To Grant or Not to Grant?

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Dr. Malcolm Cross

According to the agenda for the Stephenville City Council meeting on Tuesday, January 3, one of the items is a vote on whether to give an “economic development grant” of $6,100 to a local business to help it buy equipment.  Under the law which created the Stephenville Economic Development Authority, businesses are well within their rights to ask for aid, and the city is well within its authority to give it.   But that doesn’t mean giving aid, whether in the form of grants, or tax breaks, or some other form, is necessarily good public policy.

When the government gives aid to local businesses, it’s trying to pick economic winners and losers, and help the former and shun the latter.  But governments are ill-equipped to figure out which businesses can “win,” i. e., thrive and prosper, and which will lose, i. e., fail and go under.  After all, the city decided to back, with tax breaks, the prospective restaurant to be put in the Fiddle Creek facility.  What happened there?

Besides, even if the government could pick winners and losers, why should it?  It’s easy to see why the government should not grant financial aid to losers:  Doing so is simply throwing the taxpayers’ dollars away.  But why should it help winners?  If a business is likely to prosper, it is, by definition, an attractive beneficiary for those in the private sector who specialize in picking winners in which to invest.  It doesn’t need government money or any aid beyond the services and protections the government should be providing every person and business within its jurisdiction.  The government should, in its expenditures, emphasize public safety and infrastructure.  Additional aid in whatever form to businesses in whatever condition simply diverts needed funds away from the financing and performance of government’s core functions.

Besides, to give aid to some businesses and not to their competitors smacks of favoritism.  Government should impartially develop rules for doing business which encourage and promote free market competition among new and existing businesses, and enforce those rules to promote fairness for all, favoritism for none.  It should, in other words, act as a baseball umpire or football referee.  For the government to give tax breaks or financial grants to some businesses and not their competitors is like arbitrarily granting more points to the favored teams in athletic competitions, while imposing more penalties on the others.

How the city council responds to the proposed economic development grant request this Tuesday remains to be seen.  As noted above, the business in question has the right to ask for the money, and the city has the authority to give it.  But Stephenville’s economic development would be greatly enhanced if the city council worked to  keep the services excellent and taxes rational (high enough to finance services, not so high as to discourage private business), make sure the rules for free and fair competition were simple and fairly enforced, and otherwise avoid substituting its judgment for the market’s when it comes to picking winners and losers.

Of course, whether the business in question gets the money it’s requesting, one cannot help but wish it, its competitors, and all businesses and residents a happy and prosperous New Year.

Malcolm L. Cross has lived in Stephenville and taught politics and government at Tarleton since 1987. His political and civic activities include service on the Stephenville City Council (2000-2014) and on the Erath County Republican Executive Committee (1990 to the present).  He was Mayor Pro Tem of Stephenville from 2008 to 2014.  He is a member of St. Luke’s Episcopal Church and the Stephenville Rotary Club, and does volunteer work for the Boy Scouts of America. Views expressed in this column are his and do not reflect those of The Flash as a whole.

5 Comments

  1. There are very clear factors that differentiate a Grant and a Gift. It is important to be able to recognize the difference so that the grant/gift is set-up appropriately. Grants are set-up by Sponsored Programs Accounting and are assigned grant account numbers. Gifts are set-up by the Budget Office and are assigned Department ID accounts.

  2. Let’s meet in Granbury or Weatherford or Ft. Worth to discuss the difference between Grants and Gifts. We will be sure to see plenty of familiar faces from Stephenville spending their money in those places.

  3. Wondering if the council looks at companies books just to see if a grant is needed, and to determine if company is profitable and here for the long run; also wondering if council establishes accountability and has timely audits, and if there are tight controls on how grant can be spent;

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