I think it's because we've always admired rich people, and that we want to become like them, that we often don't seem to care how they got that way. Some rich people worked hard and ethically to get where they are, but you'd be surprised at how many didn't. The truth of the matter is that a heck of a lot of them got their mansions and Lear jets by stomping on you on their way up.A lot of people blame the free market for the economic problems that we have in our country. In reality, with the shysters that we elect to the federal and other governments year in and year out, we haven't had a free market in decades. We've had a butt-kiss market. I'm not better off than I was ten years ago, not to mention just last year. And it's your fault, because you keep voting members of the butt-kiss market into public office.
So quit it!
The Real Benevolence of the Profiteering Non-Profit Law Firms. I just found out this morning that a lot of these so-called benevolent law firms who do all kinds of pro bono work aren't really as benevolent as I thought.
Non-profit law firms funded by the federal Legal Services Corporation invested tax dollars in booze, interest-free loans for employees, lobbying registration fees and $750,000 for an independent "information technology" contractor whose contract had been lost and whose address was identical to the law firm's address, says the Government Accountability Office.Why am I surprised?
Sports Stadiums. Every time I drive past Sandy, Utah on the freeway I just want to scream. Sandy city
A lot of people blame the free market for our economic problems. With the shysters that we elect to government year in and year out, we haven't had a free market in decades.
government has got to be the most unethical city government in the state. Tom Dolan and his cronies should be sent off to a penitentiary. After paying themselves bonuses because they are so indispensable, the Sandy City government is now trying to ace you out of several million more dollars as they entice a developer (with a tax giveaway) to build a broadway-style theatre that nobody wants.Even before that, Sandy somehow finagled 35 million dollars from you and me for their monstrosity of a soccer stadium, because enough state legislators were STUPID enough to believe that they'll get their money back sometime in the next 50 years. And then Dave Checketts reneged on $7.5 million that he would donate to youth sports parks. What a chump. No, actually...we're the chumps.
But again, I'm not surprised. That's chump change compared to George Steinbrenner, who raped the Bronx public park system, with the help of "America's mayor", Rudi Giuliani, and built a new stadium for the New York Yankees with a gift from the government of $276 million. Washington D.C. forked out $611 million to build a stadium so their rich friends--owners of the Washington Nationals--could play baseball. There are such stories galore. It makes me never want to attend another professional athletic event ever again.
Shop at Wal-Mart and Cabela's--So You Don't Get Screwed Twice. Most of the Wal-Marts and Cabela's all across the United States have strong-armed the cities in which they ultimately build stores for very favorable economic perks, such as free land and much lower taxes. Chances are very great that Utah county did this for our local Wal-Mart and Cabela's
Unless we start electing honest and courageous people, a government "solution" to our problems will be worse, but only because the sins of the butt-kiss market are not yet pervasive across the entire country.
When they are pervasive, though, both "solutions" will be the same.
vultures. I thought for quite some time that both of these businesses grew themselves from the ground up. But I have found that Sam Walton and Mr. Cabela are part of the butt-kiss market. You like getting stomped on, don't you? If they really have a good product, why can't they sell it in a market that doesn't give them the advantage?Their strong-armed advantage is the primary reason that Wal-Mart and Cabela's can afford to have lower prices than their competition. So I guess you'd better shop there so that you don't get screwed twice--first, because they made you pay the taxes that they should have paid, and second because you'll pay more than everyone else who shops there.
On second thought, if you have a spine, you can shop somewhere else and send a letter telling Wal-Mart and Cabela's that they suck because they didn't get rich by honest means.
The Booty of Political Conquest. George W. Bush is coming to Utah to take millions of dollars from Utahns who want to have a part in the butt-kiss market--so that another establishmentarian (John McCain) can pilot America on its downward trajectory. Imagine what productively could be done with those millions of dollars. It's beginning to make me think that we should change campaign finance reform laws so that every candidate gets the same amount of money.
