From the 26 February 2007 Greater Niagara Newspapers

BUY AMERICAN, SUPPORT OUR ECONOMY

By Bob Confer, www.BobConfer.net

It has been discussed at length in this column before that the burgeoning global economy is our own doing as a cumulative American populace thanks to our roles as consumers and recipients of government services. Low-cost overseas production and thusly low-cost consumer goods came about due to our demand for items at prices and varieties that were not possible within America’s borders due to the cost of business created by high taxes and restrictive regulations. Only in the Chinas and Indias of the world could our insatiable materialism be satisfied at prices we are willing to pay.

From this transfer of production the global economy has become at once a Godsend and a death knell for our national economy. It allows people from all class levels to purchase consumer goods and durables that they were unable to purchase before, assuring that low-income and lower-middle-class people can appreciate what was once a comfortable way of life only afforded by middle-and-upper income people. But, for all this good there comes with it an undesirable side effect. The United States are gradually transforming into what is predominantly a service economy, taking away the incredible economic benefit that comes with a powerful manufacturing sector.

Service economies have limited impact because they either take what is made elsewhere and sell it or they use humanity to appease humanity. Therefore, the value-added effect is slim because there is minimal investment of resources, technology, and personnel to “create” what is produced or offered. Mathematically stated, for every $1 of sales in the service industry intermediate economic impact is only another 71 cents.         

Unlike a service economy, a manufacturing economy creates true wealth for a nation. For every $1 of manufactured goods sold to a consumer another $1.43 is created in sectors outside of manufacturing. This is because manufacturing creates or empowers support functions. It needs the transportation sector and its people to get goods from point A to point B. It needs the service sector to market and sell its products. And, it needs the education and health care sectors to provide for the people employed by manufacturing and the other sectors it empowers.  

The fact that manufacturing is over twice as financially-important as servicing is only part of the story. The human factor – employment - is the other part of the equation. On average, those employed in the manufacturing sector receive wages and benefits that are 17% higher than the compensation packages found in all other sectors combined. And, these well-compensated jobs - in a fashion similar to the economic driver - create employment in other sectors. According to federal statistics, just a handful of years ago manufacturing employed 15 million Americans and required another 8 million workers in other sectors as a means of support.

You may be wondering how we prevent further losses in manufacturing and keep the economy strong with American made goods. Since the government has done little to rectify the impediments that affect American manufacturing we cannot leave it to the powers-that-be to address the issue. It requires instead a veritable grassroots effort by each and every one of us as consumers to act in a patriotic fashion.

Typically you will see grocery shoppers smartly traversing the aisles investigating cartons and labels to see what a food item is made of and how much the product might yield. Rarely do you see that same sort of inquisitiveness in department stores. Those shoppers might buy only on the factors of impulse, name brand, and price, satisfied only with the visual presentation of the products and the brief product description plastered on the face of the carton. Rarely do they turn the carton over to see if the item was manufactured here in America or someplace on the other side of the world. That mindset needs to be eliminated.

Such label shopping will not be in vain, for, yes, goods are still manufactured in the United States and, believe it or not, at ever-growing levels. A quick search at a directory like www.madeinusa.com will show countless thousands of American manufactures and products responsible for this growth. While we may be losing in what could be considered manufactured “commodities” we are gaining in durable goods, vehicles, and more. Buying patriotically does not make you a bad shopper either, for despite global market trends many American products remain very competitive in pricing and are far superior in quality.

We as nation of consumers need to buy smartly. We need to buy American. Doing so not only satisfies our buying urge but it also keeps real, honest-to-goodness Americans (your friends, families, and neighbors) employed and our economy strong. We all win with patriotic buying.

CORN IS GOLDEN
By Bob Confer, www.BobConfer.net

The problem with single-issue special interest groups influencing what happens in government is the fact that such groups have no understanding of – and often no care for - the ramifications of their desires upon the rest of the world. They fail to see that in the realm of politics every action sets off a domino effect that deeply influences national culture, economics, and well-being. This chain of events is perfectly exemplified by what is occurring because of the emphasis on ethanol usage. 

For years the environmental crowd have demanded a change in our ways in regards to the consumption of our natural resources. They are well-intentioned in this desire, for not only have we been taking from Mother Nature but we’ve also been killing her through pollution. But, as much as we do need to change the energy sources that we use it’s an almost impossible endeavor due to the stubbornness of American consumers. We are a nation addicted to oil.

This addiction is perpetuated by two other special interest groups that are just as powerful as the environmentalists: Big Oil and the American automotive industry. The former exists only because of our addiction and the latter is only equipped to provide products that consume what the former is selling.

