Walters: The Rise of Mississippi’s Socialist Republicans

Senator Chris McDaniel one of only a handful to stand against the growing corporatist welfare state.

By Ryan S. Walters | @ryanswalters73

The Republican Party is supposed to advocate conservatism. That’s kinda what our party has stood for since the long-gone days of Warren Harding and Calvin Coolidge. But now, sadly, very few Republicans are actually true conservatives, standing up for the traditions of limited government, free markets, low taxes, sound money, and reduced regulations.

The recent passage of a massive half a billion dollar economic development package in the Mississippi Legislature proves, as if we didn’t have enough evidence already, that the party no longer hold to those timeless principles. It is now a Party of Corporate Socialism. The battle in the party is now one between the ideas of Karl Marx and the philosophy of Adam Smith, between Tate Reeves and Chris McDaniel, between a government-driven economy and one built upon economic freedom.

Wyatt Emmerich wrote a great column last week, a piece entitled “Mississippi’s Version of Socialism”: “When the government picks which industries come to Mississippi, you can’t get more socialistic than that.” Indeed, as Emmerich points out, “Mississippi is in the top 10 in company-specific subsidies per capita. A few years ago, Mississippi was number two.” But after two decades of “bribing companies to come to Mississippi, how’s it looking? With the third highest unemployment rate in the nation, not very good. That’s a typical lousy result for socialistic economic policies.”

Though Socialism may be defined, at least officially, as government ownership of the means of production, there are other aspects of it to help achieve that goal – economic central planning, re-distribution of wealth, and, in the words of Kevin D. Williamson, “using political agencies to provide goods and services that otherwise would be provided privately in the marketplace.”

And it’s these last two agenda items that ensnare the current Republican Party in Mississippi. When we think of re-distributing wealth, we tend to think of it in terms of taxing the rich and giving it to the poor, and that’s certainly a lot of what Socialism entails but not Mississippi’s version. The Magnolia State is now re-distributing wealth from the pockets of the taxpayers to the wallets of large multi-billion dollar corporations.

As to the package in question, the legislature voted, with just six dissenting votes in both chambers, to award hundreds of millions of dollars in subsidies to build a shipyard in Gulfport and for Continental Tire to construct a plant in Hinds County, the latter being a 145-year-old company with more than $42.5 billion in sales per year and 208,000 employees that will now be receiving a huge “investment” from the taxpayers of Mississippi, all paid for in full by the state’s credit card.

As the leader of the opposition, what little could be mustered, Senator McDaniel has taken a beating of sorts by the Establishment elite in the media, though not among the rank-and-file across the state, who are supporting his position by a 20-to-1 margin.

To the press he gave his reasoning for opposing the package:

Corporate welfare, as a general rule, should concern us as Mississippians. With so many small businesses in Mississippi suffering, why can we justify or how can we justify spending hundreds of millions of dollars for a Fortune 500 company, essentially, from Germany that has $42.5 billion in sales each year?

The best way to grow an economy is to make sure that corporations are unhindered by obstacles. That is, things like the franchise tax, things like corporate income tax, things like the inventory tax. Why don’t we remove those obstacles for all businesses? That way, our economy is hospitable to all businesses. What the studies have shown, these larger companies, and even smaller ones, gravitate toward states with no corporate income tax. Why not take that approach instead of singling out a company, spending hundreds of millions of dollars and hoping that everything works out in the future? They tell us that we don’t have enough money for state retirement. They tell us we don’t have enough money for teachers. They tell us we don’t have enough money for highways and bridges and our roads, but we had enough money to give hundreds of millions of dollars to a big company in Germany. That gave me some heartburn.

And it should have given many more in the legislature heartburn too, but sadly many of them fell right into line behind the Establishment leadership.

So, let’s look at some key facts on the economic development package and see what we got for our money:

First, Senator McDaniel had major concerns with the secrecy behind the deal. He didn’t receive a copy of the 200-page bill until the morning of the vote. It would have been reckless to support the bill without time to read and research it. In fact, the whole deal from birth to final passage took all of five hours.

Second, not only did the numbers not seem fair to the taxpayers, the corporate welfare aspect of the legislation caused great concern. Instead of handouts to billion dollar corporations, Mississippi should assist its small business owners by creating a free and fair environment – Adam Smith’s free market – which allows for economic growth. As McDaniel said, eliminating the inventory tax, franchise tax and corporate income tax would be a good start.

