Good To Miss The Amazon HQ Sweepstakes

amazon_hq2

amazon_hq2The Amazon HQ announcement is coming to your headlines soon. CEO Jeff Bezos said by the end of the year, even though others believe they’re going to Northern Virginia. I’m thankful neither Houston nor San Antonio played that game, although Austin was named a top-20 finalist.

The game, if you need a refresher, is that Amazon intends to build a new 50,000-employee second headquarters, and invited city and county leaders last year to inundate the company with slavish economic incentives to woo Amazon and those sweet, sweet, jobs.

Economic Development: Left and Right

One of the things I think about economic development incentives, which is clearly quite naive of me, is that partisans on the Left and Right should always, for ideological reasons, oppose targeted tax breaks for specific companies.

On the Right, a targeted tax break incentive seems the very antithesis of free-market capitalism. This involves a government, usually a state or city or county, putting its thumb on the scale to pick winners and losers. Pro-market folks should see this as a clear disruption of the way markets are supposed work. Worse, the incentives usually come with intrusive requirements like minimum numbers of jobs created, minimum salaries, and further government interference. From a free-market perspective, when the government picks winners and losers we get a bad mixture of misallocated resources and opportunities for corruption.

To the Left, a targeted tax break for a specific company should appear as clear corporate welfare. When a government cuts property taxes or other fees for a specific business, the small number of capitalist owners of that specific company get a direct benefit to their bottom line, while the general population bears a greater burden for all the rest of the taxes.  That’s the very definition of benefitting the few on the backs of the many, and should present clear problem for ideologues on the Left.

Setting aside my naïve brain, however, it seems like both the givers of government largesse and the recipients of the largesse believe in tremendous personal benefits from economic incentives. Meanwhile PR announcements inevitably focus on some amount of “good paying jobs,” or praise the “job-creating government.”

Again, this is just one man’s dumb opinion, but when you incentivize companies to move to your city because of a supposed tax break, and that company is willing to submit itself to a specific requirement for creating a certain number of jobs at a certain salary, there are two highly likely scenarios.

The optimistic scenario is that the company is well-run, planned the expansion anyway with or without government incentives, and is cynically happy to receive government freebies because, hey, free money. That’s at least a clever, but cynical, company.

The pessimistic scenario is that the company makes important executive decisions based on tax incentives. That kind of company will be gone in five years, either because their executives have their priorities wrong and the company is badly run, or because another city or county has another better set of incentives to offer five years from now.

To be clear, I’m confident Amazon is extremely well-run, will extract maximum value from its already preferred and chosen location, and they’re interested in incentives because, hey, free money.

The Academics’ View on Economic Development Incentives

UT Austin Professor Nathan M. Jensen and Duke University professor Edmund J. Malesky recently published a book Incentives To Pander: How Politicians Use Corporate Welfare For Political Gain addressing these problems. They review what economists already know, which is that there’s scant evidence that economic incentives work. Or if they work, the public benefit cannot be justified by the public cost.

Their study focuses less on the economic case for incentives and more on the political advantage city and county leaders get by offering these corporate goodies. It doesn’t matter so much that incentives don’t work, but rather it matters that voters think they work. And voters have far less information than leaders, so generally can’t prove that incentives don’t work.  Jensen and Malesky further argue that even an unsuccessful attempt to woo a company with tax breaks, for example, helps a political leader, because they can at least claim to have “tried their best.”

One Mayor’s View on Amazon

In the light of Jensen and Malesky’s book, and leaders’ incentives to pander, San Antonio Mayor Ron Nirenberg and Bexar County Judge Nelson Wolff’s early and decisive NO to Amazon HQ in October 2017 stands out as particularly courageous.

Nirenberg_Letter_to_AmazonI asked Nirenberg recently whether he had any regrets about declining to compete for Amazon HQ. His short answer is, no, no regrets.

