Dumb As A...

The Denver Post opines today, "Also on the chopping block is half the tourism promotion budget, a particularly counterintuitive move, since such studies show tourism promotion spending brings back $13 for every dollar spent."

Uh, no.

First, the Post isn't reporting the full results of the "study" in question. The study alleges that the "state taxes returned per ad dollar invested" amount to $5.81; the rest is local taxes. (See page 21.)

Second, and more importantly, the study itself is laughable, as my dad and I pointed out earlier this month, and as Vincent Carroll has also noted. Yet, so far as I'm aware, this is the third time the Post has mentioned these studies in an editorial without critical comment.

The entire budget for corporate welfare should be eliminated.

Let's hope the state's legislators aren't as dumb as the Post.

Hollywood Welfare

With more and more Colorado families struggling to pay the bills, the Colorado legislature is looking to put Hollywood movie producers on the dole.

The Rocky Mountain News reports, "With an eye on luring movie productions to the state, the Colorado Film Commission hopes its latest proposal will fly because its $10 million cost would be offset by payroll and sales taxes paid by film companies that come to Colorado."

The relevant House Bill is 1010, which would create "within the Colorado Office of Economic Development the Colorado Office of Film, Television, and Media." The new bureaucracy would, among other things, "market Colorado as a destination for making feature films..."

The proper purpose of government is to protect individual rights, not help produce films. By forcibly transferring wealth to the project, the legislature would violate the rights of those who do not wish to fund it. Among other problems, many Coloradans would be forced to subsidize films that they regard as philosophically corrupt.

If legislators really want to help develop the economy, they will put an end to corporate welfare, protectionism, high taxes, and economic controls. They will eliminate the Office of Economic Development and cut tax rates across the board.

Sean Page points out that Hollywood Welfare isn't all it's cracked up to be; one study for New Mexico "found that the state gets about 14.4 cents in tax revenue for every dollar it spends on these efforts."

The Rocky reports, "Colorado's film industry has argued that productions no longer choose locations based on scenery or a movie's plot, but look first at states that offer financial incentives."

That's just pathetic. We don't need to stoop to our knees to grovel beside other states over who can best bilk the taxpayers in order to subsidize movie producers.

It's also a good argument against the alleged economic gains. States that play this game will find they are trying to out-compete each other in luring these Hollywood bandits to town.

Shut Down Corporate Welfare for Tourism

The following article originally appeared in the January 5, 2009, edition of Grand Junction's Free Press. Additional links and notes are provided here.

Shut down corporate welfare for tourism

by Linn and Ari Armstrong

Does Colorado need corporate welfare to promote tourism? The Denver Post argues in a December 28 editorial that, in this time of economic trouble, state legislators should continue to forcibly transfer your money to bureaucrats to spend on tourism advertising.

However, such corporate welfare is inherently unjust and economically wasteful, and now is the perfect time for the legislature to eliminate it.

The proper purpose of government is to protect people's rights of property and voluntary association. Corporate welfare violates rights by forcing some to subsidize the business of others.

Colorado's constitution rightly bans corporate welfare. Article XI, Section 2, states, "Neither the state, nor any county [etc.] shall make any donation or grant to, or in aid of... any corporation or company..."

Article V, Section 25, prevents the state legislature from "granting to any corporation... any special or exclusive privilege." And Article V, Section 34, states, "No appropriation shall be made for charitable, industrial, educational or benevolent purposes to any person, corporation or community not under the absolute control of the state..."*

Not only does corporate welfare for tourism violate the state's constitution, it defies economic sense. Bureaucrats who spend tax dollars have poor incentives to spend the money wisely. Businesses that fund their own advertising, on the other hand, tend to look harder at results.

If the Denver Post were correct about the benefits of tourism advertising, that would prove only that businesses that benefit should fund the advertising on their own. Most other businesses advertise without drawing on tax dollars.

