PPB August 2016

58 •

PPB

• AUGUST 2016

GROW

American

Dragon

In their fiscal year 2016

budget request, the CPSC asked

for 50 additional inspectors and

an improved technology target-

ing system that would allow

them to “analyze 100 percent of

incoming import product lines

under the CPSC’s jurisdiction

and designate high-risk entries

before those imports reach U.S.

ports . . .” Total estimated cost

for the program? $36 million.

Seems like a bargain to me.

These requests should be granted

not only to ensure that unsafe

imported products don’t make it

to our store shelves, but also to

help level the playing field for

U.S. manufacturers. Overseas

companies know they have a

good chance of beating the odds

when they ship unsafe products

into our country. Let’s change

the odds in our favor by ade-

quately funding CPSC port

inspections.

Inspection of imported food

is perhaps an even bigger prob-

lem. In October 2012,

Bloomberg News reported on

shrimp from Vietnam, headed

eventually to the U.S., being

stored in dirty plastic vats filled

with ice made from tap water

that even the Vietnamese Health

Ministry states should be boiled

before drinking. The same story

described tilapia from China that

had been partly fed with feces

from pigs and geese. Yet less than

two percent of all food brought

into the country is physically

inspected.

In its budget request for fis-

cal year 2016, the FDA asked for

a $109.5 million increase in its

budget to enhance oversight of

both domestic and overseas com-

panies. Clearly, Congress will go

over that request with a fine-

tooth comb. When it comes time

to make the inevitable cuts,

funding for the inspection of

imported food should receive the

highest priority.

Stop Trying to Pick “Winning”

Industries

In the fall of 2010, former

Red Sox pitcher Curt Schilling

and his start-up video company,

38 Studios, were lured from

Massachusetts to Rhode Island

with a $75 million loan from the

state’s Economic Development

Corporation. A press release

from the governor’s office read,

“38 Studios presents Rhode

Island with a tremendous eco-

nomic development opportunity.

This investment creates 450

high-paying jobs, provides job

opportunities for our college

graduates in a fast-growing

industry, and will attract other

interactive and entertainment

companies to Rhode Island.” By

May 2012, the company had col-

lapsed and the state of Rhode

Island was on the hook for as

much as $110 million.

The 38 Studios deal is a

near perfect example of why

government economic develop-

ment efforts should not be

focused on selecting companies

in particular industries that are

considered “advanced” or high

tech. There were, no doubt, a

number of small to mid-size

manufacturing companies in

Rhode Island that could have

used a small piece of that $75

million to expand their facility

and hire more employees. But

economic development efforts

always seem to focus on the

brass ring of “advanced” indus-

tries. During the time that the

38 Studios deal was imploding, I

was aware of a Rhode Island

manufacturer—with a multi-

million-dollar order in hand

from a big box retailer—who

could not get a loan to expand

his factory. Clearly, a better bet

for the Rhode Island EDC

would have been to make a loan

1/10th the size of the 38 Studios

loan to this company. I suspect

they didn’t think their product

was glamorous enough.

And if you think the federal

government can do a better job

at picking winners, the Solyndra

debacle proves otherwise. In

2009, the U.S. Energy

Department provided the

California-based manufacturer

of solar panels with a $536 mil-

lion loan guarantee to build a

new fabrication plant that would

employ hundreds. By August

2011, the company had filed for

Chapter 11 bankruptcy protec-

tion. The government recouped

20 percent of the investment,

but $385 million was lost.

Records showed that as the

company was spiraling down-

ward, politicians in D.C. were

more concerned with the politi-

cal fallout than with the massive

loss of jobs.

It is apparent that govern-

ment typically does a poor job

of picking winners when it

comes to loaning money to

companies in “advanced” indus-

tries. Yet, in the triumph of

hope over experience, they con-

tinue to try. Meanwhile smaller

companies in basic manufactur-

ing industries have trouble get-

ting a modest loan. This isn’t to

say that companies in high-tech

industries should not be sup-

ported; only that economic

development efforts should not

slight basic manufacturing in

favor of high tech industries. In

fact, they shouldn’t look at

industry at all.

Government sponsored eco-

nomic development efforts

should focus less on industry and