A vile economic lie exposed

Pennsylvania Auditor General Jack Wagner says the state's Opportunity Grant Program "is a valuable tool" to help the commonwealth "create and retain jobs in a hypercompetitive world economy."

With all due to respect to Mr. Wagner, if this is "value," I'm a liberal. And if this is sound economic policy, turkeys pull Santa's sleigh.

Mr. Wagner's words came in an eye-opening audit of a program administered by the state Department of Community and Economic Development (DCED). Among the simply shocking findings regarding a program long suspected of being largely a feel-good public-relations machine regularly used to bolster the political fortunes of those in power:

&#149 About 360 companies receiving public subsidies between 2000 and 2003 -- 60 percent of the recipients -- failed to produce the jobs that were promised.

&#149 An independent Associated Press audit looking at 2003-04 pegged the failure rate at 55 percent at a public cost of $44 million.

&#149 Between 2000 and 2005 in Allegheny County, 59 companies that received $18.5 million in grants created less than half of the 12,000 jobs that were projected to be created.

&#149 The much-touted Pittsburgh Digital Greenhouse was given public subsidies of $1.25 million with the promise of creating 1,500 jobs. The public got 305. The guy who was running the joint at the time was Dennis Yablonsky. Yes, that's the same Dennis Yablonsky who now heads the DCED. Is this a great state or what?

&#149 In one of the more egregious cases, $900,000 in taxpayer money was forked over to AcceLight Networks. The Bridgeville computer network company said it would create 900 jobs. It went belly up in 2002. Not only did it not create 900 jobs, 14 existing ones were lost.

But wait, this wonderful tale is not yet done: The public never got its money back.

&#149 Then there's Ebara Solar in Westmoreland County. It was handed $100,000 in public money in 2001. It promised to retain 77 jobs and create 43 more. It didn't. It closed in 2002. The DCED, ever on top of things, didn't know Ebara Solar closed until 2005.

&#149 Not only was the DCED nonfeasant in its oversight, it waived the return of nearly $50 million in public money between 2000 and 2005, a huge kitty of corporate wealthfare doled out beginning in 1996. And it was by design.

Yablonsky rationalizes the failure by saying some companies allowed to dip into the taxpayer swag create more jobs than promised. Yablonsky further states that the risk inherent with giving incentives to companies means that some will fail. Earth to Yablonsky: Taxpayers are not venture capitalists.

Yablonsky additionally says that companies bankrolled by the public beneficence since 2003 have created 98 percent of the promised jobs. Let's see the numbers, pal. Given DCED's track record, how can anybody believe that?

Simply put, it is not the government's role in a free-market economy to pick winners and losers. And from Wagner's audit and the AP analysis, it's pretty honkin' striking that 60 percent and 55 percent failure rates cannot be spun as a "success."

These are the kinds of "proactive efforts to revitalize Pennsylvania's economy" touted in Yablonsky's official state biography? Take a look at the state economic indicators and you'll weep -- then look for another state in which to invest your capital.

And what is the state doing lending its credit anyway? Article VIII, Section 8, of the Pennsylvania Constitution is clear:

The credit of the commonwealth shall not be pledged or loaned to any individual, company, corporation or association nor shall the commonwealth become a joint owner or stockholder in any company, corporation or association.

Now, all due kudos to Jack Wagner for finally exposing this jobs grants malarkey. But juxtaposing it with the praise he gives it is a nonsense indicating political fence-straddling. Wagner should be walking his audit and a copy of the state Constitution over to Attorney General Tom Corbett's office for an investigation, the convening of a grand jury and very public prosecution.

The state's Opportunity Grant Program is not a "valuable tool." The grant program is another in a long line of government-knows-best deadweights that drain private capital out of the economy, help bring to market companies that, sans sucking at the public teat, never should be and create a government middleman that, as per usual, is good only at laughably inefficient administration.

It's a failure. And it's why we have private venture capital firms.

"(T)he economic policy of interventionism, which is advertised by its advocates as a progressive socioeconomic policy, is based on a fallacy," reminded the late Austrian economist Ludwig von Mises nearly 70 years ago. "(I)t is not true that interventionism can lead to a lasting system of economic organization.

"The various measures, by which interventionism tries to direct business, cannot achieve the aims its honest advocates are seeking by their application. Interventionist measures lead to conditions which, from the standpoint of those who recommend them, are actually less desirable than those they are designed to alleviate."

Continued von Mises: "They create unemployment, depression, monopoly, distress. They may make a few people richer but they make all others poorer and less satisfied."

And most critically: "If governments do not give them up and return to the unhampered market economy, if they stubbornly persist in the attempt to compensate by further interventions for the shortcomings of earlier interventions, they will find eventually that they have adopted socialism."

DCED's Dennis Yablonsky vows to place caps on future state Opportunity Grants and to better monitor performance.

Why didn't he do so before?

Because his agency didn't get caught until now.

Yablonsky would do the Pennsylvania economy and taxpayers a bigger favor by putting a halt to this market-perverting charade and abolishing what, at its base, is a vile economic lie.