BuckeyeBlog

The bankruptcy of an Allen County ethanol plant illustrates a variety of problems with government intervention in the market. The only reason ethanol is being used as fuel is because the farm lobby (which benefits from having another market for corn) and the environmental lobby (whose hatred of fossil fuels blinds them to scientific facts) teamed up to convince federal and state governments to promote ethanol usage. Of course, this push for ethanol ignores the fact that it is bad for car engines, environmentally destructive, and may have raised the cost of food, thus contributing to food riots around the world.

These facts were ignored by policymakers because they like to appease farmers and appear environmentally-friendly. So there was a push at the state level (in Ohio and many other states) to use taxpayer money to invest in ethanol plants. Now those plants are going bankrupt. The one that went bankrupt in Allen County cost taxpayers $1 million.

When you have governmentally-directed “economic development” strategies, this thing is inevitable. Sure, in a free market situation there are plenty of products that fail. But there is no way that a product like ethanol, which has so many flaws, would still be produced unless the government was offering such absurdly high incentives for its production and mandating its usage. And when private business ventures fail, it is businessmen and investors who lose money, not taxpayers.

The ethanol boondoggle should be a sobering lesson for all those who want the government to promote “green technology.”

It must be nice to have allies in the General Assembly. As the Ohio Contractors Association found out, getting a provision tucked into the budget bill which will reduce comptition for state construction jobs (and, in turn, drive up the cost of those jobs) was pretty easy:

House Democrats slipped a provision into the state budget last month banning some uses of a new style of competitive bidding over the Internet that has netted big savings in Portage County.

Inserted at the request of the Ohio Contractors Association, the provision added during the early hours of April 28 bans Internet reverse auctions for supplies and services related to construction projects.

Vernon Sykes, an Akron Democrat, was behind this language. As Portage County’s experience with these auctions shows, they can produce substantial savings:

Jeff Lonzrick, an engineering manager for Portage County’s water resources department, said the online bidding on the water project was done April 20 by a half-dozen companies prequalified to do the work. It resulted in a low bid of $188,500, while the engineer’s estimated cost had been $253,000, he said. The project was a routine replacement of 1,126 feet of a 16-inch water main in Aurora.

The contractors claim that these auctions don’t produce this kind of savings regularly. Fine. As Portage County Commissioner Chuck Keiper says, then their supporters should have this debate in the full House and not stick the ban in a budget bill.

Making businesses compete for government contracts is good. The more transparent the competition, the better. Trying to reduce this transparency at the behest of a politically-connected interest group is a shameful. Perhaps that’s why Rep. Sykes tried to slip this into the budget bill unnoticed. Kudos to the Plain Dealer’s Aaron Marshall for exposing this anti-taxpayer move on the part of Rep. Skyes and the Ohio Contractors Association.

George Will continues to call the GOP on its hypocrisy, this time in his Sunday column explaining the hypocrisy of the McCain/Palin cry of “socialism”:

America can’t have that, exclaimed the Republican ticket while Republicans — whose prescription drug entitlement is the largest expansion of the welfare state since President Lyndon Johnson’s Great Society gave birth to Medicare in 1965; and a majority of whom in Congress supported a lavish farm bill at a time of record profits for the less than 2 percent of the American people-cum-corporations who farm — and their administration were partially nationalizing the banking system, putting Detroit on the dole and looking around to see if some bit of what is smilingly called “the private sector” has been inadvertently left off the ever-expanding list of entities eligible for a bailout from the $1 trillion or so that is to be “spread around.”

Will goes on to note:

McCain and Palin, plucky foes of spreading the wealth, must have known that such spreading is most of what Washington does. Here, the Constitution is an afterthought; the supreme law of the land is the principle of concentrated benefits and dispersed costs. Sugar import quotas cost the American people approximately $2 billion a year, but that sum is siphoned from 300 million consumers in small, hidden increments that are not noticed. The few thousand sugar producers on whom billions are thereby conferred do notice and are grateful to the government that bilks the many for the enrichment of the few.

Read the whole thing here and let your anger boil at both parties, which each rush to embrace the chance to give away your tax dollars to a variety of special interest groups.