His longer answer is that they didn’t so much say no to Amazon as they started a different economic opportunity conversation about what San Antonio has to offer.

“With respect to HQ2 and the sweepstakes, that narrative of San Antonio’s bright future is weaved right into it. When the stories are written about the Amazon RFP, there is a subplot, which is San Antonio’s response,” Nirenberg said.

I have to say, because I hate incentives so much, that it’s refreshing to see an earnest refocus on the economic advantages of a place rather than dangling public goodies to a private company.

Nirenberg continued, “We are investing in the fundamentals in terms of housing, water supply, a reliable energy grid. And we have a workforce that mirrors what the rest of the country will look like 20 years from now. We are making investments in that workforce before most cities have even woken up to that reality.”

Says Nirenberg, “if a company is interested in a 5-year return, and cashing out, there are many other cities.  But if companies are interested in the 30-year return, I feel the fundamentals of our city are extremely competitive.”

Brother, can I get an Amen? This is the kind of talk professors Jensen and Malesky would welcome.

Northern Virginia, early congrats on your future “win.”

 

Please see related posts:

Need Transparency on Economic Development Taken To Eleven

Amarillo By Mornin’ – Stadium Building

Economic Development for Solar – Turtles All The Way Down

 

 

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Super Bowl Stadium Thoughts

minneapolis_stadiumIn case the broadcast of the Super Bowl on Sunday didn’t make it crystal clear on high definition TV, there’s one very specific reason why the NFL chose to hold a giant tourist event in freezing Minnesota in February. (Hint: It wasn’t for the fan experience.)

The reason: Money.

Specifically, $1.2 billion spent to construct the new US Bank Stadium in Minneapolis. Even more specifically, the estimated $498 million in taxpayer subsidies for the stadium. That amount of public money keeps sports franchise owners toasty warm in their luxury boxes, bless their hearts.

The NFL’s reward for extracting our taxpayer funds is the Super Bowl. Historically the NFL chooses a warm-weather city in Florida, Texas, Arizona, or Louisiana for the Super Bowl. Football fans, one would sort of think, prefer their walkable pre-game experience without putting on eight layers of clothing. For the right amount of taxpayer money, however, the NFL will send die-hard fans to the weather-equivalent of planet Hoth.

Awarding Super Bowl locations follows the construction of new stadiums by NFL cities, just like night follows day. Here, have some data:

New $1.2 billion stadium for the Vikings in 2016? Super Bowl LII in Minneapolis in 2018.

New $1.4 billion stadium for the Falcons in 2017? Super Bowl LIII in Atlanta 2019.

$550 stadium renovation of the Dolphins’ stadium in 2016? Super Bowl LIV in Miami 2020.

$150 stadium renovation for the Buccaneers in 2017: Super Bowl LV in Tampa 2021.

New $2.6 billion stadium for the LA Rams in 2020: Super Bowl LVI in Inglewood, CA. in 2022.

If I were a gambling man, I’d wager my life’s fortune on Super Bowl in 2023 in Las Vegas, after the peripatetic Raiders’ new stadium gets built on the sturdy foundation of taxpayers’ wallets in Nevada. Please, somebody, tell me if there’s a sports book at Caesar’s Palace that will accept my wager on the location of Super Bowl LVII in 2023.

Anyway, those new stadium price tags aren’t the amount taxpayers subsidize billionaire sports owners, but rather the total estimated costs of construction. Here are the estimated taxpayer subsidies associated with those specific stadium construction projects:

Minnesota: $498 million

Atlanta: $200 million

Miami: $75 million

Tampa: $29 million

LA-adjacent Inglewood: $0. The LA Rams’ owner reportedly turned down an offer of $477 million in public subsidies from St. Louis to keep the Rams from moving to California. Yay!

Las Vegas: $750 million

By the way, I love the owner of the LA Rams for that. That’s the way a good NFL owner does it.

The way the rest of the owners do it, however, is to extract maximum taxpayer dollars as a subsidy for their privately-owned sports businesses. Which makes me mad.