Third, the clawback provisions, which are the built-in mechanisms that could allow the state to re-coup its money if the deal’s job-creation goals are not met, are not practical, and perhaps even unworkable.

Fourth, Mississippi’s bond indebtedness – that is, our debt – presently exceeds $4 billion. The state has increased that debt by $1.5 billion since Haley Barbour became Governor in 2004. That’s how much the state currently owes, and it’s quickly worsening.

But how much is it really? Well, just servicing the state’s debt costs the taxpayers more than $450,000,000 each year – more than enough to fully fund education (x2), or stabilize PERS, or maintain our roads and bridges, which we currently have a gasoline tax for.

In response to the vote, Mississippi State Director for the Americans for Prosperity Foundation, Russ Latino, shared the following facts:

1. The state is authorizing $243 million in bonds for a tire manufacturer to be located near Clinton. Hinds County is authorizing another $20 million in bonds. In addition to the $263 million in bonds, this company will be virtually tax exempt (not just property and income taxes). Senator Hob Bryan seemed to have some numbers to suggest that the total value to this company is half a BILLION DOLLARS.

2. This tire company, in turn, must hire at least 500 people by 2020 and is supposed to hire another 2000 by 2028.

3. If the company does not live up to the hiring goals, the state MAY (not shall) recoup all or a “partial” amount of the money disbursed by virtue of a guarantee from the parent company. The state may also retake the 5 million square foot facility.

4. $11 million in bonds are being given to a Coast company, presumably to allow us to hit a HUD requirement stemming from Katrina money. This at least appears to be for infrastructure. Why these two projects were combined is beyond me.

5. The State’s revenue projections for these projects is based on voodoo economics. Basically, for their numbers to work you have to assume that all of the people who will be hired by these companies are presently unemployed Mississippians. The State also could not answer the question of how much revenue would be lost by giving all these special tax breaks or whether other projects had lived up to their initial projections.

6. With the exception of the chairmen who had to present the 200-page bill, no one in the chambers had received a copy until this morning. In the case of Chairman Fillingane, he indicated he’d received it 3 days ago.

So what’s the difference between this terrible deal and anything the Democrats do? It was cloaked in secrecy (like Obamacare), unveiled with hardly enough time to read it, much less study it to any degree, and it awarded millions to huge corporations. We expect such from the liberals in government, not from so-called conservatives.

And these deals never, ever pan out. Writes Russ Latino, “In Mississippi alone, there have been costly failures (Beef Plant, $55 million; Kior, $75 million; Twin Creeks, $26 million), projects that have not come close to satisfying job projections (Stion, the port expansion) and companies that have left after incentives have run (Oreck). The current crop of projects may not bear the same risks, but they are not risk free. On a practical level, it would seem no one is really asking the question ‘how much is too much for a taxpayer sponsored job?’”

As Emmerich pointed out, even if the job projections did manage to pan out, which they almost never do, it would add up to $300,000 in taxpayer subsidies per job! Twenty-five years ago, he writes, “Mississippi’s unemployment rate was consistently two percentage points better than the national average” but now “it’s two percentage points worse. So after two decades of company subsidies, Mississippi has increased its unemployment by four percentage points. That’s 52,000 lost jobs – at least five times as many jobs lost than jobs gained by all these subsidies.”

Senator McDaniel once again showed that he will stand on the principles of conservatism, the very principles that have proven to work time and again, and will stand no matter the issue or the pie-in-the-sky promises behind it.

To those who say Senator McDaniel is anti-business in his vote, consider that he has been a BIPEC Business Champion for 8 Consecutive Years, has a perfect 100% score with the NFIB, and has authored and co-authored several pro-business bills, including inventory tax reduction and franchise tax elimination.

And at the end of the day Senator McDaniel will be proven right when this aid package, along with all the others, never achieves the great assurances we have been given by politicians who know nothing of job creation or free market economics.

Hopefully one day soon the Republican Party in Mississippi, and in Washington, will return to a party of free markets and capitalism, of the ideas of Adam Smith, and not of Karl Marx. Only then will we finally achieve true economic growth and prosperity for all our people, just as we did in the by-gone days of Harding and Coolidge. Or, if not, we run the risk of Socialism’s end game, which is, in the words of Margaret Thatcher, running out of our money.