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How crony capitalism works

December 2, 2016

Kevin Williamson has a good article about how Trump ‘saved’ jobs at a Carrier plant in Indiana. RTWT.

The Economic Stupidity of the Carrier Bailout

One particularly tough and indigestible nugget of talk-radio stupidity afflicting the guts of conservatism is the idea that there is some sort of fundamental difference between bribing a business with tax cuts and bribing it with a wheelbarrow full of cash. The Trump-Pence bailout of Carrier’s operations in Indiana provides an illustrative case. […]

Republicans might have had a little bit of a point in the question of general tax cuts: A tax cut and spending are different things, even if the budgetary effects are exactly the same.

But in the matter of industry-specific or firm-specific tax benefits of the sort extended to Carrier in Indiana, they do not have a leg to stand on. These are straight-up corporate welfare, ethically and fiscally indistinguishable from shipping containers full of $100 bills. […]

For Carrier’s accountant, any pecuniary benefit will do. So far as the bottom line is concerned, a $7 million tax credit is the same as a $7 million check or $7 million in Apple stock or $7 million in gold. It’s all +$7 million on the line where you want it. […]

This is a case of Frédéric Bastiat’s problem of the seen vs. the unseen. The benefits are easy to see, all those sympathetic workers in Indiana. The costs are born by sympathetic workers, too, around the country, and by their families and by their neighbors. But those are widely dispersed, so they are harder to see and do not hit with the same dramatic impact.

But the math is the math is the math. Trump and Pence are trying to sell you a free lunch, the same way the Keynesians and their magical spending multiplier do when they promise that government stimulus programs (Trump is pushing one of those, too) will somehow magically pay for themselves. […]

I suppose the good news for most of us is that the State of Indiana (and its taxpayers) will be the ones picking up the tab for this.

Bastiat’s That Which is Seen, and That Which is Not Seen.

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