Why should politicians advertise for only certain businesses and not others? If putting politicians and bureaucrats in charge of advertising is such a great idea, why don't we let bureaucrats handle everybody's advertising? Central planning by bureaucrats is the best way to run the economy, right?

The Denver Post ignores the general problems of corporate welfare, and the paper makes ludicrous claims about the benefits of the tourism subsidies.

The Post argues that, because tourism spending dipped during a recession, that somehow proves that corporate welfare was responsible for the subsequent rise of tourism. But might we surmise that more prosperous times were the cause?

The Post reports, "State tourism director Kim McNulty tells us studies show that, for every dollar the state spends to promote itself to tourists, it makes back more than $13."

And what are these "studies?" The Post declines to name them. McNulty told us in an e-mail that "the study that was quoted in the Denver Post article... is a study that Longwoods International did for the Colorado Tourism Office."

The web page of Longwoods International shows that this Canadian company conducts "Budget Justification" for a variety of government agencies. Back in 1986, "The Colorado Tourism Board (CTB) hired Longwoods to conduct an image study as input into a new advertising campaign." In 2002-03, "Longwoods was hired to measure the Return on Investment of the campaign [at that time], which information would be used to help secure future funding."

So do you get the idea of how this works? Colorado bureaucrats spend tax dollars to hire a Canadian company to provide "justification" of the bureaucrats' budget and to "help secure future funding" for those bureaucrats. Surprise, surprise, those are the results that Longwoods delivers.

We asked McNulty via e-mail and phone message how much the state spent on the latest study. Unfortunately, we did not hear back from McNulty by deadline.** So another thing we have not been able to ask her is how many tax dollars her office spends on salaries, supplies, and facilities.

Anyone with a rudimentary understanding of statistics can tell that Longwoods' claims about the returns on tax dollars are bogus. You can find the study at http://tinyurl.com/9975uk. Longwoods works from survey data that simply cannot demonstrate what Longwoods claims they can.

Longwoods asked people whether they were "aware" of the tourism ads and whether they traveled to Colorado. But this confuses cause and effect. It is not the case that, in a random sample of the population, some people become aware of the ads and because of that decide to travel to Colorado. Instead, people already keen on traveling to Colorado are more likely to become aware of Colorado-specific advertising. Similarly, if you're planning to buy a new Volkswagen, you start seeing Volkswagens everywhere.***

Based on this flawed methodology, Longwoods makes the wildly implausible claim that each advertising dollar generates $193 of "visitor spending" and $13 of "total taxes returned." What would you think if somebody offered to take your money, promising to return nearly 200 times the revenues? We'd expect such an offer to arrive in an e-mail from the widow of Prince Sajutamiwa from the Federal Republic of Nigeria.

Sadly, the Denver Post cited the same sort of bogus claims back in 2006.**** Hopefully our legislators will display a bit less credulity than these editorial writers and take the tourism industry off the dole.


* Dave Kopel listed these three sections in a 1996 article.
** McNulty replied regarding the cost of the study on January 5 at around 3:30. She writes via e-mail, "I was out of the office and was not able to respond until today. The contract amount for the Advertising Effectiveness, Image Benchmarking and Return on Investment survey was $122,000. This is not a study we do every year."
*** Paul Hsieh provided the Volkswagen example.
**** The Denver Post's editorial was dated June 11, 2006. For additional background on Colorado's corporate welfare for tourism, see "Wasteful Spending by Colorado Government," page 12; "Corporate Welfare"; "Taxes for Tourism: Further Reflections"; and "Intel Inside."

Obama Signals Massive Federal Spending

Well, here it comes. We can't claim he didn't warn us. Obama will try to socialize medicine and massively increase federal spending.

The Denver Post reports:

President-elect Barack Obama is formally launching his ambitious health-care reform effort with a call for ordinary Americans to spend the last two weeks of December talking about health care, then sending their ideas to Washington.

