The Free Market or Central Planning–What’s next for Wyoming?

When politicians justify handing out public dollars for private benefit, they use the word investment to spin this spending into something more palatable to voters. However, state directed spending in the economy is nothing more than economic central planning in disguise. To stop the growth in central planning in Wyoming, we must bring the state's role back to that of an umpire, rather than a participant, in the economy.

The state does make real investments, those with measurable returns. That is the role of the Wyoming State Treasurer. According to the Treaasurer's 2015 annual report, the state now has an investment portfolio totaling $19.3 billion. As a result of an increase in savings and good investment returns, investment income is now the second largest source of revenue to the general fund. According to Treasurer Mark Gordon during a radio interview, the department generated $1 billion in revenue last year.

While government is able to successfully invest savings to generate income, it is less successful when it spends on what it deviously describes as economic development.

For example, the Wyoming government loans money from the Permanent Wyoming Mineral Trust Fund to businesses through a program called Public Purpose Investments (PPI). In a report published by the Legislative Service Office (LSO), a project with a "public purpose" is defined as one that would diversify the economy, create jobs, speed up construction, increase economic activity during slumps, generate tax dollars, and increase productivity. It has no return on investment requirement and its nebulousness made it impossible for the LSO to determine whether the people of Wyoming are better off with this program or not.

PPIs lost the state between $2 million and $19 million between 2006 and 2015, depending on how the funds would have been invested had they not been used to supported these politically motivated spending schemes.

In other words, politicians directed savings from the PWMTF, the legacy savings account set up to protect future generations when mineral wealth was gone forever, to money losing projects. This puts the future of our children and grandchildren at risk.

The underlying problem is that when politicians make spending decisions, they are making political, not economic decisions. When politicians divert money to politically motivated spending schemes, they reduce real investment earnings the state could have properly made. In these cases, resources flow to where they benefit politicians and bureaucrats, not where they benefit citizens and the economy.

Ethanol subsides are a good example of a politically motivated spending scheme that cost taxpayers in more way than one. In 1995, the Wyoming government created an ethanol credit to encourage ethanol production in the state to "create green jobs." That year, Renova Energy, an Idaho company, took an unused ethanol plant from Louisiana, rebuilt it in Torrington, Wyoming, and christened it Wyoming Ethanol. As the only ethanol producer in the state, it got the tax credit, which was originally capped at $2 million annually, but then increased to $4 million per year in 2003. Over the past 19 years, Wyoming Ethanol received $38.5 million in credits.

The ethanol tax credit came to an end in July 2015 and Renova has reportedly closed down, but its subsidies did have a longer term effect. According to a Wyoming Department of Transportation report published in January 2014, the $38.5 million handout to Wyoming Ethanol took $38.5 million in fuel tax revenue from the state highway fund and cities and counties. To generate more money for roads, the state passed a higher fuel tax.

As this example shows, political meddling in the economy makes us worse off, not better off. This means the state must remove itself from so-called investment in economic development because the state can't develop the economy. All it can do is get out of the way so entrepreneurs can invest in economically viable projects.

The role of government is to set the stage for competition in a free market and let resources flow to their best use.

What should government do to develop the economy? What economic development should mean is long term productivity gains, taxpaying, not tax consuming job creation and technological development. For that we need a pro-growth tax regime and a low level of regulation. This would level the playing field in business, attract investment, let resources flow to their best use and stop this waste of taxpayers' money.