What do Taylor Swift, county fairs and taxpayer handouts to Hollywood all have in common?
They all ostensibly boost the economy, magically multiplying every dollar spent. It’s a common claim made about the smallest local festivals and the biggest public events and government spending plans. Yet, it’s rarely true. The public is being fooled by the voodoo science of “economic multipliers.”
This trickery takes many forms. Some are harmless, like the constant assertions that Taylor Swift’s current world tour brings an economic boom everywhere she goes − apparently $1,300 or more in local spending for every $100 spent on tickets. It’s a simplistic claim that ignores how people may have otherwise spent their money on a thousand other wants and needs.
The rosy numbers are essentially a cost-benefit analysis that looks only at the benefits, which is an obviously flawed approach. Similar problems generally exist when people tout the benefits of things like youth soccer tournaments, golf invitationals and state and county fairs. Those are all important and lovely things, no doubt, but usually not the economic titans they’re held up to be.
Thankfully, no one is really hurt when the news media touts misleading studies about Taylor Swift concerts and tractor pulls at the state fair. But people are most certainly hurt when “economic multipliers” are used to justify wasteful taxpayer subsidies − a phenomenon that happens almost daily.
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Special interests specialize in concocting studies that show they’ll do great things if only the taxpayer funds them. For instance, Hollywood executives desperately want taxpayers to pay for film production, so they claim they’ll return $8.40 to the economy for every dollar they get from taxpayers. States have spent at least $25 billion on film subsidies, but the money is just funding different things, not creating new things. And unlike Taylor Swift concerts, it’s at taxpayers’ expense.
Plenty of self-serving interest groups have gotten in on the economic multiplier game. The American Public Transportation Association proclaims that every taxpayer dollar spent on transit generates $5 for the economy. Transit advocates in Cleveland boast even more gains, claiming a dollar in rapid transit there generates $114 in economic activity.
The Great Lakes Coalition wants Congress to spend more money on the Great Lakes, and proponents say it will provide $3.35 in economic activity for each dollar it gets.
And green energy lobbyists claim a return of $1.42 in economic activity for their subsidies.
Yet, when taxpayers fund green energy projects, they’re merely taking money that would have been spent elsewhere and giving it to a politically powerful lobby − one that’s already received hundreds of billions of taxpayer dollars, with more on the way.
It’s obvious why these flawed assertions abound. They make taxpayer funding seem like an easy choice, as if only idiots could oppose such clear economic benefits. But reporters should ask hard questions about the motivation behind them.
Interest groups want to make it seem like they’re the best recipient of precious taxpayer resources. And elected officials are happy to have analyses that ignore the costs but tout the benefits.
Economic multipliers are typically used to multiply handouts that should never be approved.
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Americans need to see through this charade. They should demand better from economists and researchers, question news stories that tout a project’s far-reaching economic benefits and look twice at politicians who claim transformative benefits if the taxpayer subsidizes some favored project.
It’s one thing to say that Taylor Swift is an economic force of nature. It’s another thing entirely to throw billions of dollars in public money at anyone and everyone who claims their idea is the best thing since sliced bread.
Jarrett Skorup is vice president of marketing and communications and James Hohman is director of fiscal policy at theMackinac Center for Public Policy.