Did you know that Patriots owner Robert Kraft also built Gillette Stadium without using any taxpayer money?  Karmically speaking, that explains everything about their success in the last 17 years, no?

Back in 2002, Houston received its award from the NFL for building the $449 million NRG stadium, two-thirds of which was funded by taxpayers. That entitled Houston to host two Patriots championships during the 2004 and 2017 Super Bowls. So that was nice. Maybe taxpayer funds help you host, but karma wins championships?

I’m sorry, where was I?

Oh yes. Besides the inherently anti-capitalist practice of using public subsidies for private owners’ gain, I don’t believe the public gets good value for its money.

The New York Times filed a glowing economic development report in mid-January on the surge in economic development around Minneapolis’ new US Bank stadium. The story features excited architects, developers, real estate agents, and the leaders of a public-private partnership promoting their neighborhood, and lots of pictures of cranes at construction sites. The story name-drops future company office spaces, a big number of planned housing units, and potential hotels with plans to move there. What’s not to love, at least according to developers? This echoes the familiar argument that taxpayer money into the pockets of billionaire owners is justified because it spurs local economic development.

Now I’ll adopt my grumpy Bill Belichick-persona about the Times’ glowing report. Studies regularly debunk this myth of development-through-publically-subsidized stadiums. The University of Chicago polled economists on whether taxpayer costs for stadium building outweighed public benefits, with 83 percent agreeing, and 2 percent disagreeing. (The remaining economists polled did what economists do, which is respond with some version of “it’s complicated.”)

A Brookings Institute report on the subject in 2016 does not equivocate: “after 20 years of academic research on the topic, articles published in peer-reviewed economics journals contain almost no evidence that professional sports franchises and facilities have a measurable economic impact on the economy.” Take that, New York Times.

On the subject of the myriad ways we taxpayers subsidize private sports team owners, do you remember the Tax Cuts and Jobs Act passed in December 2017? Whatever the merits or demerits of the final bill, I had pinned my hopes on a little-discussed provision of the proposed House bill that forbade federal taxpayer subsidies for sports stadiums via tax-exempt municipal bonds.

Frankly, I loved that little reform provision with all my heart.

The House version of the bill would have eliminated that subsidy right up until the very end. Oklahoma Senator James Lankford (R) and New Jersey Senator Cory Booker (D) tried to team up in the Senate to eliminate subsidies in the bill’s Senate version as well. And then, in the wee hours of legislative reconciliation, the final bill re-opened up federal subsidies for sports stadiums via tax exempt municipal bonds. Nevada Senator Dean Heller (R) bragged about “preserving” the subsidy in the final bill, presumably because of the upcoming stadium to be built for the Raiders in Las Vegas, using taxpayer money.

The Empire struck back! Billionaire sports owners won again. Senator Heller was Lucy to our Charlie Brown, snatching the ball away from our kickoff at the last minute. A little part of me – the uber-nerdy federal tax-reform-following part of me – died that day. (The other part of me died when the Pats didn’t win Sunday.)

 

 

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Need Transparency Taken To Eleven

In my last post I mentioned the terrible scores Houston and San Antonio governments received for transparency in their economic development programs, according to a report by Good Jobs First.

One reason the stakes for transparency are high is because the amounts of subsidy are so big. How big? Well, we’ll soon find out. In 2017, for the first time, cities and counties nationwide will have to disclose how much in total subsidies they provide to private businesses, due to a new accounting standard known as GASB 77.

A study by the New York Times in 2012 found that governments in Texas provided the most economic subsidies to private business of any state in the nation, at $19.1 billion.

Texas Monthly writer Erica Grieder makes the point in her book Big, Hot, Cheap and Right: What America Can Learn From the Strange Genius of Texas, that “free-market capitalism” in Texas has, ironically, long relied on strong government intervention and subsidies for private business.

