Unless you are a baseball fan or local politics wonk you may have missed the big news last week: the Atlanta Braves will be leaving Atlanta for greener fields in Cobb County beginning with the 2017 season (speculation has already begun whether they will change their name to the Marietta Braves). This move has created a teachable moment concerning bureaucrats who credulously believe they can derive a net benefit by subsidizing the profits of private business via the public tax trough.
The particulars of this prospective Braves relocation are rather interesting in light of the epidemic of head-in-the-sand disease that is sweeping through Cobb County government. The Braves have released an infographic that details the massive extent to which Cobb County will be bribing, err, supporting them. The Cliff Notes version is this: Cobb will cover 45% of the overall $672 million cost of the project through a mix of new and increased taxes amounting to $18 million per year over the next 16 years. This tax expense will however be offset by increased local retail spending that will bring in an (estimated) whopping additional $89 thousand per year in sales tax revenue. I don’t know, maybe I’m being unfair: Would you pay $180 a year for the opportunity to possibly earn as much as a cool 89¢? The math for this deal just does not work. Cobb County would have to realize an ADDITIONAL $1.8 billion in retail sales just to break even. Given that the current total amount of retail sales in Cobb County is $2.1 billion that seems a bit of stretch to imagine that a mere baseball team could nearly double the entire retail economic output of the county.
There is nothing wrong with the Braves relocating to wherever they desire. However, they should bear 100% of the cost of their relocation speculation. It’s lose-lose for the taxpayer. If the move goes well for the Braves then the taxpayer has paid for something the Braves could have paid for themselves. If the move goes poorly then the Braves are shielded from the effects of that bad decision via the taxpayer picking up nearly half the tab. Some will invariably argue that the local community should bear some of the costs to lure the Braves to their neck of the woods because the local community will indirectly benefit. To accept such a flawed argument one must also accept the premise that Walmart should likewise demand to be subsidized by other businesses nearby because those businesses will derive increased traffic owing to the “anchor” location of the Walmart. Everything each one of us does will conceivably benefit someone else indirectly. This argument, taken to its logical conclusion, demands that we should all attempt to extort money from our neighbors before we do anything.
But, we can’t really blame those in charge over in Cobb County for making such absurdly wrong-headed decisions; they are simply following precedent. Those who can think, think, those you can’t, follow precedent. Local (and national) governments have been hooked to the same economic voodoo for decades. They wish/hope/believe that if they offer up financial support to a private business looking to relocate within their territorial boundaries that the potential increased economic activity will provide a net benefit to them and their constituents. Unfortunately wishing for something doesn’t make it so. In fact there has never been a situation where such subsidization has bore net economic fruit. So why do governments keep making the same mistake over and over? Because government has no feedback mechanism to correct their mistakes. There is no profit and loss test. If they subsidize some boondoggle and it doesn’t pan out (a loss), oh well, the taxpayers will still have to continue paying for it for years after the private entity they were subsidizing is gone and those elected officials have left office. Government legally can’t go out of business, so they are free to make the same mistakes over and over. The people may “vote the bums out”, but the institution remains. The aphorism “Those who fail to learn from history are doomed to repeat it” is nowhere more true than with government.