Wisconsin's Bogus Invisible Hand

When Congress voted last week to “bail out” the country’s large investment firms, most representatives had to hold their nose before the vote, and immediately fled the Capitol to avoid detection.  Finding a congressperson willing to defend the bill was as likely as finding a Chicago Cub with a World Series ring.  But the bill passed, despite the average American’s hesitance to spend their tax dollars to prop up companies that made such terrible business decisions.

Yet here in Wisconsin, on a much smaller scale, we bail companies out on almost a daily basis.  Through grants issued by the state Department of Commerce, a select few businesses get taxpayer cash in the name of “economic development” or “worker training.”  But, in fact, there’s little that’s worse for commerce in this state than the Department of Commerce.  For businesses with a sound business model, we reward them with our expendable income.  In Wisconsin, for businesses with an unsuccessful business model, we reward them with our tax dollars.

When you read up on the state Department of Commerce, everything looks kosher – the state rides in on a ray of sunshine and saves businesses, shelling out tens of millions of dollars per year.  The grants and loans the state awards require an array of thresholds that businesses must meet, although many of them are vague.  You may recall August of 2005, when Governor Doyle utilized Commerce to send $5.4 million to the General Motors plant in Janesville, boldly predicting that Sport Utility Vehicles were the future of Wisconsin’s economy.  (Not surprisingly, online access to this press release from Commerce’s main site has been deactivated.)

Yet in practice, the Department of Commerce is no more than a slush fund from which the Governor can hand out goodies to his buddies.  This phenomenon is bipartisan – after creating Commerce, Tommy Thompson shelled out the grants like beads at Mardi Gras.  But more recently, Governor Doyle has used Commerce simply as a vehicle to allow him to travel the state and hand out taxpayer-funded checks to his favorite businesses and local governments.

Just take a look at the press releases from the Department of Commerce in August of 2008:

8/27/08 Governor Doyle Announces $630,000 for MPP Group, LLC

8/22/08 Governor Doyle Announces $500,000 for Hodan Center Expansion

8/22/08 Governor Doyle Announces $220,000 for Infrastructure Improvements in Oconto County

8/22/08 Governor Doyle Announces Wausau Equipment Company, Inc. Expansion

8/19/08 Wisconsin Basic Economic Development Course, Nov 10-13, 2008 in Madison

8/19/08 Governor Doyle Announces Industrial Revenue Bond Allocation in Little Chute

8/19/08 Governor Doyle Announces Industrial Revenue Bond Allocation in Elm Grove

8/18/08 Governor Doyle Announces $750,000 for Merit Gear and City of Antigo

8/15/08 Governor Doyle Awards Rhinelander $12,000 Waterfront Initiative Grant

8/14/08 Governor Doyle Announces Winona Production Services Inc. Expansion

8/14/08 Governor Doyle Announces Industrial Revenue Bond Allocation in Milwaukee

8/14/08 Governor Doyle Announces Funding For Data Specialists, Inc.

8/14/08 Governor Doyle Announces Training Project with Appleton Papers

8/14/08 Marketplace 2008 to Showcase Wisconsin Minority Business Awards

8/13/08 Governor Doyle Announces Renewable Energy Advances at Flambeau River Papers

8/13/08 Governor Doyle Announces $200,000 for City of Mellen

8/12/08 Governor Doyle Awards Bayfield with Wisconsin Waterfront Initiative Grant

8/11/08 Governor Doyle Announces $385,059 to Washington Apartments in Superior

8/11/08 International Code Council Conference to Hold Final Action Hearings on 2009 Code

And it goes on and on.  Given that list, one would get the impression that no dollar is spent in the Wisconsin economy without Governor Doyle’s permission.

But how effective are these grants?  Are the businesses and local governments actually using them for their stated purpose?  Are we, as taxpayers, getting our money back with all this economic development we’re supposedly helping create?  Nobody knows, nor will we ever.

In 2005, über-lefty State Senator Mark Miller introduced a bill that attempted to get to the bottom of a lot of these direct Commerce grants to businesses.  The bill, co-authored entirely by Democrats, would have required full disclosure of how the grant was used and what the economic development effects were, and mandated state oversight of the grants via the State Audit Bureau.  And it is a good idea.  Taxpayers deserve the right to know how their money is being spent, and whether the promises businesses are making them are being kept.

It may be that Commerce runs programs that are valuable, such as their brownfield mitigation program.  And reducing funding would certainly irritate businesses counting on a quick taxpayer cash infusion.  But the state’s economy as a whole would be much better served by reducing our tax burden by the department’s $190 million annual budget, rather than shelling out funds to a select few businesses in need.  Reducing taxes on businesses across the board would provide capital without prejudice - as one recent recipient of a Commerce grant said, "they're just giving me my wallet back."  Presumably, when Adam Smith posited the “invisible hand” that guides the economy, he likely wasn’t talking about the list of people who have successfully sucked up to Jim Doyle.

You may recall the department in the news recently, when Commerce Secretary Jack Fischer was caught cavorting around the globe on extravagant “trade missions” with his female aide.  Of course, state officials have been going on these trade missions for years, and nobody has ever ascertained a single benefit to Wisconsin’s economy.  While most people were asking how Fischer could ever get away with wasting taxpayer money, the more observant were asking: “why do we have this department again?”

-October 9, 2008