For each dollar spent by the state, there is one less spent by the private sector–there is no free lunch, not to mention breakfast, dinner, and midnight snack. Government spending requires taxes (and when the government spends without taxing individuals and firms, i.e. deficit spending, it shifts the burden of taxation unto future generations, who must foot the bill later, often with added interest).
Hazlitt concedes that some amount of government spending is necessary to perform essential functions, such as infrastructure: “With such public works, necessary for their own sake, and defended on that ground alone, I am not here concerned.” Instead, he is concerned with government spending as a means of providing employment or creating wealth:
“When providing employment becomes the end, need becomes a subordinate consideration. ‘Projects’ have to be invented. Instead of thinking only where bridges must be built, the government spenders begin to ask themselves where bridges can be built. It soon becomes absolutely essential. Those who doubt the necessity are dismissed as obstructionists and reactionaries.”
Several studies indicate that subsidizing stadiums is a net financial loss for taxpayers. Those lobbying on behalf of franchises often exaggerate the benefits associated with hosting a professional sports team or a major event. For instance, the average economic return in cities that hosted the Super Bowl between 1970 and 2001 was $60 million–roughly 6 per cent of Halifax Regional Municipality’s operating and project budget. On the contrary, the average estimated return was 500 per cent higher. Furthermore, most ventures are tax-exempt–a convention that flourished out of the assertion that stadiums have a superior economic contribution than shopping malls, coffee shops, and convenience stores.
Studies also question the notion that building them facilitates economic growth. In fact, economist Victor Matheson argues that, “Most of the independent research can’t find any economic impact associated with new arenas, new stadiums, or new franchises or large events. Building a new arena doesn’t seem to have any effect on a city’s employment, per capita income, hotel occupancy rates, or taxable sales.”
Consider, for instance, Detroit–the former economic engine of the United States. The city offers a number of generous perquisites to three of the largest sports franchises in the world and it is bankrupt. Brookings Institute’s Andrew Zimbalist and Roger Noll point toward “perhaps the most successful new baseball stadium,” Oriole Park at Camden Yards in Baltimore, which, “Costs Maryland residents $14 million a year.” Then there is Quebec, which hosted the 1976 Winter Olympics in Montreal, incurred nearly $1.5 billion in debt, and finally managed to pay it off thirty years later.
Hazlitt’s concern was much more philosophical: public works mean taxes and taxes discourage, if not divert, production. Unless the government dedicates taxpayer dollars toward projects of necessity–those that reduce the transaction costs associated with commerce–it is merely removing capital from the private sector that would have otherwise been spent on goods, services, construction, investment, and so on.
Stadium building is not a silver bullet and it is unlikely to surge the region’s economy. If it was, there would be no debate about whether to build a new stadium–it would be about whether to build a second, third, fourth, and fifth.
One thing is certain, though: public works mean taxes. That means higher property taxes; higher goods and services taxes; higher income taxes. In a region where taxation exceeds the national average (and so too unemployment), however, indulging in ambitious ventures seems irresponsible. Instead, the government should focus on creating conditions conducive to economic growth. Then, maybe, the Canadian Football League will decide to foot the entire bill.
Shaun Fantauzzo is a policy analyst and the AIMS on Campus project coordinator at the Atlantic Institute for Market Studies