Opinion

Dan Walters: California politicians, interests play ‘economic impact’ game

dwalters@sacbee.comDecember 29, 2013 

One of the games that politicians and interest groups play is called “economic impact.”

The sponsors of a particular project or program, particularly a scheme that involves public funds, pay some consulting firm to gin up a report purporting to prove that it will generate gobs of jobs and other economic benefits.

The consultants employ all sorts of arithmetic tricks to accomplish the predigested result, such as mysterious “multiplier effects” that take one dollar of “investment” (it’s never spending) and magically transform it into $10 worth of benefits.

One of the seamier devices that projects sponsors use has to do with the number of jobs that will result.

Most of us would assume that if 10 workers are hired to do the work, it generates 10 jobs. But the hype mongers count one worker for one year as one job, so if it lasts for 10 years, they claim it would create 100 jobs.

We got a dose of economic puffery recently when John A. Pérez, the speaker of the state Assembly, and Nancy Skinner, who chairs the Assembly’s budget committee, unveiled a “blueprint for a responsible budget” that includes a “jobs investment proposal” (once again, it’s “investment,” not “spending”).

Spending more state money on clean energy projects, parks and schools, creating a state-financed bank to loan money to local governments for public works and using anti-greenhouse gas “cap and trade” fees on business “to reinvest into our communities,” plus expanding various forms of welfare payments, they claimed, would be an economic boon.

How extracting money from California taxpayers and businesses and redirecting it to these other uses would be a net economic gain was not explained.

It was financial alchemy, one supposes.

We are seeing a lot of other “economic impact” hype these days from sponsors of public and semi-public projects, such as the north-south bullet train, a twin tunnel water project in the Sacramento-San Joaquin Delta, a football stadium in Los Angeles and new basketball arenas in Sacramento and San Francisco.

But then there’s reality.

A final report on the America’s Cup races in San Francisco reveals that they didn’t have quite the economic impact sponsors had touted.

For one thing, they cost taxpayers an estimated $5.5 million, in net terms, to underwrite the indulgences of wealthy boat owners and their highly paid crews, most of which were from other countries.

And the projected $902 million in private economic impact turned out to be perhaps half that, while private fundraising that was supposed to offset the cost missed its mark by 75 percent.

We should keep the America’s Cup and failing, red ink-saturated sports venue projects in Stockton and Fresno in mind when someone purports to prove that his or her scheme will be a big economic gainer.

Call Dan Walters, (916) 321-1195. Back columns, www.sacbee.com/walters. Follow him on Twitter @WaltersBee.

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