EB-5 Mess Stirs Discussion About Government’s Role in Economic Development
(NPN) — If there is any good to come out of South Dakota’s EB-5 mess, maybe it is a discussion about what government’s role is in economic development.
Since covering politics in the early 1980s, governmental involvement at all levels—national, state, local–in economic development has been the norm. Whether it is TIFs—tax increment financing—or low interest state REDI loans or green cards for foreign investment like the federal EB-5 program, governments’ hands are deeply in the economic development pot.
But it hasn’t always been this way. And, the 2014 GOP U.S. Senate race has inarticulately pointed this out.
Former Gov. Mike Rounds is the poster child for governmental assistance for economic development.
State Rep. Stace Nelson and more or less the other three Republican candidates seem to stand for government getting out of the economic development business.
While Nelson tries to tar Rounds as some sort of liberal, in reality, Rounds is no different from his modern South Dakota gubernatorial counterparts like Dick Kneip, Bill Janklow and George Mickelson. They all pushed for direct state involvement in economic development to help develop a mostly agrarian state.
It used to be the local governments provided schools, streets and utilities like water and sewer, the state provided highways and a National Guard and the federal government kept a military and might help with some highways.
President Franklin Roosevelt and the Great Depression caused some of the change in the role in government, but even that was more in the realm of making sure people were working and eating and providing some planning and regulation of the economy or sectors of the economy.
The idea that the government had to spend money on or for businesses or attracting businesses is a relatively recent development.
Even with the well-documented problems the EB-5 visa program has had in South Dakota and elsewhere, it is not a government giveaway program. It is a means to spur (and what some might call spurious) foreign investment in American economic projects. Private investors put their money on the line. As to some projects, they’ve made money. As to others, like Northern Beef Packers, they lost money.
Isn’t that how capitalism is supposed to work?
Though on the same token, what if governments at all levels simply put all their time, money and effort in simply setting the table for economic development? Things like outstanding K-12 education, vocational education and colleges. Like top-notch streets and highways. Like well functioning and reliable utilities like water, sewage and electricity?
As professional sports teams, however, large and growing businesses know they can play one city, state or even nation against another for the right to the “franchise.” So, governments have engaged in an economic development arms race that ends up in giving companies that are perfectly able to pay property taxes a 20 year moratorium for building something they were going to build anyway, somewhere.
That means a cheap, government backed loan for a company doesn’t need it because banks are more than willing to loan them money at slightly less attractive rates.
So in 2014, in fits and starts, the discussion in South Dakota begins: Does the state continue to be an economic player or an economic bystander?