Saddled with such a drastic impasse of philosophies and capabilities, the politicians who felt obligated to comfort all the affected parties decided to balance all of their needs. Rather than fully appeasing only one group, all were appeased to an extent, meaning that in this case the capitalists and the environmentalists could claim some sort of victory. This balance was accomplished through legislation in various states as well as at the federal level (the EPA’s proposed Renewable Fuel Standards) which have dictated that gasoline shall contain a specific volume by percentage of ethanol.

Unfortunately, by looking at the needs of only these groups, the government failed to look beyond the issue, ignoring the realm of economics and the needs of the most important special interest group: Our citizens. In the whole scheme of things, using ethanol rather than focusing on a true long-term victory like hydrogen fuel cells will have a negative impact on our society, thanks to, of all things, the almighty corn.

Ethanol is derived from the distillation of corn. A bushel of corn produces an average of 2.7 gallons of ethanol. In 2006 the annual output of American ethanol plants reached nearly 5 billion gallons, three times what it was five years earlier. It is estimated by some economists that the ethanol demand created by legislation and new vehicles will cause American production to exceed 10 billion gallons per year by 2010.

With this unprecedented demand for corn – and corn’s sudden transformation from only a foodstuff to a resource - comes two problems. One is high price while the other is tight supply.

The high price will have the greatest impact on our well-being. In recent years corn sold in the mid-$2.00 range per bushel. Currently, corn’s value is over $4 per bushel and could reach $5 by this time next year. Pricy it is, but it so much more than just those few kernels on your plate. Corn is in everything…the sugary sweetener corn syrup is a found in sodas, beverages, cereals, candies, condiments and more. A tour of a grocery store will find you and your pocketbook unable to escape its grasp.

Realize, as well, that meat prices are destined to go through the roof. Corn is the most important and expensive feedstock for beef cattle, pigs, and chickens and in many instances it accounts for 50% of a meat farm’s operational costs. So, as the value of corn continues to skyrocket, so will the cost of your meats (and milks).     

The other problem - tight availability of corn - is readily met with increased output. 10 million more acres of arable land are going to corn production this year. But, as that occurs (and more acres follow), fields that once supported soybeans and the like won’t, and their prices will rise. And, with a lack of non-corn land, more of our fruits and vegetables will be grown overseas. The more we rely on foreign nations to produce our food the greater of a danger we are putting ourselves in.        

Basically, corn is more than just golden in color. It is becoming golden in value as well. Ethanol is taking it to unfathomable values and negatively affecting the world around us. Even though ethanol as a renewable resource looks like a winner at first glance, it is not. It is feared that it will do more harm than good in the long run and it probably will, thanks to the self-important efforts of a few special interest groups.  

This is the final piece in a four part series about Industrial Development Agencies

IMPROVING IDAs THROUGH LEGISLATION
By Bob Confer, www.BobConfer.net

As was addressed over the past few weeks in this column, it is apparent that most Industrial Development Agencies throughout New York - and similarly devised entities throughout the United States – have serious flaws. Despite all the good that IDAs do, such as initiation of growth in the private sector, they offer a smorgasbord of problems. These problems include, but are not limited to, job theft (employment moving between regions), a security blanket effect for politicians (they cover-up a region’s political-economic ills), empowerment of capitalism’s dark side (broken promises by new/growing firms) and, worse of all, undertaxation (taking the act of tax abating to huge levels).

In the bigger picture of constitutionality the federal government could save the day and squash IDAs and other economic development functions throughout the nation. When our government was created one of its four sole responsibilities consisted of the regulation of interstate trade. Therefore, the federal government could suspend all such functions based upon inequality of trade whereby one state steals from another by creating unfair advantages. Though realistic in intent, it is unrealistic in application. The federal government has become so much larger than intended that interstate trade is the least of its worries and is no longer an item of focus. And, were such legislation to even be addressed by the congressional mainstream, a great many of the politicians would lose a lot of “friends” back home.

Looking at this from another point of view, one cannot suspend IDAs because under certain circumstances they may be a necessary evil. Most states don’t have localized IDAs and lean heavily on their state economic development agencies in regards to tax giveaways. New York is not like them and far and away leads all other states with 115 IDAs. Each one in and of itself may be necessary to keep money flowing and people working in this state, because, right off the bat, businesses that compete across state and national borders suffer a 2% to 4% revenue loss (depending on industry) by operating in over-taxed, over-regulated NY. So, theoretically, tax abatements here may be a means to equalize the playing field for firms whose primary sales/services are not encapsulated by NY’s borders.

