Corporate Welfare and “Trickle Down Economics” With a Big D! Democrat Style!

January 24, 2019

1013

On his second full day in office — 18 January — JB Pritzker, the new Governor of Illinois, ordered a study to determine what jobs and industries Illinois should be investing in. The Governor explained the goal of the study:

“Whether the industries that received target funds are the right industries, the growth potential of a variety of industries, and whether we are coordinating our resources wisely across workforce development, adult education, employment services, and other investments.”

It’s a common refrain among libertarians that taxation is theft. The state of Illinois has been experiencing a 5 year exodus of residents, fleeing the state for those with less burdensome taxes and more business friendly practices.

Oddly, it’s a common refrain among progressives and Democrats that tax cuts for corporations and the rich are “corporate welfare”.

Allowing anyone, rich or poor, to keep a greater portion of the wealth they generate is not welfare, and to imply otherwise is pure insanity. To make that claim, you have to believe that the state owns all wealth generated within its borders, and that to allow anyone to keep any portion of it at all is an act of generosity.

Here, however, we have a Democrat engaging in the act of taking the wealth of others, and then giving it to the industries that he has deemed worthy. This is literally corporate welfare. It is a wealth redistribution policy from rich and poor alike to the industries that the Illinois government favors.

Aside from this being a clear-cut case of corporate welfare committed by a Democrat, it’s also a clear-cut case of Democrats supporting supply-side economics; something they often condemn and straw-man as “trickle down economics”. To support these policies, those on the left must also accept the premise that investment in growing productive activities, that is, those which would increase aggregate supply, are good for the economy.

At least when Republicans do it, they accept the economic theories on which those policies are built.

The main difference here seems to be that the Republican method of encouraging savings and investment is to lower taxes, though that doesn’t necessarily mean it isn’t also served with a helping of corporate welfare. Whereas when Democrats do it, they prefer that the government take money from taxpayers and invest in industries for them, because citizens’ tiny brains couldn’t possibly fathom what industries are worth investing in.

The problem with these policies isn’t just that it’s hypocritical on the Democrats’ part, but that it’s bad economic policy, regardless of who implements it.

Ultimately, when the government invests in anything, it distorts market signals in favor of that thing in which they are investing, thus inflating its value and creating a market bubble. Whatever industries that the state of Illinois decides are worthy of investing taxpayer money, it is a divergence of the spending, saving, and investment that would normally have occurred had taxpayers been allowed to keep their money. This signals a demand for the production of goods which may not necessarily exist, at least to the degree which state investment would inflate it, and thus create a bubble.

Eventually that bubble will burst, and the government will be faced with another policy choice: do they put those favored industries on life support, thus further inflating the economic bubble, or endure the pain of economic instability that the bust will create, and allow the market to correct itself?