How NOT To Do Economic Development

According to a recent report in the Capital Chronicle, the Indiana Economic Development Corporation wants a massive increase in funding. It justifies that request by insisting that larger expenditures are necessary to keep Indiana competitive in the national job market,  “especially as Indiana pivots from manufacturing to the “economy of the future.” Those industries — electric vehicles, semiconductors, agricultural technology — will need incentives to come to the Hoosier State.”

The article describes the nature of the “incentives” that will be offered: purchases of land, tax credits, a “Deal Closing Fund,” and others.

If you are interested in the details, you can find them at the link. My reason for highlighting the article is that it underlines Indiana’s persistent–and exclusive– focus on an economic development approach that is essentially bribery.

There’s a lot wrong with that focus.

First of all, even when successful, it uses tax dollars generated by Hoosiers to reward/bribe enterprises new to the state, rather than trying to grow businesses and employers who are already here. Second, it is an approach that buys in to the “zero sum” game being played by American states that are encouraged to bid against each other to lure Enterprise X,  which, if successful, simply moves the site of employment to state A from state B, rather than adding positions to the nation’s job market.

But my biggest beef with the bribery approach is that it misconceives and misunderstands what makes a state attractive both to business and to skilled workers.

In a recent interview, the new CEO of Techpoint spoke of that organization’s commitment to working with partners “to bring more people of color and women into the sector.” Indiana is currently 37th in tech employment, and–as I have previously noted– there are reasons for that.

Economic development– the addition of skilled workers and new companies–depends  on a state’s quality of life. That quality may be enhanced by good weather and natural beauty (assets Indiana mostly lacks), but it is a far more capacious concept.

As one economic development firm explains,  improving quality of life raises a destination’s desirability, attracts (and retains) population, adds revenue, and boosts recognition and reputation.

As the Brookings Institution has found,

There is compelling new data that these traditional economic development tools may be ineffective compared to investments in quality of life and place. Our research on smaller communities has found that community amenities such as recreation opportunities, cultural activities, and excellent services (e.g., good schools, transportation options) are likely bigger contributors to healthy local economies than traditional “business-friendly” measures. Smaller places with a higher quality of life experience both higher employment and population growth than similarly situated communities, including those that rank high by traditional economic competitiveness measures.

Research has shown that people are willing to pay higher housing prices and even accept lower wages to live in places offering a higher quality of life, and that businesses are willing to pay higher real estate prices and offer higher wages to locate in places with more productive workers.

After estimating quality of life (what makes a place attractive to households) and quality of business environment (what makes a place especially productive and attractive to businesses) in communities across the Midwest, we found quality of life matters more for population growth, employment growth, and lower poverty rates than quality of business environment. 

As the article notes, policymakers can’t build a Great Lake, mountain, or other natural feature. But they can focus on enhancing other quality of life aspects and providing solid public services for their current residents.

The Brookings analysis found that one of the strongest factors associated with higher quality of life was spending on public schools, “with public school quality and the availability of early childhood education being two of the most important factors for working parents.”

Bottom line?

The findings reinforce that local leaders and economic developers should prioritize quality of life strategies over tax incentives and lax regulation. The long-standing Midwestern community economic development strategy of low taxes, business incentives, and loose environmental regulations usually doesn’t work, and has often proven disappointing to communities that have given away tax dollars and reduced business standards without seeing substantial returns. Low business taxes often hide a hidden opportunity cost by reducing available funding for local schools and other public amenities. 

If our legislative overlords really wanted to attract skilled workers–including female workers and workers of color– they would fund child care and pre-K programs. They would work to create great public schools and excellent transit systems. (They would also leave medical decisions to the professionals who understand the complexities of those decisions, rather than imposing the beliefs of fundamentalist Christians on all Hoosiers.)

Pledging billions for bribery while ignoring quality of life isn’t a viable economic development strategy.