Former Sen. Tom Daschle, the man who will lead the reform effort and Obama's likely nominee for Secretary of Health and Human Services, reached out to citizens during a health-care summit in Denver on Friday morning. He cast it as the first step in an ambitious effort that will end in a much improved health-care system for the country -- and one that won't be derailed by economic crisis.

Especially now that the Rocky Mountain News appears to be on its way out, we can look forward to more such journalistic cheerleading for Obama's grand spending sprees.

Obama, the Post declares (citing Tom Daschle), will "increase access to health care for the poor and uninsured."

Of course the system is rigged to solicit the opinions of those special interests who desire the concentrated benefits of wealth transfers. But Americans who favor liberty may also send in comments. (I include my comments below.)

Paul Hsieh explains why Obama's plan would lead inexorably to a government take-over of medicine. See also a piece by Grace-Marie Turner (via Brian Schwartz).

Obama also wants to redirect resources on a massive scale to politically-approved enterprises. The New York Times reports:

President-elect Barack Obama promised Saturday to create the largest public works construction program since the inception of the interstate highway system a half century ago...

Mr. Obama's remarks showcased his ambition to expand the definition of traditional work programs for the middle class, like infrastructure projects to repair roads and bridges, to include new-era jobs in technology and so-called green jobs that reduce energy use and global warming emissions.

Given the government ownership of roads, the government will fund such projects. Yet, given that system, the dedicated gas tax is the best way to link use to funding. The only goal should be to improve the roads, not to "stimulate" the economy, a recipe for wasteful special-interest spending. (The proper policy of turning the transportation infrastructure over to a free market lies beyond the scope of this post.)

Spending in other industries will only further bring them under the direct control of the federal government. We'll see more spectacles like the one of car manufacturers prostrating themselves before their political masters, promising to be good boys and girls and make things the way Big Mommy thinks best.

Obama's policy, to the degree that it is implemented, will stifle entrepreneurial creativity, turn business leaders into servants of the political class, and transfer funds away from the productive to the profligate.

Following are my comments to Obama:

Dear President-Elect Barack Obama,

I am writing express my support for individual rights, which you appear ready to undermine. People have the right to decide for themselves how to spend what they earn and on what terms to cooperate with others. The government's sole legitimate function is to protect our rights to life, liberty, property, and pursuit of happiness.

You propose to expand the forcible redistribution of wealth, not only to advance the government take-over of medicine, but to "create" numerous politically-approved jobs.

Yet the failures of modern health care are a direct result of previous political controls of medicine, including tax policies that have tied insurance to employment and mandates that have increased the cost of insurance.

Your make-work schemes will not add net jobs to the U.S. economy; they will only divert resources away from some jobs to ones that you and your political supporters favor. The funds inevitably will be influenced by special-interest politicking. The modern mortgage crisis, like modern problems in medicine, were caused by misguided political controls, including manipulation of interest rates, government-sponsored lending institutions, and unjust lending mandates. The proper response to the mortgage crisis is a renewal of economic liberty, not a continuation of failed political controls.

I am not persuaded that your administration will listen to the voices of Americans who favor liberty. As you surely know, special interests will dominate your solicitation process, as they stand to gain from your wealth redistribution plans. Meanwhile, the many Americans who stand to pay the price in terms of higher eventual taxes, inflation, and lost economic opportunities may be mostly ignored. I urge your administration to rethink your unjust policies of "spreading the wealth around" by political force. I urge you to instead help restore the nation to its heritage of liberty.

Sincerely,
Ari Armstrong

Looter State

We're becoming a Looter State to join the Looter Nation.

In the fantasy land of the central planners, corporate welfare -- that is, taking money by force from those who earn it to give to politically-connected firms -- somehow strengthens the economy.

The Rocky Mountain News reports, "Gov. Bill Ritter announced this morning a series of immediate economic development initiatives totaling $12 million to keep Colorado's economy pumping..."

