Public investment or corporate welfare? The search for consistency on the dole

Mike: Cynthia, you missed quite a week. The changing forest industries — with growth in Baileyville and Ashland with closings in Bucksport and Millinocket — has led to a discussion about the myriad of incentives used to attract and support businesses. What say you?

Cynthia: I say if “welfare reform” is on the agenda this election season, let’s talk about the many millions of public dollars that were recklessly thrown at Cate Street Capital to allegedly “save” a dying paper industry and jobs, but ended up in the pockets of foreign investors.

Mike: Well, I agree and disagree with you. I don’t believe forest products are a dying industry. Besides Ashland and Baileyville, we have Sappi in Westbrook, Huhtamaki in Waterville, and Vic Firth in Newport all doing well. Add that together with new opportunities in engineered wood and timber-derived products, and the future of forest products burns pretty brightly.

That said, I agree that corporate welfare needs reining in, but we need to be consistent. I don’t think Washington should have bailed out the banks nor GM and Chrysler. I also don’t think we should give politically connected industries special treatment, like wind’s special permitting rights or government-mandated, above-market prices. TIFs, tax credits, and taxpayer grants all potentially privatize profits and socialize losses.

If we are going to give these incentives, let’s have a coherent conversation on the wisdom of it and justify them.

Cynthia: And how about showing some personal responsibility! If a corporation like Cate Street is a “person” under the law with rights, why shouldn’t it be held accountable for accepting the public’s money in exchange for false and misleading promises about “creating jobs?”

Of course not all paper mills are obsolete, nor are all corporations bad, but let’s talk more about Cate Street Capital and the snake oil it sold to “businessman” Paul LePage. There are reports lately about the $15.9 million Mainers will pay in tax credits for the temporary re-opening of the now shuttered East Millinocket mill, but don’t forget — taxpayers also paid $17 million or so to acquire and close the Dolby Landfill used to store toxic waste from there, too.

What a deal. Mainers get an empty mill and a polluted landfill, while private foreign investors get richer off of our tax dollars.

Where’s the outrage from Republicans about these welfare cheats? Let’s be consistent, after all.

Mike: Hey, Gov. Baldacci let Brookfield skate on the landfill by not requiring any accessible financial commitment for its closure. And if they went ahead, filed for bankruptcy and dismantled the mill, the landfill was going to be the state’s problem anyway — they don’t pack up and move. Since we were going to be on the hook for Dolby regardless, it made sense to save the mills from dismantling in order to give the towns a fighting chance.

As for outrage, I think some is justified, but the shouts are overdone. This was never a great deal economically; if it was, government support would not have been necessary. But I do not recall other options coming forward; where were all of Eliot’s Chinese investors? The complaints about Cate Street stem from the outcome of this taxpayer funding, not the funding itself. If GNP were succeeding, we would hear calls for “strengthening” the tax credit program.

So, in order words, it comes down to politics. How do the politics of it all play out?

Cynthia: Pretty poorly for Paul LePage. Handing out millions in cash from the public till to something called “Enhanced Capital New Market Development Fund X LLC” while saddling taxpayers with a contaminated dump is not what I call a winning campaign “narrative.”

And if you are right, Mike, that the future of Maine’s forest products industry burns brightly (and I hope you are) then why should we pump our money into the coffers of any investor who has no stake in the future success of our state?

Why not explore the purchase of one of these mills by the people who actually work there? Men and women who support their families with mill jobs have the strongest incentive to succeed and in whom public investment makes a lot of sense. An employee stock ownership plan with help from the government could be the perfect “public private partnership” that reduces both corporate and individual welfare.

What say you about that? Of course, we would need a bold governor with experience dealing with mills, labor unions and government bureaucracy to lead such a deal…

Mike: You mean Gov. LePage, who met his wife when he was mill management and she was a union steward? But I thought you were just griping about politicians getting involved with private business deals? It must be okay if they campaign primarily on “working together.”

If the employees can put together an ESOP and buy the company to compete in the open market, then great; I hope they hit a home run. But the amount of investment needed to purchase and then modernize the plant to have a chance at success is reportedly massive, plus government involvement would create the perverse situation where one company’s tax dollars are used to subsidize its competitor.

And if you are right and this industry is dying, why should the taxpayers throw more money at a failing proposition? Or should we just have the taxpayers take it all and make a national park?

Cynthia: Oh, the irony of mentioning Gov. LePage in the context of mills, the national park proposal and welfare. On one hand, he had no problem using public money to grease the skids of the private Cate Street Capital deal that handsomely lined the pockets of its investors. On the other, LePage rejected a private gift of a pristine national park plus millions of dollars that would benefit the public and the economy immensely for generations.

The governor’s inconsistency is the only thing consistent about his approach to promoting the common welfare.

Mike: We will see what November brings. But “consistently inconsistent” could also be said about the Patriots; I’m not betting against them, forest products, or Paul LePage!