BY: Chris McDaniel | Mississippi PEP
“United Conservatives seek to remove the suffocating grip of government regulation, no matter the originating source or reasoning, that has caused the slow withering of once vibrant communities and the destruction of individual character by reducing the incentive of our people to develop their unique talents and strive for something better and more meaningful.”
“Society is best served by volunteerism, capitalism and free markets.”
Though widely misunderstood, passing a bond bill is akin to using a credit card.
And this past legislative session, we charged our card in a wild and reckless manner.
State government added $582 million to its debt with the passage of two bond bills. In HB 1729, more than $308 million in debt was incurred in April, which was in addition to the more than $274 million given to Continental Tire and Topship in February. Put another way, we borrowed $582 million dollars.
Why is this a problem?
Well, as of April 1, 2016, the state’s bond debt added up to more than $4.4 billion. That’s what the taxpayers owe, and it’s increasing. It will take us 37 years to retire the state’s bond debt, not including the unfunded liabilities in the state’s retirement fund and the new debt contained in HB 1729. That translates into more than $1,747 owed by every citizen, which is more than double the national average. And that’s not counting the federal debt. The numbers will only worsen as we continue to borrow.
Among the many pork projects contained in HB 1729, $45 million in taxpayer funds were given to Ingalls. During debate, I specifically questioned the wisdom of corporate welfare. In so doing, I unintentionally injected myself into a thorny issue involving Ingalls, when the purpose of my questions was merely to draw attention to poor long-term economic policy and an omnibus bond bill filled with projects I found objectionable. But I’m glad I raised the argument.
Sid Salter discussed my position against the bills in a recent column, and although he was kind and respectful in disagreeing with my position, additional clarity is required.
I am a strong supporter of Ingalls Shipbuilding. My grandfather was employed with Ingalls in the 1940s, and my family has always been appreciative of the company’s hard work, especially in military shipbuilding. Ingalls is an instrumental part of the state’s economy and plays a vital role on the Mississippi Gulf Coast. But being beloved does not justify our state’s poorly-executed long-term economic plans, which is evidenced by irrational spending in many of our bond bills, not to mention a lack of reform in our overall business climate.
We are facing numerous economic difficulties, and many of the problems are exacerbated by a political class who favors pork-barrel spending and corporate welfare more than it does the creation of a tax system that is hospitable to investment and growth for all of Mississippi’s business community. The way to spur economic growth is not through business subsidies, but by breaking down barriers to entrepreneurs.
Regardless of how we attempt to mask it, corporate welfare creates market failures by misallocating resources. It likewise induces business to spend more time of lobbying government than on making better products, and it incentivizes government officials to remain comfortable and not reform existing shortcomings in the tax and regulatory codes. Making matters worse, such welfare transfers wealth from average Mississippi families to favored businesses, and it manufactures corrupting ties between government officials, politicians, and business leaders. There is a term for this kind of collusion between business and government: crony capitalism.
According to University of Iowa Professors Alan Peters and Peter Fisher, after decades of policy experimentation and hundreds of scholarly studies, there is little evidence that incentives or corporate subsidies are successful in a long-term economic setting. Other studies reached the same conclusions. The data is clear, but the news is not good for Mississippi.
From a financial standpoint, the $45 million gift makes little sense. Ingalls is part of a larger publicly-traded corporate conglomerate, which is incredibly successful. Its viability does not depend on Mississippi’s taxpayers.
In 2014, Huntington Ingalls recorded $10.1 billion in “new business awards” (bringing total backlog to $21.4 billion). $10.1 billion is $3.1 billion more than the revenues that Huntington recorded in 2014. As a result, the company’s book-to-bill ratio for 2014 was a sterling 1.4. Presently, its yearly revenue exceeds $7 billion dollars (which is greater than Mississippi’s yearly revenue intake of approximately $6.2 billion). The company also employs more than 37,000 people, exceeding the number of people employed by the entire State of Mississippi. And this morning, its stock price is hovering around $144 per share.
A Fortune 500 Company, it is financially healthy, in a better economic condition than Mississippi.
Meanwhile, our state is facing another budget crises, and it will intensify within the next few years. We cannot fully fund MAEP. State employees are grossly underpaid. Medicaid continues its uninterrupted growth. Our state public retirement system (PERS) is struggling to remain solvent. Even public safety is not being properly funded.
Giving millions to financially solvent corporations will not improve our condition. And in the long term, the lasting impact of such irresponsible decisions will result in a stagnant economy, causing additional suffering to an already long-suffering population.
And we will have no one to blame but ourselves.