It’s block grant time in Indiana. Representatives at the state level are encouraging localities to get “their fare share” and apply for funds from the federal government.
The Indiana Office of Community and Rural Affairs (IOCRA) finds federal funds to “help rural communities improve their quality of of life and ensure the health and safety of their citizens” through the use of block grants. Apparently rural communities are not capable of improving their own lives.
There are six categories of grants that rural communities can apply for assistance to help with: Blight Clearance Program, Planning Grants, Public Facilities Program, Main Street Revitalization Program, Stormwater Improvement Programs and Wastewater Drinking Water.
In 2017, $37 million in grants were given to communities through IOCRA. As Lt. Governor Suzanne Crouch (R – Evansville) stated, “We must continue to provide support for our rural communities if we want to keep Indiana’s economy thriving…..and encourage more growth opportunities.”
Voluntary Exchange Keeps Economies Thriving
Does “supporting our rural communities” help “keep Indiana’s economy thriving”? No. What keeps Indiana’s economy thriving? Individuals working each day to produce goods and services and exchanging what they produce with those who produce something different. The free market keeps economies thriving, not government interference.
Economies grow, regardless of physical location – rural or urban – as individuals meet the needs of others. I don’t know much about pigs, but I do know about finance. The market allows one individual’s specialty to meet the needs of others. Ultimately, the pig farmer exchanged his product for mine. I eat bacon and he has a loan to produce pigs.
Block grants do not meet a logical economic standard
I have a proposition for you. Give me a dollar and I will give you back $0.85, at most. Would you do it? Before the federal government gives block grants to the state, it must first take the funds from the citizens of that state and other states. Before the funds return to the state, the federal government pays itself (politicians, administrators) for their labor. They don’t work for free after all. At a minimum, $0.15 of every dollar goes to pay for the federal administration.
Secondly, there is not a $1.00 to $0.85 correspondence between money taken via taxation and returned through block grants. Not only is it possible that some states get less than $.85 for every dollar Washington takes, but it actually happens. Likewise, some states get more than $0.85 for every dollar sent. Some states are more equal than others. If you live in New Mexico, you love it. Minnesotans, not so much.
How is it possible for local economies to experience “more growth opportunities” when the federal block grant program reduces the wealth of the community thereby reducing opportunities? They don’t. Reality is that block grants only work for the select few who receive more in grants than tax dollars taken.
The illogic of intervention
The justification for economic illogical is the grants go to programs necessary for economic growth that the private market will not fund. Main Street Revitalization Program demonstrates the folly.
Main Street dies because the goods and services offered by its businesses are not what the consumer wants. Main Street was replaced by a new paradigm and that paradigm will be replaced by the next wave of entrepreneurship that meets the consumers needs.
In 20 years, will there be block grants for Big Box Retailer Revitalization or Strip Center Revitalization as they are being replaced by a newer wave of entrepreneurship and consumerism?
Nonetheless, politicians and individuals are ready to profit from illogic continue to promote a morally superior idea of the 1950’s Main Street. “1950’s Soda Shop good, WalMart bad”. In the future it will change, “WalMart good, Amazon bad”. Main Street Revitalization will happen when an entrepreneur senses any opportunity and takes a risk.
Politicians profit by convincing the electorate that they have done the community good by securing the grants thus “jump starting business” activity. Individual businesses profit by securing funding for a “road to nowhere” that would be a non-starter in the free market. Somewhere, somebody else is paying for the risk taken and being deprived of the opportunity to use their wealth in a way that meets their individual needs.
Economic Growth: Organic of Manufactured
Organic growth is the product of the free market. Individuals pursuing their ends by exchange. Acquiring what they value more by giving up what they value less under the auspices of government that protects the property they use for exchange. The simplicity is lost in the age when “experts” know best.
All the economic theory and it’s associated mathematical equations and use of statistics will never manufacture economic growth and wealth as efficiently and equitably as the “invisible hand” of the market. The problem is the “experts” who “know how” to live your life better than you do think they can. And we let them.