“Directions for Iowa’s Economic Growth” ought to be required reading for every local and state government body, to say nothing of the boys in Washington (the less said about them, the better).
Drafted by a University of Iowa research team under the direction of the Iowa Department of Economic Development and the Planning and Research Bureau, the 82-page document illustrates the best in Midwestern straight-thinking—and the 18-page executive summary is even better.
While Iowa is certainly not the first state to put out a document and call it a “strategic plan,” this skinny little report is one of the few to deserve that name. And there’s really nothing novel or sophisticated here: just common sense, plainly expressed and modestly packaged. It’s never been fashionable for government at any level to look beyond the present, but foresightedness has become urgent, and Iowa, let us pray, will help to set a trend.
What’s so astonishing about the report? Well, for one thing, it accepts nothing at face value. Take an old complaint of most states: that native graduates of state colleges find out-of-state jobs after graduation. All kinds of solutions have been tried over the years; tax credits, tuition reimbursement, and forgiven loans have all been used as bait to get kids to stay at home after graduation. The Iowa report reminds us that this doesn’t increase total employment of college grads; it just swaps one set—in-state grads, about which nothing is sacred—for another. What we need is more high- level jobs to interest college graduates, period. It’s elementary, but I can’t remember the last time I saw it in writing.
Or take the old bromide of raising sales and income taxes whenever government needs more money. Does it work? No. It just drives the owners of mobile resources—those who are free to respond to better opportunities elsewhere—out of the state. The writers recommend raising property taxes instead. Property owners have the most to gain and lose from the economy, and so should contribute the most towards its success. Besides, they can’t leave. It’s tough, but it’s correct.
Two years ago, my state made a long-term commitment to give gasahol a big sales-tax break. It was an effort to promote what promised to be a thriving in-state ethanol industry that would also use large amounts of damaged grain. Our highway system is financed by user fees, chief among them the gas tax, so this tax break means that two very wobbly ethanol plants take a huge bite out of the highway fund. The plants actually use only a drop of the grain produced in the state, and ethanol produced out-of-state but sold here gets the tax break, too. Other fledgling industries are asking, with justification, “Where’s ours?” Construction and highway-user groups are opposed to a much-needed gas-tax increase because part of the money from the current gas tax is being diverted to the ethanol industry. And the new legislature voted, after long debate, to keep the tax break; after all, they’d promised.
If our legislators had had the Iowa report in front of them back then, they would have known that “direct and flexible methods of assistance, such as loans, grants, and principal and interest buydowns, are much to be preferred over tax concessions, which are blunt instruments.” (Oh, this is pure poetry!) Tax concessions are hard to focus, adjust, and remove—even when they’re no longer needed. And other businesses will expect similar treatment. The “likely consequences”: “erosions of the tax system’s ability to generate revenue and its public acceptability.” I couldn’t have said it better myself.
There’s more, much more. How about a grassroots vindication of Charles Murray’s Losing Ground: “The state should move cautiously in expanding assistance, because it is difficult to determine whether assistance generates benefits commensurate with its costs. . . . As a practical matter, assistance programs cannot be expanded to meet the ‘demand’ [read ‘desire’] for assistance.” Or this: “A business seeking state assistance should ordinarily be required to obtain most of its funding from private lenders” because it’s a good indication of the business’s viability. Or the suggestion that a state should engage in information and “marketing” programs only if (a) the state does have a good business climate and (b) segments of the business world don’t know it. Or this: In spite of legislative turnover, the state must have a “formal and explicit” commitment to “tax system stability.”
This is subversive stuff!
What’s most amazing here, perhaps, is the unashamed defense and promotion of free enterprise by—forgive me—bureaucrats. They declare outright that they can’t “control the geographic and industrial pattern of economic activity in Iowa; that is best determined by free market choices.” They admit that “policies do not themselves create jobs,” and that the ultimate success of the state’s economy will be determined as it has always been: by private investments. The writers understand that their job is merely to encourage private investment.
This study was mandated by Iowa’s Democratic legislature and, according to Lane Palmer, one of the directors, has bipartisan support in both houses, as well as the support of the state’s Republican governor. Sometimes the world does make sense.
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