Soccer Dad

Robbing peter doesn't pay paul

I was kind of surprised by this (via memeorandum)

Q: Perhaps the most intriguing finding, at least for me, was the degree and consistency to which federal spending at the state level seemed to be connected with a decrease in corporate spending and employment. Did you suspect this was the case when you started the study?

A: We began by examining how the average firm in a chairman's state was impacted by his ascension. The idea was that this would provide a lower bound on the benefits from being politically connected. It was an enormous surprise, at least to us, to learn that the average firm in the chairman's state did not benefit at all from the increase in spending. Indeed, the firms significantly cut physical and R&D spending, reduce employment, and experience lower sales.

The results show up throughout the past 40 years, in large and small states, in large and small firms, and are most pronounced in geographically concentrated firms and within the industries that are the target of the spending.

In other words, robbing Peter to pay Paul (or, to be more precise, taxing Peter to provide pork for Paul) ends up not benefiting Peter.

Remember that the next time your senator or representative boasts about bringing a project to your state.

The Watcher's Council discusses this here.