But with that high subsidy comes – I would argue – a heightened duty to keep the public informed of programs and results.

The current way of reporting on economic development subsidies, officials in each of the City of Houston, City of San Antonio, and Bexar County all told me, is that, once a year, the economic development department sends a spreadsheet over to someone at the newspaper, either the Houston Chronicle or San Antonio Express News. Beyond that once-a-year data dump, either an enterprising citizen or more likely a bored reporter on a fishing expedition working on deadline would need to submit a specific request to the economic development department of the city or county.

Since the information is deemed public, this request presumably would be fulfilled with little muss or fuss. All of the officials with whom I spoke reiterated that no formal “Freedom of Information Act” request (a “FOIA” for the cool kids) needs to be filed.

But you can probably see why, although that constitutes a minimum standard of public disclosure, it falls far short of what we should reasonably expect in 2017. What if the reporter or editor at the respective paper had a full plate of stories that week and didn’t really want to make use of the information? What if – as is likely every year – no particular economic development deal jumped out as worthy of newspaper coverage? What if – as shocking as this will sound to all of you reader-types – a citizen doesn’t actually read the newspaper? How would they learn about this? For each of these reasons and more, an annual newspaper data dump isn’t the right level of transparency at this point in time.

good_jobs_firstAll of the economic development officials I spoke with agreed with me in theory on this point, but obviously it will take some effort and resources in their respective departments to improve the situation.

And we can agree that improving searchable websites for ease of transparency can be difficult. Bexar County’s Executive Director of Economic Development David Marquez pointed out to me that certain (not to be named) newspaper websites can be notoriously un-searchable. That’s a fair point, my man. A fair point.

Anyway, I hope they will all take a look at Austin’s searchable database, to see what good disclosure and transparency looks like.

Beyond the amount of money involved, why else do we need a high degree of transparency with respect to economic development deals? Just this. There is nothing quite like conferring a public good – a generous tax break – to a private company that gets my spider sense tingling about potential conflicts of interest. You don’t have to be paranoid or a cynic like me (although I invite you to be) to believe that a natural symbiosis exists between public officials who need money and have the ability to award valuable subsidies and private enterprises who would happily return the favor.

going_to_elevenWe – not just writers, but also citizens – should be able bring up an online database showing, just to pick an example, political campaign contributions, and compare that database to public subsidies of private companies. Are there any connections? Does a company that contributes to a campaign show up as a beneficiary of public subsidy? That’s the very definition of conflict of interest, and we need the tools to prevent that. If there are any dots to connect, everyone should have the power and ability to connect them, from the comfort of their own laptop. If there are no dots to connect, then we all sleep better at night.

This is in no way a Republican or Democratic Party issue. But if you want to see it that way, just consider the importance of making sure officials from that other party (the one you most distrust) can’t get away with it. We need you on that wall, people, guarding against that other party’s nefarious conflicts of interest!

I believe the right volume of transparency for economic development tax breaks for private companies is a “SHOUT IT FROM THE ROOFTOPS, CONSTANTLY” level of transparency. On a scale of one to ten, I want transparency that goes to eleven. Because you see, it’s that one bit louder, isn’t it?

The next best thing to a transparency volume turned up to eleven is an online searchable database. Properly understood, that’s strongly in the interest of public officials and private corporate recipients as well. They also want and deserve the legitimacy that goes with transparent economic development plans, free from charges of influence peddling or conflicts of interest.
Please see related posts:

A version of this post ran in the San Antonio Express News and Houston Chronicle.

Need for Transparency in Economic Development Part 1

Economic Development Subsidies: Turtles All The Way Down

Book Review: Big Hot Cheap and Right, by Erica Greider

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Failing Transparency Scores for Houston and San Antonio

democracy_diesLet’s say it’s Friday night, 11:30pm. You stayed in to Netflix and Chill with Bae. But then you bolt upright in bed, wide awake because, like, “Exactly what kind of tax abatements DID my city give out to attract that out-of-state manufacturing company, anyway? And also, how many jobs does my city expect and what’s the average salary for those new jobs?” Darn it, now there will be no sleeping for hours.

