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By: Robert A. Lawson, Ph.D., posted October 27, 2005 by Buckeye Institute.

This November, Ohioans will be asked to vote on an amendment to our state constitution called “Jobs for Ohio.” Issue 1, as it is known, has three parts: $500 million in more money for the so-called “Third Frontier,” $1.35 billion for “public infrastructure,” and $150 million for private business site development. All of this is to be financed using bonds. Before saddling our state, and our grandchildren, with $2 billion of debt voters should know the facts that belie the rhetoric.

First, the advocates of Issue 1 claim that it will not raise taxes. This is disingenuous at best. Every single dollar of the $2 billion in bonds has to be paid back by taxpayers with interest totaling about $600 million. It is natural for the politicians to say vote for this and it won’t cost you anything, but we should know better. There is no such thing as a free lunch.

Second, the largest chunk of money is for “public infrastructure.” No doubt they emphasize this because they feel the public is more likely to support money for ‘roads and bridges.’ The problem is that we already have money in the pipeline from other bond initiatives for such items and there has been no demonstration that we need an infusion of new money.

Furthermore, voters should ask why the legislature would not allow them to vote on these three different bond issues separately, as supposed to be required by the state constitution. In the end though, these other two components of the amendment are ‘poison pills’ that make Issue 1 a bad idea no matter how much you might like to see more spending on roads and bridges. The state has no business spending taxpayer dollars to invest in private businesses. The idea that state development officials will do a better job of finding profitable investment opportunities than private investors is simply laughable.

Third, advocates say that thousands of jobs will be created. But the fact remains that there is simply no evidence that these sorts of corporate subsidies create net jobs. Taking money from taxpayers (thus destroying jobs) and giving it to favored businesses (thus creating jobs) doesn’t create jobs, it simply moves them around. But politicians know they can claim success whether the jobs are real or just the result of a sleight of hand illusion.

Fourth, in addition to the flawed economics of this plan there are serious political implications. Issue 1 allows for the state of Ohio to engage in joint ventures with private firms. This raises serious concerns about the opportunities for corruption, as the state will be directly investing funds in private companies. This makes Governor Taft’s Third Frontier the perfect breeding ground for the kind of corruption and scandals that are all too common in state and local government as it is.

Additionally, such investments by the state will have a corrupting influence on businesses as they will begin to look for investment opportunities that are not profitable perhaps but will get them funding from the state. Businesses should be focused on pleasing their customers and private investors, not on getting state funding.

Lastly, the Ohio Constitution recognizes many of these flaws and indeed several constitutional safeguards will have to be waived within Issue 1 to make it happen. Issue 1 allows for more debt issuance within a fiscal year than the Constitution permits. It permits the state to directly aid private entities including forming joint ventures, which the Constitution forbids. It also exempts the bond issue from a number of Constitutional requirements such as the requirement that taxes must be provided for to pay for the interest and final bond repayments.

Clearly the rhetoric does not live up to reality when it comes to the arguments behind Issue 1. Voters should know exactly what they are voting for when they pull the lever on Issue 1 come election day, and it is nothing more than industrial planning, corporate welfare and socialism dressed up as a jobs plan.

Robert A. Lawson, Ph.D. is Professor of Economics and George H. Moor Chair at Capital University in Columbus, Ohio and a Senior Fellow with The Buckeye Institute.