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It Turns Out the Pie Is Not in the Sky

December 15, 2023

This morning’s New York Times carries an in-depth article examining how New Mexico’s government-subsidized Spaceport America has been (in the words of one local citizen quoted in the article) “a flop.” It hasn’t generated the tourism dollars that politicians claimed it would, and the promised employment gains never really materialized. Yet taxpayers were forced to spend some $200 million for the venture—about a hundred bucks for every citizen in the Land of Enchantment.

It’s an old story—and one Arizonans, too, are familiar with. In 2016, Pima County officials decided to devote $15 million in taxpayer resources to providing start-up financing for a company called World View, which, like Spaceport America, was supposed to generate big bucks for the Tucson area by selling space rides to wealthy adventurers. By comparison to New Mexico’s galactic venture, Pima County’s “Spaceport Tucson” was modest: people would supposedly ride in balloons to the stratosphere at a mere $75,000 per ticket, whereas Virgin Galactic was charging six times that. But Pima County politicians, like their New Mexico colleagues, promised that the Pima County balloon project would improve the local economy, “create jobs,” etc.—making it a worthwhile recipient of taxpayer money.

Of course, it never happened. Almost eight years later, the company has still not launched a single passenger balloon. It also never met its employment targets, and a few years ago it laid off much of the staff it had hired. As for the $15 million, that was illegal from the outset, given that the Arizona Constitution forbids the government from subsidizing private businesses. We sued, and in October 2022, the Arizona Court of Appeals agreed with us that the county broke the law by forcing taxpayers to foot the bill for a private company.

The failures of things like Spaceport America and Spaceport Tucson aren’t accidental or coincidental. They’re examples of a basic principle of economics: if the government is subsidizing a business, the reason is almost certainly because the company couldn’t get a loan from private investors. And why is that? Because potential investors analyzed the risks and decided it wasn’t worth it. Politicians, by contrast, aren’t spending their own money—they’re spending your money. And that means they have a different perspective on what’s “worth it.”

Since politicians are spending other people’s money—and since they will still get paid even if they make bad investments—there’s no reason to think they’ll make wise investment choices. But they make good targets for what scholars call “political entrepreneurs”—that is, businesspeople who want to succeed by getting political favors instead of winning in the normal, competitive market. Political entrepreneurs seduce politicians by promising big employment gains, shiny new office buildings, and huge increases in tax revenue. Politicians are happy to fall for it, because they want to look like “bold visionaries” with a “plan for the future.”

None of this means that the idea of commercial space travel is a bad idea—in fact, it sounds like a lot of fun! And if there’s a market demand for it, businesses will find a way to provide it, in order to reap the profits. But if there’s no market demand, then politicians shouldn’t replace it with political demand—and force taxpayers to underwrite projects to send rich people into space.

Spaceport America has become a ludicrous monument to government boondoggles. And all Americans would be wise to learn from that experience. Politicians bought a literal “pie in the sky” project—and bought it with their constituents’ money. And that failure is the result of the same economic incentives that apply to all other businesses.

In fact, the Times article ends on a revealing note: it describes the owner of small store in the town near the Spaceport, who knows his business well and has been able to pay his bills without handouts from taxpayers. “I know what people come here for,” he says, “and it’s not to go to space.” Those are the words of a business owner who’s learned from experience how to keep out of the red. Politicians can, so to speak, promise you the moon. But when they try to choose winners in the economy—instead of business and consumers negotiating for themselves—the result is unfulfilled promises, uninhabited “spaceports”…and unpaid bills.

Timothy Sandefur is the Vice President for Legal Affairs at the Goldwater Institute.

 

 

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