Necessary Roughness

In a Newark (OH) Advocate editorial, Ohio candidate for State Representative Dan Dodd discusses the Third Frontier program that was defeated in November 2003 and is resurfacing on this year’s November ballot. Licking County voted 63% against the proposal the last time. I’d like to see an even harsher dismissal this time around.

“We should thank those officials who voted ‘yes’ for allowing Ohio to invest in our future and ask those voting ‘no’ why they oppose opportunities for job growth in our part of Ohio.”

I’m glad he asked. Let’s take a look at why he wants it passed:

The Third Frontier project is made up of two different programs. One will broaden the ability of the state, public universities and local governments to issue bonds for research, development and technology commercialization, according to Policy Matters Ohio, a nonpartisan research organization in Cleveland. It would allow entities to borrow funds through bonds for high-tech development throughout our state, which will lead to thousands of jobs in our state at all skill levels. The other part of the package is a program that will allow the state to borrow, through the use of bonds, several million dollars that will be used specifically for infrastructure development, including road improvements. The improvements will be beneficial to folks in Licking and Perry County because our lack of infrastructure development is a negative for prospective investors looking for a new business opportunity. In time, the investments made by our state through these programs will lead to new educational and employment opportunities for people throughout Ohio. (my emphasis)

So, the first part of this program is to let private companies and organizations (who else would be an entity?) borrow taxes collected from Ohioans, at a lower rate than what these companies can borrow from banks alone (otherwise, why borrow from the State?). This alone was enough for me to vote “No”. If banks won’t touch these companies, why should the State? What makes the State of Ohio more intelligent than professional lenders when it comes to assessing credit worthiness?

Let’s say we assume their risk, and sure enough, some jobs are created. Maybe a company will hit on the magic fuel cell research and score big, but the chances of that are slim. If their chances were not slim, they would have secured money from the banks. The failed company then can’t pay back the loan, the company has to let its employees go (there go those wonderful jobs), and the State owns assets it doesn’t need when it forecloses on the loan. Moreover, there’s an opportunity cost: what would the State have bought if it didn’t buy these worthless assets, or what could the State have avoided collecting from its citizens?

After this, the second half of the bill is merely an infrastructure bill presented as a lure to businesses looking for locations. The State has to guess in advance where companies will want to locate, or overbuild in several areas which won’t be used later. This requires knowledge that the State does not have. It is way more practical to have a need first and address the need, rather than predict a need. Maybe instead of fuel cells which require a certain infrastructure, the answer to all our problems is in, say, conversion of water to hydrogen. An area may be suited for microscale research but not for nuclear research. Instead of a high requirement for highway infrastructure so that we can haul metal, lead, and acid to form fuel cells, we need a high water infrastructure to produce the latest and greatest hydrogen plants. Again, we incur a high opportunity cost if we guess wrong, which more likely than not, we will.

Interestingly enough, there is a real-life case study on private infrastructure. The Chesapeake Bay Bridge-Tunnel connects Virginia Beach, VA, to the rest of eastern Virginia. It is financed solely by tolls, with no tax money used. Enabling the profit motive keeps costs down and quality up; if the bridge falls into disrepair, nobody drives on it, and revenues aren’t collected. In not so nearly an extreme example, Les Wexner, kicked in private funds to improve infrastructure to his Easton Town Center in Columbus, OH.

So there’s two reasons why I will be voting (likely absentee) against this big government “solution” again: financing marginal companies and guessing infrastructure needs are a waste of our tax dollars. If Ohio doesn’t need the money for other things, it need not collect the money from us in the first place.