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Average/Median–Or Lying With Statistics

I have previously mentioned–and sometimes quoted–my friend Morton Marcus. Marcus   is an economist; he is retired from Indiana University, where for many years he headed up the Kelly School’s business research center. Morton and I have been friends for a long time, and have just co-authored a book on the women’s movement. (More on that when it’s published.)

Morton also writes a weekly column on economic data  called “Eye on the Pie,” explaining in relatively simple language what various data points tell us about Indiana. That column runs in a number of the remaining small newspapers around the state. In a recent column, he made a point that I think is so important I feel compelled to share it.

Morton fashioned his column as “A note to Gov. Holcomb,” and began by saying that normally, he doesn’t write to the Governor.

But this week is different. A few days ago, you gave your “State of the State” address to the General Assembly. It was a nice talk and very well presented.
You had some good ideas for our state, but, and this is awkward for me to say, you don’t have a staff that keeps you from making the same mistake time-after-time. You’re not the only Governor who makes this mistake. I’ve known them all from Gov. Whitcomb onwards and they all make the same mistake.

And what was that mistake? (I must admit, it’s an error I have often made too.) Let Morton explain:

Almost always the Indiana Economic Development Corporation (IEDC – bless their hearts) tells us the average wage going to be paid by a firm they have arranged (lured, bribed) to open or expand in Indiana.

Most of the media (bless their hearts) regurgitate the press release because they don’t have the time or energy to remember that the average is the mean of a set of numbers. It can be heavily influenced by extreme (high or low) values.

The median, however, tells a different, more meaningful story (if you’ll excuse a little pun there). The median is the wage above which half of the employees will get paid and below which the other half of the workers will be paid.

Let’s say the top gun gets paid $150,000 per year. The #2 gets $75,000, the other eight get $30,000 each. That’s a total payroll of $465,000 for ten employees or an average (mean) annual wage of $46,500. Yet the median pay is $30,000. That’s $16,500 (35%) below the IEDC-advertised average.

From what I hear, Governor, you’re not the type who intentionally misleads or lies to the people of Indiana. But by using the average (mean), rather than the median figure, you’ve been passing on some real whoppers over the years.

If I might have just a bit more of your attention, let me note the average (mean) annual pay for all occupations in Indiana in 2021 was $50,440 (37th in the nation) or $12,110 (32%) above the median Hoosier pay of $38,330 (39th among the 50 states).

With just two years left in your term of office, you said you were going to work harder than ever for all Hoosiers. Maybe you could get IEDC and your staff to give you the most accurate, realistic numbers. Then the people of Indiana would not continue to be misled by excess enthusiasm and just plain ignorance.

When I read this column, it immediately reminded me of a book I read several years ago, debunking several of the claims that were then being made about the “failures” of the nation’s public schools. The authors noted that much of the data being uncritically reported about “averages” was similar to the rather misleading result one would get when averaging a mouse with an elephant.

If you average my income with that of Bill Gates, you’ll come up with a pretty impressive average…

Actually, Morton’s column does inadvertently highlight a failing of the education system: too many Americans (including, I am sorry to say, the one writing this blog) are innumerate–lacking a basic knowledge of mathematics and arithmetic. That innumeracy encourages the use of statistics to mislead. As the saying goes: statistics don’t lie, but liars (and innumerate folks) do use–or misuse– statistics.

The Governor’s error perpetuates the erroneous belief that Indiana is succeeding with an economic development approach that relies almost entirely on keeping the state’s  taxes low–and ignores the fact that those low tax rates prevent the state from spending tax dollars to achieve a quality of life that would be far more likely to attract the businesses and skilled workers we need.

More on that to come….

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First It Was Taney

The New Republic recently published a long but incredibly illuminating essay on the Supreme Court.It deserves to be read in its entirety.

The author, Brynn Tannehill, compared the Roberts Court to past Courts that today are widely considered to have decided important cases wrongly–beginning with the Taney Court. In 1857, that Court decided  in Dred Scott that Scott was not a free man, that no Black person could be a citizen of the United States, and that Black people were not entitled to Constitutional protections. As Tannehill says, that decision doomed the country to civil war.

