A conservative governor and a conservative legislature in a conservative state that ranks as one of the poorest in the nation are about to commit a big lump of taxpayer money to support the national military budget and fatten the profits of one the biggest, richest corporations in the world. Does that make sense? Does it pass the smell test?
Of course not, but it will happen routinely next week. Gov. Asa Hutchinson has summoned the legislature to the Capitol to issue state bonds to help Lockheed Martin build a plant near Camden that would make the next generation of military vehicles to succeed the Humvee.
The promise of the Arkansas taxpayers’ bailout may allow Lockheed Martin to lower its bid to the Defense Department enough that it can win the government contract to build the vehicle. In that way, we will be subsidizing the national defense budget, which exceeds all the military budgets of the rest of the world combined.
We describe the issue in terms that neither the governor nor the promoters of the Lockheed bonds use. It doesn’t sound fetching when you describe it that way, as a subsidy to a company that is bigger than the state of Arkansas (Lockheed made a profit of more than $5 billion last year on sales of $45 billion while Arkansas’ total general-revenue budget barely exceeds $5 billion) and a national defense budget that has been very generous to Lockheed.
But like all forms of corporate welfare, it is salable and is sold as a job creator. Lockheed will hire hundreds of workers in the next several years if it underbids the other big defense industries and gets the contract. Ah, so it is the little people hungry for jobs that we are doing this for? All right, we all say, let’s do it.
Who would stand in the way of creating jobs for hungry people? Arkansas voted to underwrite with state funds the development of a big new steel mill in Mississippi County because it promised jobs.
If we did it for Mississippi County, shouldn’t we do it also for people in Ouachita and Calhoun counties? The big steel project still looks like a giant risk to the state and the taxpayers and to Arkansas schoolteachers, whose retirement system invested heavily in the scheme, but the mill is under construction.
Yesterday, an industrial consultant hired to examine the Lockheed investment produced its report and—don’t be shocked—it says it would be pretty good for the state, or at least not very bad. The state would give Lockheed $83 million for its facility and then there are some $4 million in bond costs. The state will pay interest on the bonds for 15 to 20 years.
To calculate that the bond deal would be good for the state budget in the long haul, the consultants used dynamic scoring. It calculates how much more economic activity and state taxes the plant and all its workers would generate. So over the first 20 years the state would still be slightly in the hole, but in the five years after that—if the plant is still operating—the state would no longer be paying interest and would come out ahead.
Our conservative lawmakers would not tolerate dynamic scoring in calculating the budget impact of a billion dollars a year of federal medical spending in Arkansas under Obamacare, but it’s okay to make pie-in-the-sky guesses if it helps Lockheed Martin.
If you think this is all a bit of corporate socialism, don’t blame Gov. Hutchinson and the Republicans altogether. Like the steel project, it was hatched under Gov. Mike Beebe. Hutchinson gets to claim credit—and the blame if it should turn sour.
While we are taking the conservative pulse of the governor and the legislature, we cannot pass up the other popular part of the governor’s special session agenda: moving Arkansas’ primaries in 2016 from May to March so that former Gov. Mike Huckabee can get a leg up on the vast field of Republican presidential candidates.
He needs a few early Southern victories to keep his moribund campaign alive. Presumably, Arkansas voters will give him a win, though he now calls Florida home so that he does not have to pay any income taxes into the Arkansas treasury.
Moving the primaries up will be a huge benefit to current legislators and other officeholders, whose chances of avoiding an opponent will be vastly improved. It will require moving the 2016 fiscal session of the legislature farther into the year and other costs. Our debt to the Huckster has no end.
