Friday, September 4, 2009

Government Getting in the Business Business

A couple of days ago, lawmakers in the state of Kansas announced that they were getting in the casino business. Of all the businesses to get involved with, it seems terribly odd to choose casinos. I guess it should be no surprise, as our fearless representatives view gambling as the eternal spring of revenues. Indiana has gotten bitten by the gambling revenue bug and is tempted continuously by the thought of expanding casinos even in the face of declining revenue from such venues.

The larger question is where they feel they are empowered to enter select businesses in the first place. Or (better yet) is why the government feels they will be any good at it. There is no objective evidence supporting the claim that governments run businesses very well. Although there is plenty of evidence to the contrary (Amtrak, the post office, Freddie and Fannie, etc. ad nauseum).

It appears that economist Michael Hicks, a professor at Ball State University, has some evidence that lawmakers will surely ignore. As quoted in the Wall Street Journal:

(Hicks) calculated the rate of return on the corporate tax credits. He found that for every $1 million in tax credits awarded, there were 95 lost manufacturing jobs in the counties where the companies were located—a result that is "strongly statistically significant." There was no gain in personal income in these counties. Perhaps more jobs would have been lost without the credits, but what is undeniably clear is that the businesses that got the government loot were not magnets for other employers.

Counties may lose jobs in the short term, but I am sure they are hoping they will make up for it in volume.

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