Wednesday, November 20, 2013

Senator Sherrod Brown and wealth destruction

In a recent email I received from Sen. Brown (OH) he talks about wanting to help Ohio manufactures out innovate the rest of the world. His plan for doing this is the typical liberal plan of throwing federal dollars at manufacturing firms and trade organizations.

One such organization, the National Additive Manufacturing Innovation Institute (NAMII) recently opened in Youngstown, OH, a city that has been hit hard by the loss of manufacturing jobs. According to Brown,

"The institute is supported by $30 million of federal funding and matched by $40 million of private funds – and it’s making Youngstown a world leader in 3-D printing manufacturing technology."

 So essentially taxpayers from around the country are contributing their dollars in order to make Youngstown a manufacturing hub again. Do the taxpayers in North Dakota, Massachusetts, or Arizona actually care whether Youngstown is a manufacturing hub again? Probably not.

Every community in every region has wants that could be satisfied with the dollars going to Youngstown, OH. But federal politicians think that it is their job to pick which regions should succeed and what those regions should do. Sen. Brown and others like him think that since Youngstown was a manufacturing town it should stay a manufacturing town, regardless of how much money it takes and how many resources are wasted.

Politicians like Sen. Brown who try to pick winners and losers distort real prices and the disrupt the feedback loops that allow resources to be allocated to their highest valued use. Taking dollars from one region of the country and giving it to another does not create real wealth. In fact, it decreases real wealth because it wastes resources subsidizing industries that can't survive on their own. If 3-D printing manufacturing in Youngstown was really a profitable business opportunity it would be funded by private entrepreneurs who want to make money. When federal tax dollars are used for things like the NAMII it means that money was taken from profitable, value creating business that pay the taxes and given to unprofitable, value destroying business that likely squander the money.

I would like to see Ohio become a manufacturing hub again, but only if it is because the workers, capital, and firms of Ohio can create goods that people are willing to pay for without government help. Sen. Brown's plan of throwing federal money at the problem is a bad plan that destroys wealth. Unfortunately the simple minds of politicians often propose bad plans.

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