Of course, the theory that robbing Peter to pay Paul helps the economy is complete nonsense. While Ritter will no doubt sing the joys of Paul's successes, he will utterly ignore the business activities of which he has deprived Peter.

Hollywood Welfare

While politicians are busy making up euphemisms for corporate welfare, journalists are busy covering for them.

Joanne Kelley wrote an article for the January 30 Rocky Mountain News titled, "$10 million bill aims to lure Hollywood to Colorado." Kelley describes a "$10 million cash rebate program" that "would boost the fledgling incentive budget from its current $600,000 a year in an attempt to help the state compete with others that have attracted far more Hollywood film productions after spending heavily on enticements." Not surprisingly, a Republican, Representative Tom Massey, co-sponsored the bill. Because Republicans love welfare, even if it's for Hollywood.

Kelley continues, "Producers with motion picture budgets of at least $250,000 would be able to collect a cash rebate of up to 15 percent of the money they spend while shooting a movie in Colorado."

Let's stop right there. This is not a "rebate." It is a forced wealth transfer, a subsidy. It is corporate welfare. The top definition of "rebate" from Dictionary.com, based on Random House, is "a return of part of the original payment for some service or merchandise; partial refund." For example, if you buy a computer from a store, and then the computer's manufacturer sends you a check for a fraction of the original payment, that's a rebate.

That's not what we're talking about here. We're talking about Colorado politicians forcibly taking money from some people in Colorado in order to give the money to other people who probably aren't even from Colorado. They're probably from California. So, basically, the proposal would forcibly transfer wealth from Coloradans to Californians -- and, indirectly, to some other Coloradans. (Does anyone wish to check which Colorado lobbyists support the bill?) To return to the computer example, it would be as though you purchased a computer from Joe, and then Fred forced Judy to pay you some money. Such a practice may accurately be described as a lot of things, but "rebate" is not among them.

The Hollywood welfare scheme is a bad idea for at least three reasons. Before turning to the fundamental moral argument, I'll deal with the two economic points.

Kelley writes:

Proponents of boosting the rebate fund to $10 million point to the recent 12-day shoot of the Paramount Pictures film NowhereLand, starring Eddie Murphy. In that short time, the production spent $3.25 million here, booking rooms at the Brown Palace and hiring 12,000 extras and 65 crew members.

"If we had better incentives, they probably would have shot more of the movie here," said Rep. Cheri Jahn, D- Wheat Ridge, a co-sponsor of the legislation.

As Jayne might say, I'm smelling a lot of "if" coming off of this plan. The fact is, we'll never know whether somebody filmed a movie here specifically to get the welfare transfer, or whether they planned to film the movie here anyway, and then decided to cash in on the Hollywood welfare. However, we can be assured that politicians will point to all of the spending of all of the movies that get a subsidy and pretend that the inflated figure is somehow relevant.

Kelley points out that New Mexico also offers Hollywood welfare. This points to the second problem with the Colorado scheme. If Colorado increases its Hollywood welfare, this will only encourage other regions to increase theirs as well. Long term, this is a great deal for Hollywood but a lousy deal for the suckers paying the subsidies.

However, the moral point is more important. It is wrong to force Coloradans to subsidize movies against their wishes. People have the right to control their own income. Moreover, Hollywood welfare is a violation of free speech. The right of free speech entails the right not to speak and not to financially support the propagation of ideas that one finds offensive. Movies, by their nature, deal with ideas. Inevitably, a subsidy will go to a movie that at least some Coloradans find objectionable. A peripheral implication is that Hollywood welfare forces Coloradans of poor and average financial means to subsidize quite wealthy people, such as Eddie Murphy and Hollywood producers. If we take seriously a recent article from The Denver Post, Colorado's taxes are already regressive. Forcing Colorado's poor to subsidize wealthy Hollywood movie makers (or even wealthy Colorado hotel owners) would add insult to injury.

Hollywood welfare violates the rights of Coloradans and is therefore morally wrong.