Worse, Taney’s Court effectively eliminated the rights of free states to prohibit slavery on their own territory– relying on the same sort of “originalist” logic used by Justice Alito in Dobbs v. Jackson.

Roger Taney was not the only Chief Justice to preside over a retrograde Supreme Court. Following the Civil War, the Court led by Chief Justice Morrison Waite, “delivered decision after decision that ended Reconstruction.”

In United States v. Reese, the court ruled 7–2 that “racially neutral” voter suppression measures such as poll taxes, literacy tests, and the grandfather clause were constitutional. In United States v. Cruikshank, the Waite court ruled 9–0 that the federal government had no right to arrest the people responsible for the Colfax Massacre, the 1873 Louisiana riot where dozens of Black militiamen were murdered by a white mob. The Waite court also decided unanimously in Minor v. Happersett that women do not have a constitutional right to vote.I

n Elk v. Wilkins, the Waite court ruled 7–2 that being born on U.S. soil did not grant citizenship to Native Americans. The court also upheld miscegenation laws 9–0 in the 1883 case Pace v. Alabama. That same year, a majority struck down the Civil Rights Act of 1875 in The Civil Rights Cases of 1883. Later, in 1896, under Chief Justice Melville Fuller, the Supreme Court enshrined segregation via Plessy v. Ferguson, under the rubric of states’ rights.

Ironically, these decisions were framed as protective of limited government and individual liberty–as Tannehill writes, “freedom in the abstract, but only in the abstract.”

As if to drive this point home, the Roberts court ruled in Shinn v. Ramirez that it doesn’t matter if a person is innocent based on the preponderance of the evidence; so long as procedure was followed, the state can still execute people. Justice in the abstract, and only in the abstract, all over again.

Then there’s the Roberts Court.

It struck down most of the Voting Rights Act . It permitted states to strip Native Americans of their right to vote using the pretext of preventing voter fraud.  Worst of all, the court recognized that partisan gerrymandering is inconsistent with democracy, but declined to do anything about it.

The Roberts Court also seems intent on eviscerating Jefferson’s wall between church and state. It keeps finding that Christian organizations have a right to government money, as well as a “freedom”  to discriminate against LGBTQ people, Jews, and others.

This is freedom in the abstract: Even if Jews and LGBTQ people were allowed to discriminate against Christians, it would have a negligible impact on Christians compared to Christians being permitted to discriminate against groups that make up much smaller percentages of the population. It is akin to saying Christians can only shop at Kroger, and Jews can only shop at Jewish-run businesses: The harm falls disproportionately on the minority groups.

Tannehill reviews several pending cases with potential to upend federalism:

But the real Dred Scott moment will be at hand when red states begin trying to extradite people from the blue states for the crime of getting abortions, providing abortions, or providing transition-related care to transgender people. Deep blue states have been creating haven and sanctuary laws to protect women, doctors, transgender people, and parents of trans youth. Both California and Massachusetts have passed sanctuary laws that would prevent people from being extradited for seeking abortions in their states. Given that eradicating abortion and eliminating health care for trans people have become the top social policy priorities for conservatives, the reaction from powerhouses like the Heritage Foundation has been swift: They see these blue-state moves as a direct threat to their agenda.

Eventually, the Supreme Court will have to decide, are people free once they leave a state like Texas? Or do they remain property of that state forever, even if they leave?

It’s entirely possible that this Court would follow Dred Scott and allow extradition. If so, officials in the “sanctuary” states would be under heavy pressure to refuse to comply.

At that point, federalism, and the Union, are dead, as states refuse to recognize the legitimacy of court decisions, and the comparisons with the Taney court are complete.

You really need to read the entire essay.

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Minority Rule, Courtesy of Gerrymandering

In addition to its website, Talking Points Memo sends out a morning newsletter to subscribers. A few days ago, that newsletter (paywall) included two paragraphs that sum up the single biggest challenge facing American democracy.

