The media was all abuzz last week with the release of the Economic Development Agenda for Nevada by Brookings Mountain West. The plan is now in the hands of the state’s policymakers, who would do well to look closely before blindly adopting its recommendations.
It does contain some good ideas – enhancing the business development data available to businesses and assisting the state’s “exporters through the ins and outs of selling abroad”. The report deviates from liberal orthodoxy in some places, for example, advocating for real alternative licensure and merit-based pay for math and science teachers. It also cites as a constraint on businesses in the state the difficulty and delays caused by the land-use and permitting policies of the various federal agencies that own 87% of Nevada’s land.
But generally it reads like a document prepared by a group of left-leaning academics and (surprise, surprise) contains what one might expect from a group of left-leaning academics – more money for academia, for instance. While it expresses a preference for bottom-up approaches as opposed to top-down dictates, it is itself an exercise in top-down planning.
One of the worst, and possibly dangerous, ideas is the creation of the positions of “sector champions” within state government (p. 96).
These champions or product managers will serve as both the state’s emissaries to the target sectors or clusters and, conversely, the target industries’ key “go-to” contacts and advocates in state government. Along these lines, the champions would as a first order of business spearhead further organizing work, but they would do more. As the sectors’ appointed champions, these professionals would work relentlessly—one with each target industry—to identify and respond to key cluster opportunities as well as binding constraints, especially in state policy and process. With those opportunities in constraints in their sights, the champions would work to seize the opportunities and to work through the policy constraints that impede growth. On the one hand, they might coordinate a targeted business attraction effort to complete a regional supply chain. On the other hand, they might drive a needed regulatory tweak with likely benefits to a prized cluster. In all, the champions will ensure that the state’s strategic industries in the regions have not just a direct line into state government but a dedicated, focused, and action-oriented point person waking up each day focused on driving the industry forward.
These “sector champions” are essentially taxpayer-funded lobbyists for privileged (“target”) industry groups.
If there is one ideal that can unite OccupyWallStreet, the Tea Party and virtually everyone in between it is a contempt for crony capitalism – the unnatural alliance of government and business in which government uses its power to promote the interests of particular (privileged or “prized”) businesses at the expense of others.
This report advocates making crony capitalism official policy of the state of Nevada. It explicitly provides for certain, selected industries to have their own lobbyist in state government, funded by the taxpayers no less!
Government should be coordinating with business to help remove regulatory barriers – or, ideally, to avoid creating them in the first place. But it doesn’t take a very cynical mind to believe that a “regulatory tweak with likely benefits to a prized cluster” might be one that provides benefits to the cluster not only with the government’s ear but with an advocate on the government payroll, and that these would come at the expense of other businesses or industries.
In some places the plan works at cross-purposes. The report identifies “retirees” as Target Opportunities for the Tourism, Gaming & Entertainment sector but then denotes the “[h]igh percentage of Medicare patients and low reimbursement rates” as a constraint on the Health and Medical Services sector. More retirees means an even higher percentage of Medicare patients.
In others the ideas are little more than repetition of liberal pipedreams. Energy Efficiency Upgrading, for example, is not a viable sector or subsector.
Large-scale Upgrades to existing buildings or residence are rarely feasible unless there are significant subsidies available to do so. In other words, only if the taxpayers are forced to bear some of the cost does this type of investment pay off for a building owner. Past experience with state- and federally-run programs of this sort is that they are, quite frankly, boondoggles – lots of money spent with little results.
The idea that this could result in a significant, or even notable, level of economic activity during the report’s time window is ridiculous. Ironically, this fact could change if Nevada follows through with implementation of its renewable portfolio standard (RPS), which requires state utilities to obtain 20% of their power from renewable sources by 2015 with higher requirements in future years. Adopting the RPS will drive the state’s energy costs significantly higher than current level, which the report terms “relatively high for the region.”
That is just a sample of the potential policy hazards contained in this document. The plan is loaded with other provisions and recommendations that come with unintended consequences, not to mention the expense of adopting these recommendations, which will have to come largely by increasing the tax burden on existing businesses and damaging the state’s attractive tax climate.
There will be a lot of pressure on the Governor’s office and Legislators to adopt the provisions of this plan wholesale. That approach would be a mistake and they need to tread carefully to avoid the numerous minefields it contains.