I’m being a bit flippant but now please forgive me if I go too far the other way. The Washington Post’s new adopted tagline captures, at least for me, why citizens need to be able to see economic development subsidies whenever the question occurs to us. Because “Democracy Dies In Darkness.” You have to be able to follow the money. We should all be sleepless if we can’t figure out which private companies enjoy our public subsidies, because the opportunity for mischief is too great.

If you live in San Antonio and Houston, you need to wait weeks, at least, to get answers to your subsidy question, if you even know how to request them, which you probably don’t. If you live in Austin, however, you’d have answers on your laptop by approximately 11:34pm, through their online searchable database. Then you can fall right back to sleep.

In March 2017 a think-tank named Good Jobs First published an excellent report titled “Show Us The Local Subsidies” grading the country’s 50 largest cities on the quality of their economic development program disclosures for subsidies like tax abatements. Meaning, if somebody wants to know which private companies received city or county tax breaks or investments, this report described how a citizen could, or could not, access that information on the web. The report included the largest Texas cities and counties, and the results were quite mixed.

Austin scored 95 and 90 points out of 100 for two of its programs, best in class. Fort Worth earned an underwhelming 50 and 55, Houston scored a middling 45, and Dallas County a 30. Other Texas governments scored zeros for web-based disclosure – include the City of San Antonio and Bexar County (San Antonio), City of Dallas, City of El Paso, Harris County (Houston), and Tarrant County (Fort Worth). To be clear, these scores do not indicate anything about the effectiveness of their economic development subsidies, but rather how easy it is for someone to get data online on the economic development deals cut by governments for private companies.

good jobs firstScoring zero means that specific information about tax abatements for private companies is not available, at all, on the web. For the purposes of the Good Jobs First report, a perfect score requires not only that information be online, but that it be conveniently searchable through a database, including the value and type of subsidy, the private recipient’s name, the date of the subsidy, and the estimated number of jobs to be affected, including average expected salaries. In addition, a perfect score would require multiple years of data for comparative purposes.

David Marquez, Executive Director of Economic Development for Bexar County, takes exception with the report’s characterization of his program as not transparent. He points out that his office is in the habit of sending a spreadsheet of information whenever a reporter requests it.

“It’s the accessibility, not so much the transparency,” says Marquez. “It’s clearly not hidden. That’s not the case. There’s a nuance there.”

Gwen Tillotson, Deputy Director of Economic Development for the City of Houston, notes that all tax abatements awarded under a program called Chapter 380 agreements are posted online in PDF format, usually between 40 and 70 pages of text. In addition, she notes, public meetings notes are posted on a separate website, but “if somebody wanted to go deeper, people could contact us, and we could help them.” Her office also told me that once a year they send a report to the Houston Chronicle on all the subsidies they awarded throughout the year.

 

Rene Dominguez, Director of Economic Development for the City of San Antonio, also assured me that once a year his office sends a spreadsheet of his office’s transactions to the San Antonio Express News. His office also responds to requests from the public, as needed.

What has worked as a minimum standard of public disclosure in past years, however, is shifting.

Aiding the positive trend toward transparency, this year – for the first time – the Government Accounting Standard Board Rule 77 (GASB 77 for you cool kids) requires cities and counties to disclose the total amount of subsidies and tax abatements awarded to private companies for economic development. Although disclosure is voluntary and does not name individual beneficiaries, nor does it need to be detailed beyond a single total number, a failure to disclose could affect pesky things like bonds ratings and official annual financial audits.

texas_transparencyThe State of Texas, through the office of Comptroller Glenn Hegar, instituted a “Transparency Stars” program last year to encourage best practices in local government financial reporting, specifically including economic development programs. The comptroller’s criteria for a star closely resemble Good Jobs First’s requirements, including disclosure of data over multiple years, and data visualization. Local governments may apply to the Comptroller’s office for a review and eligibility for a star. So far five cities in Texas have earned a star in economic development.