The success of the abortion rights coalition in ballot initiatives from Kentucky to Michigan showed that abortion can be just as powerful an incentive to vote for those who support abortion access as for those who oppose it.

For many House Republicans, that shift would, in another world, alter their behavior. With majorities in even deeply red states supporting abortion access, you’d expect these lawmakers to moderate their position. But thanks to the dearth of competitive House districts due to cumulative years of gerrymandering, many of them have more to fear from a primary challenge from the right than a general election against a Democrat.

I have frequently posted about the effects of gerrymandering. Probably the most damaging consequence is voter suppression; as I have often noted, people who live in a district considered “safe” for the party they don’t support lack an incentive to vote. When the disfavored party doesn’t turn out, that also depresses the votes for that party’s  candidates for statewide office.

Here in Indiana–a state that has been identified as one of the five most gerrymandered states in the country–our legislature is beginning a session in which the Republican super-majority continues to disregard the demonstrated priorities of its Hoosier constituents.

Several Republican lawmakers appear to oppose the Governor’s call to invest in the Hoosier state’s inadequate, struggling public health system. For that matter, there appears to be no appetite for confronting Indiana’s dismal ratings in a wide variety of quality of life indicators. As Hoosier Democrats recently pointed out: 

Hoosiers have a F rated quality-of-life and the state has a D- rated workforce, a C- rated education system, the third worst maternal mortality rate in the nation, and the country’s most polluted waterways. It appears Republicans will once again ignore the warning signs from Indiana’s top business leaders and their taxpayer-funded reports and instead choose to focus on their extreme agenda.

CNBC lists Indiana as one of the ten worst states in which to live.

Over the past couple of days, I’ve posted on just one part of that extreme agenda, the GOP’s war on public education. Other efforts include our lawmakers’ continuing war on LGBTQ Hoosiers– especially on  trans kids and anyone in the medical community who dares to serves them.

Indiana isn’t alone, unfortunately.

In 2015, two political scientists– Martin Gilens of Princeton and Benjamin Page of Northwestern–published a study concluding that the preferences of US voters barely matter. Or as they put it, “economic elites and organized interest groups play a substantial part in affecting public policy, but the general public has little or no independent influence.”…

Gilens and “a small army of research assistants” compiled nearly 2,000 polls and surveys that asked for opinions about a proposed policy change. Since he wanted to separate out the preferences of economic elites and average citizens, he only used surveys that asked about respondents’ income. He found 1,779 poll results that fit that description, spanning from 1981 to 2002. Then he took the answers of median-income voters to represent what average voters think, and the answers of respondents at the 90th income percentile to represent what economic elites think.

Next, the authors had to measure what interest groups thought about all of those issues. They decided to use Fortune magazine’s yearly “Power 25” lists of the most influential lobbying groups, but since it “seemed to neglect certain major business interests,” they added the ten industries that had reported the most spending on lobbying. Their final list includes 29 business groups, several major unions, and other well-known interest groups like the AARP, the Christian Coalition, the NRA, the American Legion, and AIPAC. Each interest group’s position on those 1,779 policy change proposals were coded, along with how strongly each group felt about each proposal. The results were combined to assess how interest groups in general, felt.

The study found that average citizens only get what they want if economic elites or organized interest groups also want it…

In contrast, the preferences of economic elites and interest groups — especially economic elites — are each quite influential.

In dramatically gerrymandered Indiana, the clear preferences/warnings of the state’s largest businesses and growing tech sector are routinely disregarded in favor of  the “influential elites” who evidently believe that low taxes are a more attractive economic development tool than a reasonable quality of life–a belief with which CNBC begs to differ.

Indiana’s super-majority does listen to the well-organized religious fundamentalists whose policy preferences repel the high-skilled workers our economy needs. 

As long as they can gerrymander, our unrepresentative representatives are safe from democracy– and their constituents.

