Iowa Grants Called Useless by Experts

• Author: Jeffrey Simmons
• Posted: 2024-02-26

During the height of the pandemic last year, the state of Iowa used some of its state funds and a lot of its CAREs money to issue rounds of grants, forgivable loans and other benefits to many of its struggling businesses throughout the state. As of July 16, the Iowa Economic Development Authority Board has announced that is going to hand out more grants and loans through what they're calling the "High Quality Jobs Program" (HQJP). A range of different companies have received grants and loans for sums like $1 million and $2.25 million, with the hopes of boosting economic growth in the area while also ensuring that Iowans have high-quality jobs that they can receive. Though some economists are not thrilled with this spending.

The Center for Economic Accountability is a board in Iowa whose main purpose is to account for all of the state's spending, to theoretically ensure that money is spent correctly. The board's president, John Mozena, is not pleased at all with Iowa's latest round of grant and loan spending. According to Mozena, there is "simply no evidence either from research or real-world experience that these deals are anything but useless." Mozena went on to claim that these grants and loans are "corporate welfare." The issue Mozena has is that Iowa is giving money to the largest corporations in the state; the very corporations that were not struggling to begin with.

According to Mozena, these sorts of "sweetheart deals" look very suspicious. They don't seem to help the average Iowan at all, though they definitely help fill the pockets of CEOs and other executives. In theory, Iowa states that giving this money to these corporations will help them to add onto their businesses, which will open up more jobs for people who need quality work and a good, steady paycheck. However, as Mozena points out, there is no evidence that these grants and loans actually cause companies to create more jobs. What they end up doing is paying their top-tier positions bigger salaries, more bonuses, and they all go on vacation. Meanwhile, starting-level salaries do not increases, and no new jobs open up. Still, Iowa insists on shoveling money at these companies through grants and loans.

Mozena has been beating this drum for years, calling it wasted money and even implying that there's something a bit criminal taking place. Although the board is supposed to be listened to, Iowa's government has been ignoring it for years and basically spending money how they want. An anonymous source on the board claimed that, "We can spot what looks like corruption, and nobody cares. Nobody stops spending. Nobody thinks 'hey, they're onto us.' They just keep spending money."

According to Mozena, the "best case is that [these incentives] work about 10% of the time, and are simply a waste of money the other 90%." The bigger issue is that no one can predict which of that 10% it will be, so it's not as if money can be directly funneled into the areas that work, and kept away from areas that do not. The fact is that the Iowa government has the ultimate say on where they spend their money, and they sure do love giving their money away to the same big corporations where the case injections help no one but the top 1% of business-people.

Though there's also another side to this. A few government officials have claimed that these sorts of deals are needed to keep these corporations operating within the state. "Iowa is a business desert by and large," claimed one official. "The moment we don't offer incentives for [these corporations] to stick around, they're going to go set up on Wall Street or in California, and there goes thousands of good-paying jobs for Iowans." Mozena and the board claim that's a bit hyperbolic, at best.

Where Does the Money Actually Go?

What worries Mozena the most is that it's nearly impossible to keep track of this money once the companies receive it. Whether it's grants or loans, there aren't really any stipulations on how the money is spent. It's a "good faith" gift, so to speak, and so what you end up with is a loose agreement that company X will do Y when they receive their gift. But there's no one really there to hold them accountable to ensure that they hold up their end.

Mozena's biggest issue is that these companies never do seem to hold up their end. He's afraid Iowa's just wasting millions of dollars with these grants and loans.