being purged of their inefficiencies and, at the same time, challenged to do more with less. The Affordable Care Act, Common Core curriculum and tax cap are all examples of this. Maybe our government entities will emerge better for it: leaner, stronger and more sustainable.
We hope that’s the goal of politicians like Gov. Cuomo. Sometimes it seems like he would rather spend our tax dollars on a luxury hotel than a school. We’ll have to see what he prioritizes in his 2014-15 budget proposal, which he’ll announce in January.