Short-sighted politicians or visionaries

The Duluth News Tribune editorial board asked for questions to ask candidates. I was fortunate to have two of mine be selected. For city councilors it was, "Is it more important to attract businesses or people to Duluth?" For school board members it was, "Is it more important to have students pass reading tests or read and discuss?

I didn't see all the responses because I didn't read much about candidates whom I could not vote for. What I did see is competing school board candidates answer, "Read and discuss." Hurray! Long term thinking. I was really disappointed to see competing council candidates answer "Business". How short sighted?

Don't they remember all the fiascos of businesses that were attracted with big fanfare and they were going to provide jobs? Far too many of these businesses never provided all they promised, and too many left town or folded.

The "correct" answer is people because people create businesses but businesses don't create people.

I saw some vindication of this in "That used to be us" by Thomas Friedman and Michael Mandelbaum.

Attracting a big plant is harder because there are fewer and fewer because of robotics. "What a town needs to thrive today is a hundred people starting companies that employ twenty-five people each, and twenty people starting companies that employ fifty each, and five people starting companies that employ three hundred people each."

Taking a different tack, how are you even going to attract businesses or people to Minnesota when many people don't want to move here because they think it is too cold? On the other hand, many people in Minnesota don't want to live anywhere else.

Many people forget that Minnesota once was a hot bed of creativity and still has many large corporations that are designing and manufacturing a wide range of innovative products. But given the political dominance of "no new taxes" and "cut spending" people, we have cut way back on our investment in creating and educating people who will carry on this tradition.

And if Minnesota regains its image as an innovative place to be, it will attract both people and businesses. The computer business in Minnesota and canoeing in the Boundary Waters attracted me forty-eight years ago.

The fallacy of ranking states by "tax burden"

It is quite the fashion to rank states by "tax burden" or how "business-friendly" they are. But are these the only criteria for determining where to live or headquarter a business?

CNN published several lists of the Fortune 500, and with a bit of wandering I found the number of Fortune 500 headquartered in each state. I used the "Pick a state" section of "Fortune 500 2011: States: California Companies".

I found tax rankings at "The Tax Foundation - Facts and Figures Handbook: How Does Your State Compare?".

I put this data in a spreadsheet and tried to figure out a correlation. I found this difficult because there is such a wide discrepancy between corporate headquarters and "low tax" states. For example, the Tax Foundation ranks New York third in "tax burden" but it has the headquarters of 57 of the Fortune 500 companies, and Texas is ranked 32nd with 51 companies. The external factors could be that New York is the "financial capital" of the U.S. and that Texas has the most oil and related companies.

I finally sorted them by "tax burden" and then summed the number of Fortune 500 companies per state for groups of 10. Starting with the "worst ten tax states", the totals were 208, 79, 96, 93, and 20.

Other external factors could include that Arkansas has four Fortune 500 companies because Sam Walton lived in Arkansas and the other three companies have a lot of business with Wal-Mart. I don't know. Or what influence do physical geography, economic geography (like rural vs. urban), social environment (cosmopolitan vs. distrust of "outsiders"), and historical factors have. It would take a few volumes to figure all of this out.

Oh, yes, how about a high "tax burden" making a state a better place to live - parks, schools, excellent infra-structure, transparent government, and on and on?

But the "bottom line" is that "tax burden" is only one factor of many in determining the success of businesses and the quality of life in any give state.

Business-friendly? Friendly to which businesses?

One of the current political buzzwords is "business-friendly" or more likely "business-unfriendly".  "Business friendly" generally means minimum or no interference with businesses or giving of breaks, tax or otherwise, to businesses.

Although some consider "business-friendly" to mean "people-unfriendly", one "business-friendly" act for one business can be "business-unfriendly" to another business.

I read a case of this in today's Star Tribune, "TCF gains in fight over debit-card fee limits", 2011-01-21.  TCF and other banks are complaining that new Federal Reserve rules on exchange-fee limits will hamper their profits.

However, other businesses complain that the exchange fees cut into their profits.  And of course, the exchange fees may cut into people's pockets with higher prices.

It wouldn't surprise me that many of the proponents of higher fees see no conflict with their call for lower taxes.  It's all right for businesses to raise prices when their costs go up but not all right for government to raise taxes when its costs go up.

Another example of one business' gain being another business' loss is fuel costs.  Maybe the producers will have more profits, but the truckers and the airlines, will have higher costs.  The fuel users will do their best to raise their prices, but another fuel user, the governments that clear the snow will be constrained.

Maybe we should have a mantra to match "No new taxes" with a people-friendly "No new prices".

The same issue of the Star Tribune reports that the newly elected governor of Wisconsin want to increase the setback for wind-farms, "Wind showdown".  On first glance, this would seem a business-unfriendly move.  But I suspect it's only towards a new business many Republicans don't like - alternative energy.

Were these politicians opposing a high-voltage power line when many Wisconsin residents were fighting against it?  The line went across, not near, their property, and they were forced to sell the right-away at a cost determined by others.  Doesn't sound very free market to me.

I wonder if the Wisconsin Republicans will bend to the popular will if there is land-owner opposition to a new nuclear plant.