Maybe, however, it will take utter economic collapse for enough of us to realize that we should be electing people like Ron Paul to public office--people whose main purpose isn't to be bought.
. . .
It's been quite some time since very much "free marketing" has been going on in the United States. Rather, government shysters are scratching the back of their K-Street business buddies and vice versa, and most of the "market" gets bottled up in the top 1% of US wage earners. Often, once they've scratched enough backs, government whores take their turn in the business sector where they can get their unfair cut of the pie. What we've got stinks an awful lot more like fascism than the free market. And it's mostly your fault.
So, for example, people who allege that the market cannot solve the problem of man-made global warming are probably right. But not for the reason that they think. Because of the real problem--rampant greed--government wouldn't be any better at solving the global warming problem than our existing butt-kiss market. Unless we start electing honest and courageous people, a government "solution" to our problems will in almost all cases be worse, but only because the sins of the butt-kiss market are not yet pervasive across the entire country.
When they are pervasive, though, both "solutions" with be the same. And then the word "suck" will have a completely new definition.
Great post, Frank. Now if we only knew the names of some hard-working, ethical rich people...
ReplyDeleteI would guess Jon Huntsman Sr., and I hope I'm not disappointed.
ReplyDelete;-)
I might say Warren Buffett. Interestingly enough, Forbes now pegs him as the richest man in the world.
ReplyDeleteWow Frank! That was pretty bold blaming all of us. :) These big companies get a lot of tax breaks. But free land? I haven't heard of that from Walmart or Cabelas. I know Cabelas bought their land. Personally, I don't think I have ever admired a rich person specifically. I have never thought that they suck. I think that someday I might want to be one, but like you said, if I get there I am going to feel good about it. Their are a lot of good rich people out there that made their money the right way that aren't big names. There are a lot of venture capitalists that have a lot of money along with morals. I hope someday I might be able to join those ranks. Frank you asked, "If they really have a good product, why can't they sell it in a market that doesn't give them the advantage?" The thing is, they most definitely could. I think they shop around for a location like we would shop for a car, or anything else--where can we get the best deal? Personally, when I get a good deal, I don't feel bad about it. I don't know why we are putting the business at fault, it is like you said Frank, the shysters we elect. If we don't want businesses to get a tax break, or free land as you state Frank, then we shouldn't elect those government officials that allow that.
ReplyDeleteP.S. Did you come up with "Butt-kiss market" on your own? I really like that!
Danny,
ReplyDeleteYup! The "butt-kiss market ®" idea was mine. It just kind of came to me as I was putting my thoughts together.
I still hope that even if the government was offering my business all these unfair advantages that I would have the cajones not to accept them because I would be giving everyone else the shaft.
The book I just got done reading indicates that it is just Wal-Mart that gets free land from time to time. Cabela's usually gets (1) no property tax ever on a significant portion of the store because the mounted animal heads allow them to call much of the store a "museum". (2) Property taxes forgiven for decades into the future because of all the extra business it would bring, and (3) forgiveness of a significant portion of sales taxes, because "if you don't we'll take our store somewhere else".
That's not fair.
See, if most "free market" advocates coped to the things you do, I would be much more amenable to the free market ideology. But since most free market advocates still heap praise on the captains of industry and finance and on the current economic system, I remain very skeptical.
ReplyDeleteDanny, why shouldn't we blame the companies for taking the booty which the "shysters" offer them? I vehemently disagree that we shouldn't expect moral behavior from business institutions. They can and should be able to make ethical decisions. And do you think those companies don't deliberately cultivate those shysters, doing everything they can to get the easy marks elected, and extorting those advantages from those less willing through threats of leaving?
When you say we shouldn't blame the companies, it sounds to me far too much like those who say boys shouldn't be blamed for fornicating "after all, they wouldn't fornicate if the girls wouldn't let them. You can't blame a guy for taking a free gift. Its all the fault of those tramps!"
When we justify financial actors for their pursuit of financial benefit above all else, and obviate responsibility for other values, we move from rational free market thought to blind free market idolatry.
