Across America, states are taking federal dollars meant to support the recovery from the COVID pandemic and using them instead to fund massive economic development subsidy deals. In a column in The Hill today, CEA President John C. Mozena and Mercatus Center Senior Research Fellow Michael D. Farren had a simple message: “We hate to say it, but we told you so.”
Farren and Mozena first predicted in June of 2020 that a federal bailout of state budgets in the name of the then-new COVID pandemic would likely drive a harmful increase in corporate welfare handouts. In a Mercatus Center working paper, they warned this would be a likely outcome, unless Congress took significant steps to guard against it such as tying receipt of the money to states pausing or ending new targeted economic development subsidies.
Farren and Mozena revisited the topic in April 2021 after the passage of the American Recovery Plan Act, writing in RealClear Policy (among other places) about the potential for the Treasury Department to interpret the law in a way that could significantly limit states’ ability to use their sudden federal windfall to fund these kinds of corporate welfare handouts.
Unfortunately, there’s been no action by the federal government to this point to enforce the law’s language, and Farren and Mozena say the results have been as expected:
Since the passage of the American Rescue Plan (ARP), we’ve seen a surge in corporate handouts. The supersized deals that misuse taxpayer dollars are typically rushed through the approval process to limit transparency and prevent constructive discussion by wiser policymakers.