Sacramento Bee (California)
August 20, 2007 Monday
METRO FINAL EDITION
Economic schemes never die
by Dan Walters
When John Garamendi segued from state insurance commissioner to
lieutenant governor this year, he found himself in a duty-free zone.
The lieutenant governor’s only real job, as someone sagely observed,
is to check the newspaper each morning and assure himself that the
governor is still alive. His unspoken task is to garner media
attention and thus position himself to run for governor, although
only one lieutenant governor in recent memory made that happen and
voters recalled him.
The last time a governor tried to help a lieutenant governor move
upward was when Ronald Reagan appointed Ed Reinecke to the job nearly
40 years ago and then created an "Economic Development Commission"
with Reinecke as chairman and securing the space shuttle project for
California its mission.
Reinecke became enmeshed in scandal and was forced to resign, but the
Economic Development Commission remained alive, embraced by his
successors as a source of patronage and a vehicle for gaining public
attention even though it has not generated any economic development
that anyone has ever catalogued.
True to time-dishonored tradition, Garamendi claims that he has
"revitalized" the Economic Development Commission and will — cross
his fingers and hope to die — make it into a force for economic
progress. Current cost: $651,000 a year.
If nothing else, it illustrates the hapless quality of the state’s
fitful efforts at spurring business investment. Governors and other
politicians are forever promoting schemes they claim will enhance the
state’s economy and create oodles of new jobs — overseas trade
offices, tax breaks of various kinds, new agencies, task forces and
the like.
They are piled one upon the other with little coordination or review
of their effectiveness, many, such as the Economic Development
Commission, surviving for decades simply because no one has enough
guts to give them the merciful deaths they deserve.
A few years ago, after they had become a media laughingstock, the
state’s overseas trade offices were shuttered — but sure enough,
there’s an effort in the Capitol to keep open the one remaining
outpost, albeit privately financed, in Armenia. Why? It’s merely a
sop to Southern California’s politically influential Armenian
American community.
The various tax breaks targeted to specific communities and
industries, some on the books for more than a half-century, are
especially egregious because there are almost no requirements to
prove their effectiveness, and they divert billions of tax dollars
that could balance the state’s deficit-ridden budget.
One of the costliest is the two- decade-old "enterprise zone" program
under which communities offer tax breaks for investment that
supposedly helps low-income people. Last January, the Los Angeles
Times detailed how enterprise zone "vouchers" only rarely help the
poor, more often benefit the wealthy and are sold by cities to firms
far removed from their borders. The article even revealed that the
Times itself benefited from such vouchers.
The Franchise Tax Board is questioning the legality of some vouchers,
and the Legislature has adopted some modest reforms, while extending
the life of existing zones, but the program needs a total review to
preclude its being welfare-for-the-wealthy.
Instead of a cleanup, however, the Schwarzenegger administration is
expanding use of enterprise zones, and legislation to make it easier
to create them is moving. Meanwhile, the Assembly has voted to punch
more than a half-billion dollars in new loopholes into the state’s
already distorted tax laws. Movie producers and multinational
corporations are just two beneficiaries of the bill, which has
stalled in the Senate.
They never learn.