Says San Antonio’s Dominguez, “I think we as a city strive to be a leader in transparency. Transparency in economic development has become a critical issue,

GASB 77 is a clear example of that, and we’re going to provide additional disclosures. That’s meant to increase transparency.”

Although all of the officials I spoke with expressed a sympathetic interest in greater disclosure, a zero score (San Antonio and Bexar) or even a 45 out of 100 (Houston) is not a good look. I’m throwing down the gauntlet now because I hope to call everyone back in 2018 to congratulate them that they all scored at the top of next year’s Good Jobs First report.

 

Please see related post:

We deserve more transparency on economic development programs – Part 2

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Worst San Antonio Financial Idea of 2015: Bringing Raiders to Town

A version of this post appeared in the San Antonio Express News

alamodome_san_antonio

Are you ready for my first nomination for San Antonio’s Worst Financial Idea of 2015 Award?

“What? So soon,” you say? “We just started the year!”

Yes, but I’ve resolved against procrastinating in the New Year, and this idea clearly needs highlighting.

Are you ready? Drum roll please:

Moving the Oakland Raiders to San Antonio!

We’ve got a winner!

My goodness, what a terrible idea. [1]

Former San Antonio Mayor Henry Cisneros told the Express News he believes moving the Raiders to San Antonio is a “very clear 50-50 proposition,” which it most certainly is not.

But more importantly, in financial terms, it’s a horrible idea. Like a $500 million horrible idea for taxpayers.

Here’s the logic

Picture yourself for a moment as Mark Davis, the owner of the Oakland Raiders.

The city of Oakland will not build you a shiny new stadium.

But that doesn’t seem fair, because you really, really want a city government to give you a subsidized place for your team to play. And anyway, that’s the reason why your dad Al Davis moved the Raiders from Los Angeles to Oakland in 1995.

Oakland_Raiders

As some of you other billionaires out there may know, rent for your privately owned business can be darned expensive!

Anyway, the way you get a public entity to provide hundreds of millions of dollars for your private business is to pretend that you are willing to move your team, especially if a different city is willing to pay you those hundreds of million dollars, in the form of free or reduced rent.

You don’t really want to leave, but on the other hand, there’s always a price, right?

But, the big question is, what’s the price?

Well, these things can be estimated, within a reasonable range.

The price depends on the cost of building a new stadium, the amount of public money offered (that’s your tax dollars at work!) and the relative attractiveness of a city’s media market.

The taxpayer price

According to a study done by the Minnesota Vikings, in the last ten years five NFL stadiums have been built at an average price of $871.5 million, with an average public subsidy of $327 million. Of course, that’s just an average.

For reasons I’ll explain below, I think the public subsidy in San Antonio will need to be larger than the recent average.

Public funds supported Jerry Jones’ privately-owned business through $444 million of Cowboy-stadium subsidy, while Indianapolis supported Jim Irsay and his Colts to the tune of $619 million in stadium subsidy. Averaging those, we’re talking around $500 million. That seems about right for San Antonio.[2]

The difference in media markets

The difference in media markets accounts for why San Antonio taxpayers would have to pay the high end of the range of subsidies to bring the Raiders to town. That’s because ‘national revenue’ through media deals, sponsorships and broadcast rights typically make up a significantly bigger proportion of an NFL team’s earnings than ‘local revenue’ like ticket, concession and merchandise sales.

Please forget the oft-repeated and misleading claim that “San Antonio is the seventh largest city in the United States.”[3]

For the purposes of an NFL owner, San Antonio is the 36th largest media market in the United States.

