It makes little sense to pay struggling businesses to “save jobs” during a labor shortage
August 17, 2018 – Milwaukee, WI — WILL President and General Counsel Rick Esenberg and WILL Director of Public Engagement Collin Roth authored a piece at National Review Online outlining the bad economics and dangerous precedent of a tax incentive package for struggling paper products company Kimberly-Clark under consideration in the Wisconsin legislature.
Esenberg and Roth write:
Every so often, life hands us a lesson in why principle matters. While compromise is often necessary, it comes at a cost: When we abandon a strongly held commitment to something — say, free markets or fiscal responsibility — we weaken our ability to insist upon it in the next case. If you don’t believe us, just look at Wisconsin.
In January, Kimberly-Clark announced plans to cut 13 percent of its global workforce. This was likely the result of two straight years of disappointing growth in a difficult market for the paper products that the company manufactures. Kimberly-Clark’s restructuring plan would result in the loss of up to 5,500 jobs nationally and the closing of ten of its 91 manufacturing facilities — including one plant in Neenah, Wis., and another in Fox Crossing, Wis., which together support 600 jobs.
The timing of Kimberly-Clark’s announcement is critical. Wisconsin recently finalized a massive $3 billion incentive package for technology company FoxConn, which plans to build an enormous $10 billion facility in the state that could employ up to 13,000. The cost of the package is staggering — somewhere between $219,000 and $587,000 per job. But supporters argue that FoxConn offers a once-in-a-lifetime opportunity, and Governor Scott Walker has made it a centerpiece of his campaign for a third term, gambling that it will spur the development of a new Silicon Valley along the western shore of Lake Michigan.
Let’s hope he’s right, because if he’s not, he will only have succeeded in establishing a dangerous precedent. What is good enough for FoxConn, supporters of the deal argue, is certainly good enough for other Wisconsin employers.
The state Assembly passed a “FoxConn-like” set of tax incentives for Kimberly-Clark earlier this year. But the plan is currently stalled in the state Senate. Esenberg and Roth urge lawmakers to reconsider the plan and what it might mean for the state going forward.
This should serve as a moment for reevaluation. Republicans talk all the time about how government doesn’t create jobs. They like to say that government shouldn’t be in the business of picking winners and losers. But a desire to appear to be “pro-business” (as distinct from “pro-market”) and curry favor with working-class voters has led Republicans in many states to embrace a role for government that they once bemoaned. Instead of simply focusing on creating the proper conditions for economic growth through low taxes and a minimal regulatory burden, they have found it politically profitable to target companies and industries with incentives and handouts. Job totals are now tallied like points on a scoreboard.
Virtuous though its intent may be, this is central planning by another name. The result is market distortion, an inefficient use of resources, and a narrative of economic development built on myths and hubris. It serves neither business nor workers. Politicians have convinced themselves that without tax incentives, new jobs would never be created and lost ones would never be replaced. This is, quite simply, false. It fails to see what occurs in the economy every day when consumer choice and markets determine whether businesses succeed or fail.
Read the entire piece at National Review Online here.