Your tax dollars are being used to give a little welfare to Warren Buffett:

NetJets Aviation and sister company FlightSafety International were formally awarded state job-creation tax credits valued at $26.4 million yesterday.

The credits were part of $67 million worth of incentives offered in March to persuade NetJets to keep its base in Columbus. …

Retaining the two companies, both controlled by billionaire Warren Buffett, is expected to save 2,000 jobs in Ohio and generate more than 800 jobs in the next several years.

This kind of thing puts Mr. Buffett’s opposition to the repeal of the estate tax in perspective: if the government was confiscating less of your money it wouldn’t be able to give these cushy tax breaks to companies he owns.

Governor Strickland wants the state to review whether an agreement between DHL and UPS would violate anti-trust laws. It seems that his main issue is not whether the agreement would be good for consumers or whether it would really be anti-competitive, but instead is aimed at pressuring DHL to keep using facilities in the Wilmington area that employ around 6,000 people. And how does Strickland justify this move? “I think DHL has an obligation to the community and to the state, because we have tried to work in such a way as to be good partners,” he says.

He is referring to this:

The Dayton-Montgomery County Port Authority in March 2007 sold $270 million in bonds to support DHL’s expansion and upgrading of the Wilmington hub in recent years. That requires DHL to repay the bonds over 40 years, which would put pressure on the company to find a new use for the one-million-square-foot Wilmington sorting facility and airport if jobs are lost there and it generates less revenue, said Ron Parker, the port authority’s executive director.

So the port authority gave some welfare to DHL and now the Governor is using that to justify pressuring DHL into keeping a (possibly) unaffordable and inefficient cargo operation open? While I deplore the governor’s use of his office’s power to strong-arm DHL or any company, I have a little less sympathy for DHL because of its acceptance of a government handout to fund its expansion. After all, he who pays the piper calls the tune. Companies that seek handouts from the government (financed using your tax dollars) should expect opportunistic government officials to meddle even more in their affairs than is normal.

The Lima News has a great editorial taking on corporate welfare for Chuck E. Cheese:

Beth Granger, a project manager for the West Central Development Corp., last week told Allen County commissioners an application for a $500,000 Community Development Block Grant is apparently to bring a Chuck E. Cheese restaurant. The county would get the grant and then fund Smiles Food and Fun of Lima LLC through the revolving loan program. The $2.1 million project would create 30 jobs. We’re guessing they won’t be the high-paying manufacturing jobs that development officials use to justify spending tax money on private enterprise.

Such an eatery already exists here, and just down the street from the Elida Road location where Chuck E. Cheese will open. But, government assisting the one business gives it a taxpayer-provided advantage. Such is the joy of Community Development Blockhead Grants.

Buckeye Institute advisor James Stotter wrote about the folly of government economic development here.

NBC4 reports Gov. Strickland defended the loss of taxpayer dollars in the Skybus failure thusly:

“We should not stop trying to move Ohio’s economy forward and take the risk necessary to do that. That’s a part of our free enterprise system,” said Ohio Governor Ted Strickland.

Actually, Governor, the phrase ‘free enterprise’ system refers to a system free from government interference such as the picking and choosing of winners and losers in the economy because of their political value to politicians instead of their economic value to citizens. Government entanglement in private enterprise to the tune of millions of taxpayer dollars is state socialism, pure and simple, and not the ‘free enterprise’ you repeatedly pretend it to be.

Please stop giving the engine of our state’s and country’s prosperity today a bad name by confusing it with the failed policies better suited to the tastes of people living less free lives, more dependent on government, than do Ohioans and Americans.

We’ve written before about Skybus, a low-cost, low-fare start-up airline based in Columbus. Skybus ceased operations last Friday evening.

A number of investors voluntarily risked much on the Skybus and lost their bet.

A lot of local and state taxpayers and Port Columbus service users similarly risked much, but the difference lies in our motivation. We were compelled to bet on the Skybus business plan and general economic conditions through taxes and fees that we had no choice but to pay.

Remember, our bets were placed by politicians spending someone else’s money. This would be politicians seeking not the best possible balance between risk and reward (and how can they possibly know the aggregate of all our individual preferences in this regard), but politicians seeking what rewards them, namely photo-ops and contributions and other perks of power.