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Education And The GOP

Yesterday, I posted about the continued effort by self-described  Hoosier”conservatives” to expand the state’s already massive school voucher program–a program that has failed to deliver the educational benefits that justified it in the first place, while deepening the divides between Americans of different races and religions.

A few days ago, I had coffee with one of Indiana’s most conscientious and effective state senators–Fady Qaddoura (who also happens to be a former, excellent student of mine)– who has introduced a bill to fully fund pre-kindergarden in the state. We discussed that proposal and several other education measures that have been or are likely to be introduced during the legislative session that just began.

In addition to the coffee with Senator Qaddoura, I’ve scheduled meetings with several other people who are knowledgable about both education policy and the Indiana General Assembly.  (My retirement allows me to dabble in matters that interest or infuriate me, and–with some prodding from my youngest son–I’ve decided to follow education bills in this session.)

In the course of our discussion, Senator Qaddoura pointed to a very interesting–and very revealing–aspect of voucher legislation that had not previously occurred to me.

The GOP’s voucher program classifies families that earn up to $145,000 per year as “poor” enough to qualify; so the state pays for their kids to attend private schools. When it comes to qualification for state-funded childcare and/or pre-kindergarden, however, families bringing home a mere $27,500 are “too rich” for their children to qualify.

This makes perfect sense–if the actual goal of the voucher program is to encourage an exodus from the state’s public schools, a goal that furthers other obvious goals of Indiana’s GOP: destroying the teacher’s union, and finding a “work-around” of the First Amendment’s prohibition against funneling tax dollars to religious organizations.

The difference in those definitions certainly sends a message about which Hoosiers our Republican legislators are there to serve.

The session has just started, but thus far, a proposall being referred to as the house’s “High School Redesign” bill has been introduced and given a low number (H.B. 1002), suggesting that it is is a GOP priority.  As another friend described it,

Basically, it is a new voucher-like program for high schoolers who would get some of their education through an employer/a company.  Student support dollars would follow the child to pay for this experience.

I haven’t yet read the bill, but if my friend’s description is correct, it looks like yet another effort to divert dollars from public school classrooms–at a time when Indiana ranks 41st among the states in teacher pay and the state’s public schools  have a massive teacher shortage.

Then, of course, there’s the culture war. Education lobbyists fully expect that an anti-CRT bill will be filed, and probably a “Don’t Say Gay” Florida rip-off.

One “culture war” effort that previously failed has already been refiled. It is back again in both the House and Senate (HB 1130 and SB 12). The bill’s synopsis reads:

Synopsis:Material harmful to minors. Removes schools and certainpublic libraries from the list of entities eligible for a specified defense to criminal prosecutions alleging: (1) the dissemination of material harmful to minors; or (2) a performance harmful to minors. Adds colleges and universities to the list of entities eligible for a specified defense to criminal prosecutions alleging: (1) the dissemination of material harmful to minors; or (2) a performance harmful to minors.

I assume that the identification of “harmful” material includes any reference to the existence of LGBTQ Hoosiers, and that the inclusion of “performance” is aimed at those “grooming” Drag Queen Story Hours. (Can’t have someone in a costume reading Green Eggs and Ham…)

Also on the culture war front, there are a few bills that would turn Indiana’s currently non-partisan school board elections into partisan contests. (Wouldn’t want a Democrat sneaking onto one of those school boards…)

There is some good news. In addition to Senator Qaddoura’s bills (one of which includes tightening oversight of charter schools) there is evidently a possibility that Indiana will finally join the great majority of states that pay for textbooks.

I realize that many if not most of the people who follow this blog don’t live in Indiana–and may be uninterested in details about our regressive legislature.  That said, these efforts are hardly confined to Indiana. ALEC provides the templates for many of these bills to numerous states, and observers fully expect our General Assembly to “borrow” from states like Florida, where Governor “what Constitution?” DeSantis and his obedient minions in that state’s legislature continue to wage war on gays, “woke” corporations and academic freedom.

Unlike Vegas, what happens in The Backward States does not stay in The Backward States.Unfortunately.

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