BTW, while I do believe there are some few people who become successful in business through honest effort and ethical behavior, I believe they rarely make it among the very most successful. The very nature of competition means that those who reach the very top are those who have fewer limits or scruples.
ReplyDeleteDerek,
ReplyDeleteAs I read the book "Free Lunch" by David Cay Johnston, it occurred to me that I'll bet my thinking is much more aligned to yours than I first thought. And you've substantiated that, in that I think we're just defining the free market differently. When you say:
But since most free market advocates still heap praise on the captains of industry and finance and on the current economic system, I remain very skeptical.
I would say that these people are not part of the free market, but champions of the "butt-kiss" market.
When it comes right down to it, though, I think we both agree that more regulation of the market is needed in this regard. But with the shysters we have in government, there's a "fat chance" that we'll get it.
Why can Wal-Mart and Cabella's and all the rest get tax incentives? Because they are big, successful businesses that will be around for a long time and will bring in consistent tax revenues. The municipalities want those revenues. They need them in order to run their cities. It's either that or increase the tax burden on private citizens directly.
ReplyDeleteI read a while ago that it's estimated that Cabella's is Utah's most visited attraction, surpassing even Temple Square. That's a lot of new people visiting, and spending money in, Utah county. Officials know this, so they recruit them with incentives and the like. I suppose they could have given "Cameron's Hiking Gear" the tax breaks, but statistically speaking my outdoor store is more likely to fail than not. Then the county is left with a vacant building and zero revenue. That doesn't seem like smart management to me.
In fact, it's stores like Wal-Mart and Cabella's that provide the draw that allows smaller stores to spring up and find success. The millions of visitors to Cabella's each year are an entirely new market in themselves.
Take Temple Square, for example. (It's critics notwithstanding, it's not a Big Box store, but from a "draw" standpoint, the example fits.) Imagine downtown Salt Lake without Temple Square and its millions of visitors each year. We could just take November and December and see how many shops and eateries benefit from having the Temple Square Christmas lights on.
Now put that kind of people pulling power in other areas and you've got a recipe for good, honest capitalism. Which is basically what happened with Cabella's, IKEA, and anywhere a Wal-Mart is.
The other interesting note is that, like Danny said, these stores shop around to find the best deal just like you or I. If I can afford to pay x amount for a car, and the dealer prices it for x amount, can I not price other dealers, or negotiate a lower price? Is that not ethical? Because that's what these stores are doing.
Now, the next test is if the municipalities are actually seeing an increase in revenue after giving the incentives. Have they done their homework? Will it really be a net gain for the city, or are they being schooled at the negotiating table? But that doesn't seem like what this post is about.
It's easy to criticize huge corporations like Wal-Mart. But it's easy to forget that they weren't always big. No one handed them their market share. Thirty years ago K-Mart was what Wal-Mart is today. Wal-Mart started out as a small-town store in Arkansas, and grew enough to compete with the K-Mart goliath because it revolutionized how retail stores operated. Now their systems are used by companies all over the world. That's capitalism. That's the free market.
Wow Cameron,
ReplyDeleteCabela's and Wal-Mart may be very successful, but how in the world does that make it fair? Should K-Mart get the same tax breaks as Wal-Mart? If not...why not? Because they don't cross some arbitrary threshold for being a big money maker?
It is completely unethical what cities do to allegedly increase their tax bases, not to mention that in most cases it doesn't increase their tax base, but simply transfers the tax burden to those less likely to have the ability to pay it.
I'm starting to understand why Derek is proud to proclaim himself a liberal if there really are that many conservatives out there who think that this favoritism is part of the "free market."
IT IS NOT. It is Fascism.
Cabela's and Wal-Mart may be very successful, but how in the world does that make it fair? Should K-Mart get the same tax breaks as Wal-Mart? If not...why not? Because they don't cross some arbitrary threshold for being a big money maker?
