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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Blinded by the Klieg Lights

We are in an era when really stupid ideas for stimulating economic growth by corporate giveaways are guaranteed to proliferate in state capitals around the country. Such schemes invariably overrate the extent to which any one state can chart its own economic destiny; overrate the importance of marginal costs to investors; overrate the importance of new, out-of-state investors as compared to home-grown business expansions; and vastly underrate the ability of executives to harvest incentives for doing what they wanted to do anyway.
Corporate welfare as an economic development “strategy” is traditionally beloved of Republicans (especially in the South), but is attractive to Democratic pols as well, especially those desparate to show tangible efforts to create jobs, however crummy or emphemeral. But of all the dubious giveaway-based “economic development initiatives” abroad in the land, few are as egregious as the recent fad of throwing taxpayer dollars at Hollywood to attract on-location film productions.
Via Matt Yglesias, we have a new analysis of film subsidies by the ever-invaluable Center for Budget and Policy Priorities (one of the few Washington-based progressive organizations paying close attention to policy trends in the states). Written by Robert Tannenwald, the CBPP report is a good primer on the false promises created by state film subsidies, which typically are excessive in size, under-audited, poorly targeted for the ostensible goal of creating real, sustainable jobs, and above all, designed to play on the excitement associated with big stars coming to town. Tannenwald doesn’t mention the corruption often associated with film subsidy programs (most notably in Louisiana and Iowa), but does emphasize one point rarely understood: the practice in some states of offering film production companies refundable or transferable tax credits that amount to cash grants, or literally paying corporations to offset big chunks of their costs.
These programs have clearly gotten out of hand as states compete for film business; as Tannenwald calculates, they cost about $1.5 billion nationally in the current fiscal year, even as states have reduced basic investments and laid off teachers and other public employees. The report doesn’t get into evaluating “really bad” or “not so bad” programs, though it’s possible to defend some (e.g., New Mexico’s) as focused on building an in-state infrastructure of film-related professionals and facilities that can become sustainable in the future. All in all, though, it’s a very strange way to spend scarce state dollars in the current, disastrous, fiscal environment, and should become a ripe target for budget-cutters who aren’t blinded by the klieg lights.

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