No owner of an NFL football team would ever willingly downgrade the value of his franchise by moving from the fourth largest media market (San Francisco/Oakland) – or forgo the opportunity to play in the second largest media market (Los Angeles, which still doesn’t have a team) – to play in the 36th largest media market in the US (San Antonio), unless he was buried in public money to induce him to make that choice.

stadium_money
Burying Mark Davis in stadium money might work

Would Davis give up Oakland – or the chance at LA – for that?

Is that clear? If former Mayor Henry Cisneros and his backers get his way, San Antonio taxpayers should be prepared to pay, and pay bigger than any city has ever paid before.

Economic impact

I understand this column will immediately be rebutted with folks carrying consultants’ economic impact analysis[4] showing that building the Raiders a shiny new stadium will bring many millions of dollars into the San Antonio economy – providing “good jobs” and “revitalizing neighborhoods” along the way.

I have two responses to those critics.

First, we’ve all heard the theory of stadium-driven neighborhood revitalization. Have you visited the Alamodome and AT&T Center lately? I live right near one, and I have visited the other frequently. The expected stadium-driven economic development and neighborhood revitalization is still – let’s politely say – in the “potential” stage.

Second – and this is a personal rule of mine – I don’t support public subsidies for individual businesses, as worthy as Mark Davis’ Oakland Raiders may appear to some. Public subsidies and public funds should go toward broad benefits in this city of extraordinary needs – public safety, schools, roads, libraries, parks, housing, and poverty alleviation all come to mind as high priorities.

Subsidizing the private business of a billionaire owner with up to $500 million in tax breaks tends to be a low priority for me.

But hey, that’s just me.

 

Please also see and listen to the followup discussion including Heywood Sanders of UTSA, Gregg Easterbrook of ESPN, author Neil DeMause, and me, on KSTX’s The Source – The NFL Coming to Town Might Be A Bad Idea

 

[1] And I don’t mean horrible for the following reasons: I don’t mean horrible because the Raiders are the worst team in the NFL, by a good margin. I don’t mean horrible because of the terrible lives led by brain-damaged and injured survivors of an NFL career. I don’t mean horrible because of the pattern of domestic abuse by players and the false ‘We’re so shocked!’ pretend-reactions of the NFL leadership from Commissioner Roger Goodell on down. I live with all that hypocrisy already, as I enjoy watching my team on Sundays. (Brady, Belichick, Arizona-bound baby! Woohoo!)

[2] Needless to say, nobody deserves half a billion dollars worth of private business subsidies more than upstanding gentlemen like Messrs. Jones and Irsay. Please don’t mention the sexual harassment and DUI charges personally leveled against those two gentlemen-owners, as that would be both impolite and not financially relevant to the discussion. Let’s focus instead on the half a billion dollars that Mark Davis will expect in public subsidy to move his Raiders to San Antonio.

[3] For the vast majority of you readers who do not live in San Antonio, that particular “7th Largest City” chestnut is something San Antonians tell themselves (and actually say outloud, and in print) on a regular basis. It has to do with the measurement of population within a metropolitan area, while the boundaries of that metropolitan area can be redrawn outward every few years in a seemingly limitless sprawling suburban way. I know, it’s embarrassing. But you can Google it and see where San Antonians get the idea.

[4] That’s a post for another time, but lets just say, the public sector could build a giant hole in downtown San Antonio, then immediately cover it up with dirt, and get a consultant to write a report claiming massive follow-on economic impact effects of the “Downtown Giant Hole and Fill” project. Think of all the ‘shovel ready’ jobs!

 

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Fired Up By Cuba Policy Change

A version of this post appeared in the San Antonio Express News.

I'm fired up by the new US policy
I’m fired up by the new US policy

I’m totally fired up that the Obama administration relaxed travel, trade, and diplomatic restrictions on Cuba last week.

Removing the US embargo will not raise up Cuban people’s lives as much as we hope without the Cuban regime, for its part, embracing more of a market system.