ReplyDeleteIt's fair because it's not an arbitrary threshold for being a moneymaker. Cities need revenue. Business provides that revenue. So cities compete with each other to bring these businesses in.
It's up to the city's leaders to negotiate the best deal with the business. They must make sure that they are actually getting the revenue they think they are. With Cabella's being Utah's #1 attraction, it stands to reason that they're bringing in a lot of revenue to the area. Wal-Marts generally have many other businesses locate around them for the same reasons. All of this brings more revenue to the municipality.
Cameron,
ReplyDeleteYou've talked about the city needing revenue (studies have been done that they don't increase their revenue and that breakeven points are decades into the future). You've talked about the businesses getting a good deal. But where do the taxpayers fit into this equation. You don't seem to care? And what about the mom and pop shops that go out of business, not because Wal-Mart is a better business, but because they don't get the same tax breaks that Wal-Mart does?
Do you care about them?
The city needs revenue to do its job. It can get that revenue by taxing its citizens directly, or by moving in businesses that will strengthen the city's tax base. The millions of people that visit Cabela's every year bring revenue to the area. I have relatives in Idaho that love Cabela's and used to buy from their catalogue or go to their store in the Midwest. Now they come to Utah. These millions of shoppers not only add tax revenues to the municipality, but they create economic opportunity for others as well.
ReplyDeleteThere are a gazillion people in IKEA at any given moment. I'm sure that the two gas stations next door have seen a huge jump in revenue since that store opened. Other businesses will follow suit.
Wal-Mart has much the same effect wherever it locates.
It's the draw, and the revenue that draw creates, that the cities are after. Smaller stores simply do not provide the same things. If city x has no stores and city y does, city x's citizens will travel to city y and spend their dollars there. City x loses revenue. Without those revenues the city's budget will shrink and its services will disappear.
The west side of northern Utah county is a traffic mess, largely because there is no business. Anyone wanting to shop has to go through Lehi to get to American Fork. There are the usual "big box" stores there like Lowes, Home Depot, Wal-Mart etc. Those stores bring in scores of people, which has resulted in many other, smaller shops opening up as well. Those shops, the "mom & pop" you speak of, very likely would not exist without the draw that the larger stores provide. Eagle Mountain has over 20,000 residents and no stores, not even mom & pops. There are two gas stations. How are the residents of Eagle Mountain benefited by not allowing big businesses to locate there? The city has enough land mass to become the 3rd largest city in the state. Would all of those residents shop at "Cameron's Grocery", or would they just go to the Wal-Mart in Saratoga Springs?
That's the dilemna facing city officials. Eagle Mountain has to compete for business with Saratoga Springs and Lehi, because if they don't then their citizens will take their tax dollars elsewhere.
Of course I care about the people. I am the people. I am simply trying to understand why city officials would incentivize the Wal-Marts of the world to build in their city. I don't think that Saratoga Springs' city leaders are on Wal-Mart's payroll. I think they are just trying to manage their city the best they can.
You've said a lot of things that are true--that neighboring services get a hit off the big-box magnets, that big box stores make it easier for people to shop--of course, I get a headache when I go into Wal-Mart ;-) --and you answered the rhetorical one of my questions (of course I know you care about people). But you didn't answer the hard one. Do you care about the mom and pop stores that are thrown out of business for no other reason than they don't get the same tax breaks?
ReplyDeleteWhy not give everyone in town the same tax breaks as Wal-Mart? How can it be fair to those who are trying to run a business if you don't?
Because Wal-Mart gets more shoppers, which means more tax revenue.
ReplyDeleteThe city's residents have shown that they will drive to where the Wal-Mart is in order to shop. The city without one is losing revenue that otherwise could be theirs.
As a city administrator, if I had to choose between one store that would bring in more money and another store that would bring in less money, would I be doing my duty if I chose the one with less money? Especially since statistically, the one producing less money is also likely to go out of business?