All this being said, we can’t eliminate IDAs, but we can make them better. When one looks at the issue in earnest, the root cause of all IDA ills is a lack of accountability. Although IDAs are directly involved in the political spectrum by deciding who pays what taxes and who doesn’t, they are not directly accountable to the politicos and, ultimately, the citizens. But, this disconnect can be changed and easily so. All it takes is a little bit of solid legislation.

Various bills have been floating around in Albany in recent years calling for the reform and betterment of IDAs. Among them was a robust 2006 bill introduced by Senator George Maziarz and others. The bill was a behemoth by Albany’s standards, many pages in length, because it essentially replaced or reinforced key components of the existing IDA law. The bill started right at the nuts and bolts, demanding that IDAs conduct and release very thorough reports that would detail the impact of every desired abatement or subsidy on the community. From there, the bill would have empowered the community at large by giving local taxing jurisdictions veto power over proposed tax breaks. It also called for “clawbacks”, which are tax/assistance repayments from businesses that fail to live up to their promises. In all of the above, the taxpayers – citizens and other businesses alike – were given well-deserved preference over the single business looking for a break.

Unfortunately, this bill was not given the time of day by the majority of the legislature in the last session. Maziarz and his peers are reintroducing it in 2007 and this year, with IDAs suddenly the topic du jour, it may receive the analysis and support it deserves.

In closing to this series, the discussion about IDAs should not end here. Even with a month of my analysis coupled with many months of analysis by people from all walks of life in regards to the current IDA controversy in Niagara County there are no definitive answers to any countless number of questions.

Are IDAs good? Are IDAs bad? Do they promote growth? Do they inhibit growth? The answer to all of those questions is “yes”. Under such a strange circumstance, one cannot help but be mystified by IDAs and how they affect every one of us.

This is Part Three of a four part series about Industrial Development Agencies

NUMBERS: THE GREAT UNKNOWN OF IDAs
By Bob Confer, www.BobConfer.net

As is the case with any hot-button issue, when discussing the impact of industrial development agencies and other economic development functions upon the economy the discussion needs to be extended beyond debates of the philosophical. The issue also needs to be looked from a data-driven standpoint, looking at various numbers from both sides of the argument, such as jobs created, dollars invested, and tax dollars negated.

It sounds like an incredibly easy request. But, in all actuality, it’s not.

Even though Albany is the epitome of Big Government and for nearly everything seems to conduct or demand incredible amounts of recordkeeping it is lacking in such vigor when it comes to IDAs. One would think there would be a state clearinghouse for IDA information, but none exists. Being that IDAs are quasi-governmental by design their relationship with Albany is not as cut and dry as that of tax-funded agencies that are completely accountable to the state legislature and, essentially, the voters. By law IDAs are designated as independent public benefit corporations (authorities per se) and this disconnects them from typical bureaucratic reporting structure.

Regardless, each and every IDA does maintain records that by law are accessible to everyone. Unfortunately, in the case of most of the state’s 115 IDAs data is only painfully accessible.

With many an IDA a concerned soul could simply request and be given a basic annual report. Annual reports are only an “okay” method to start researching IDAs as they tend to be lacking in substantive and objective information. They are more or less executive summaries, a few pages in length and just bare bones details of what happened at the IDA over the course of the year. Such reports can be misleading as they can be written with spin to appease the reader and make the IDA look good, much like the way many stockholders reports and project plans are conceived in the private sector.

If you want to dig deeper and get “factual” reports and numbers in your hands, there are two methods to pursue. If one has time to spare they can typically request from a specific IDA’s public records officer the chance to visit the IDA office and peruse their records in the confines of the IDA headquarters. This is time consuming and you have nothing at the end of the day other than your notes.

The standard practice that most of the concerned citizens and the like follow requires a Freedom of Information Law (FOIL) request, by which the person is able to receive and keep physical copies of any records that they’d like. Even though the information requested is public record by its truest definition, the FOIL must be submitted in writing and the receiver must pay a photocopying fee. It is “open government” but with an obstacle and a cost.

Comparing records across multiple IDAs one will find dissimilar methods of recordkeeping. Although they all follow standard accounting procedures when it comes to their financials, the meaty stuff like non-financial statistics that really matter to municipalities are difficult to comprehend. The Tompkins County IDA has a different method of tracking job gains and local taxation impact than does the Niagara County IDA than does the Town of Amherst IDA. Consistency is lacking across the board.

We the people are not alone in attempting to assail this mess. This elaborate puzzle of records proved to be just as confounding to Albany. Last year the State Comptroller’s Office conducted a study of a handful of IDAs and found many lost records, incomplete records, and just plain strange records, citing the Erie County IDA as a chronic abuser. Maybe that’s why they selected only six IDAs for their study…a full-blown study would be an impossible undertaking.