Wednesday, November 30, 2011

TIF: Don't Steal, Poloticians Hate Competition

Subsidizing Sprawl by Greg LeRoy has excellent points. LeRoy blames urban sprawl largely on inappropriate government subsidies. He comments, “Subsidies originally meant to rebuild older urban areas are being perverted into subsidies for suburban sprawl.” LeRoy mentions the TIF subsidy in particular as an ill devised government plan. The TIF subsidy was originally supposed to subsidize redevelopment of poor areas and neighborhoods. Not surprisingly he TIF subsidy was used to further politician’s agendas much more than it was used to subsidize poor areas. This is, of course, an excellent example of a Baptist and Bootlegger scenario. The Baptists clamor for financial aid for the poor; and the Bootlegging politicians and government ‘sells’ redevelopment to the highest bidder. This is the expected result from an economist’s perspective. The economics of politics encourages politicians to do whatever will benefit their pocket books/ get them reelected. The sprawl caused as a result of the bootlegging is, of course, caused by government failure and an expansion of bureaucracy. This government failure can also cause businesses that are benefiting from the subsidy to expand and build more recklessly. This reckless building is not efficient. Businesses will naturally allocate their goods to their highest valued use. However, with the subsidy the normal, natural system is skewed. The TIF subsidy takes away the caution found in a free market economy. The subsidy lowers the cost of business and the chance of failure and monetary loss normally associated with business growth and change. According to LeRoy, this subsidy can last up to forty years. The author also mentions a similar issue with enterprise zones. Enterprise zones originally “intended to help poor inner-city areas…are gerrymandered showing political favoritism.” Gerrymadining and political favoritism show yet again another example inefficiency and Baptists and Bootleggers, a corrupt government system effecting free market economics.

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