Like I said, Eagle Mountain has no business. Not even mom & pop business. The city has services to provide, a budget to meet. It can either raise taxes on its citizens directly, or it can incentivize business to locate there. When they plan their budgets, which business is more appealing?
Look, I understand the mom & pop thing. I come from a family of mom & pop people. They build horse trailers in a small town in Idaho. They have dealers all over the western US. They compete directly with much larger companies. They've had good times and bad. They've become wildly successful over the last 15 years because they found their niche - they found where they could compete, they found other revenue streams, other products, and they know when and how they can win. For that area, they are big business.
Wal-Mart was a mom & pop. They innovated and competed and won against the much larger K-Mart. That innovation has made other businesses better as well.
RC Willey started out as a door to door salesman. Now they've got huge stores here and in other states as well.
Now, where maybe you've got me is the following scenario: My horse trailer building, mom & pop store family is established in Idaho. Their city gives free land and heavy tax incentives to bring in a larger horse trailer company with brand appeal and nationwide sales.
My mom & pop store relatives are at a disadvantage because of this and go out of business. That would suck. The city leaders who made the deal would be dumb, especially if they incentivized the big store so much that they don't really make any money.
But what happens if it's the city down the road? They incentivize the bigger trailer company to come in, steal all the first city's customers, and run the smaller company out of business. My family's mom & pop city failed its citizens because now they're left with nothing.
Again, it goes back to the draw these big businesses bring, the revenue that draw produces, and the competition between cities for that revenue. Do we make a state law outlawing Wal-Mart? Or maybe we outlaw all tax incentives so Wal-Mart, IKEA and Cabela's don't come here at all. Maybe you could argue that they'd come anyway, that the incentives aren't needed. But then what tools do cities have to draw stores to them instead of somewhere else? Who gets to pick which city gets the revenue stream of Home Depot and which one gets "Cameron's Tool Shack"?
Thanks for seeing my point of view. You raise a great point, that it is a cut-throat competition of sorts between cities that presents the major problem to my thesis.
ReplyDeleteAlong similar lines: when I served on a city council, I voted on principle against accepting Community Development Block Grant money from the Federal Government--because the federal govt should not have taken that money from us in the first place. Other council members chided me because "that money would just go to some other city".
They are right--and you are right--some other city will get the benefit. States do that as well in their competition with each other. I think the way to solve that problem is to prohibit states and localities from offering such benefits at all.
When it advantages some at the expense of others (your horse trailer business example is an excellent one), it is unfair and needs to be stopped. Because the Waltons and the Cabelas, regardless of how they started, have become filthy rich largely on the backs of the poor.
Here's another example that illustrates the quandary, one that I suspect you'll appreciate--I having read several of your interesting articles about the Utah Jazz on MagicValleyMormon: Studies show that as a general rule, sports franchises would be in the red except for government subsidies for their stadiums, etc. In other words, athletes' salaries have risen in part by about the amount of the subsidies that governments give the franchises, further widening the gap between rich and poor. If it were only that we continue to demand the sporting event by paying for the increasing cost of the event ticket, that's one thing, but to enrich athletes further by taking tax revenues to pay for them is quite another.
The problem with saying no to Wal-Mart out of principle is illustrated by my horse trailer example. Either way, the city lost the trailer company. In one scenario, they gained the bigger company, in the other they lost out on both.
ReplyDeleteSo the only way to solve this problem would be to outlaw tax incentives. But I wonder what the unintended side effects of that would be?
As for your last example, it's true, I am a Jazz fan. I find your example fascinating and would love to read the studies you talk about. In Larry's defense, it was my understanding that ESA didn't get tax breaks?
Anyhow, I imagine the point of this example is that if athletes are getting richer by the amount of the tax subsidies, then the correlation would be that the Waltons are as well. The example is a little off in that the athletes are the employees and the Waltons are the owners. Does it not stand to reason then that Wal-Mart employees are getting rich off the backs of taxpayers? :-)
But again, what happens to the macro if we outlaw tax incentives?