For over 50 years, the Castros took every public speaking opportunity to point their fingers North and blame all of their country’s ills on the US.

By lifting the US embargo, we at least remove the Cuban regime’s primary excuse for the past fifty years of horrific economic conditions of the Cuban people under the Castros.

It’s not the embargo, it’s their suppression of a market economy.

cuba

Markets vs. Cuban Socialism

I’ll be the first to declare that our markets-based system has tremendous failures.

Markets are unjust.

Markets – without a safety net – heartlessly leave children, the unemployed, and the elderly in poverty.

Unregulated markets commonly lead to the terrible treatment of consumers and the environment.

But to paraphrase Winston Churchill’s famous quip about Democracy, I would say free markets are the worst form of economy, except for all those other forms that have been tried from time to time.

winston_churchill
Churchill had something pithy and brilliant to say about everything

One thing that made me a card-carrying Adam Smithian Wealth of Nations-thumping pro-markets guy was visiting Cuba under the Castros.

My wife and I visited twice in the 2000s. We’ve visited many resource-limited countries. But nothing compares to Cuba.

In Cuba, everything is illegal

In the absence of any legitimate way for ordinary Cubans to earn enough to get food to eat, corruption envelops every day life.

Everyday. corruption.

Not for anything special, or anything nice. Just to get enough calories in the body.

For us as tourists, simply securing a room in a private home for a few nights in Havana involved a cat-and-mouse game to fool the local police.

“Ok, I’ll arrange it all for you,” the man offered at our café, his eyes scanning for signs of government authorities.

“Follow me down this road. About two minutes after I go, walk to the end of the block, turn right, and I will meet you inside the third doorway. Make sure you do not follow me too closely, as the police are watching.“

One day in Cuba and you will become a card-carrying Capitalist
Just spend one day in Cuba and you will become a card-carrying Capitalist

This was all standard procedure for renting a room. The homeowners – like thousands in Havana – desperately needed to earn dollars to buy bare necessities. The room cost us about $5 per night.

To further support that family we bought a home-cooked meal from them for another $2. I knew it was the best our host could do, and her eyes asked for a kind of understanding of their difficult situation as she laid the pigs-knuckles plate plaintively in front of us, murmuring “No es mucho pero esta hecho con mucho cariño” – “It’s not much but it is made with a lot of love.”

We wanted to cry.

Later, we slipped into an illegal restaurant –known as a paladar – run out of another private home that was desperate to earn dollars, despite them running the risk of breaking the law and being arrested.

Incidentally, you do not want to be arrested and go to a Cuban prison, as described in Reinaldo Arenas’ memoir Before Night Falls.

The Cuban health care system

On our second visit, my wife lived for six weeks working and researching in a Cuban hospital.

She arrived in Cuba ready to admire their health care system – free, universal, and reportedly successful. Long story, short: You do not want to get sick in Cuba.

The doctors are excellently trained, they have outstanding vaccination rates and access to prenatal care, but the facilities and access to medicines are awful.

When a woman who worked for her hospital needed specific antibiotics for a persistent infection, could she access the vaunted Cuban health care system?

Absolutely not! Appropriate antibiotics were unavailable to her, except through corruption. She ended up paying precious (and illegally obtained) dollars to the limousine driver of a Communist Party member, who had access to scarce antibiotics that ordinary Cubans do not.

With markets for nearly everything outlawed, everybody must cheat merely to gather life necessities.

Spying on everyone because everything is outlawed

Cubans are not allowed to move within the island to seek employment, without permission from authorities – which permission cannot be obtained without corrupt connections.

But hunger is a powerful motivator. People stay at friends’ houses illegally in Havana, for example, hopeful to earn dollars. They have to sneak in and out house, however, fearful all along that neighbors would report them.

The official Cuban Party propaganda since the 1960s has maintained that US sanctions primarily caused the degradation of the Cuban economy.

With US sanctions lifted, that lie at least will be exposed.

 

 

 

 

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