Anti-Stimulus for Las Vegas
President Obama has stated that companies should not have events in Las Vegas “on the taxpayer’s dime.”
February 16, 2009
Fred Foldvary, Ph.D.
Economist

Companies and organizations are canceling plans to hold conventions in Las Vegas. President Obama stated that companies should not have events in Las Vegas “on the taxpayer’s dime.” This is not a prohibition passed by Congress, but when a president speaks, it has much of the effect of law.

Firms and associations seek to avoid the displeasure of governments, since the state can inflict great damage or withhold subsidies. With government stimuli and subsidies everywhere, everybody is now on the taxpayer’s dime. Even taxpayers are now having their taxes subsidized. While to some, Las Vegas has the image of gambling and lavish spending, many conferences take place in that city in the same way they would meet in San Francisco or New York City. Las Vegas hotels specialize in having large conference rooms and facilities, and has become an international center for conventions.

Much of the economy of Las Vegas depends not just on gambling, but on the meetings that take place. Another attraction is the shows and the dazzling visual effects of the themes of the hotels. In Las Vegas, you can pretend to be in New York or Paris and even render unto Caesar. The combination of attractions creates synergy, as convention goers enjoy the evening shows and might indulge in good food and a bit of, as they say there, gaming.

The recession has shriveled business in Las Vegas, as fewer people travel, and the presidential displeasure has made the demand for the city’s attractions that much less. The mayor of Las Vegas has written a letter to the president stating that the president’s comments has hurt the economy of Las Vegas.

Of course firms which have been bailed out by the federal government should use the money for the intended purpose of reviving the economy, not for gifts to the company’s chiefs or lavish parties for employees. But companies can splurge in many places. If they can’t go to Las Vegas, they can have parties in the Bahamas or Cancun. If they want to add some gambling, they can meet in Macau. There is no good reason to single out Las Vegas.

The mayor stated that 22,000 meetings take place annually in Las Vegas. Six million business travelers spend $8.5 billion per year in that city. Many of these are just annual conference that would take place somewhere. Las Vegas offers lower hotel costs, since they also get profits from gambling. So firms that have to relocate their meetings incur higher hotel expenses.

A presidential statement has great psychological impact. When travel to Las Vegas seems tainted, those who get hurt most are the workers who get laid off and the taxpayers who have more unemployment payments and welfare costs. There are already hiring freezes, wage cuts, and layoffs in Las Vegas. The previous building boom has collapsed, and now the city is suffering many foreclosures. They did it to themselves, as Nevada could have prevented its boom-bust if it had not subsidized real estate, but now when they are down is the worst time for anti-stimulus.

Rather than take a chance, companies, all being potential candidates for subsidies, cancel Las Vegas and head to Bermuda or the real Paris. Individual travelers are also likely to cancel, as travel to Las Vegas seems to have official disapproval. Obama is enjoying a presidential honeymoon, and if he says don’t go to Las Vegas, many folks will do as he says. Foreign firms might also decide to skip Las Vegas, since they too do not wish to incur the displeasure of the US government.

The federal government is a fourteen trillion dollar gorilla, and when it waves its arms, many get out of the way. The government should avoid seeking to micro-manage the economy such as telling firms where to meet, but stick to macro-economic policy. The government is bad enough at macro decisions. It is that much worse at making management decisions for the millions of firms that are struggling to survive in the crash created by government in the first place.

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Fred Foldvary, Ph.D.
Economist

FRED E. FOLDVARY, Ph.D., is an economist and has been writing weekly editorials for Progress.org since 1997. Foldvary's commentaries are well respected for their currency, sound logic, wit, and consistent devotion to human freedom. He received his B.A. in economics from the University of California at Berkeley, and his M.A. and Ph.D. in economics from George Mason University. He has taught economics at Virginia Tech, John F. Kennedy University, Santa Clara University, and currently teaches at San Jose State University.

Foldvary is the author of The Soul of LibertyPublic Goods and Private Communities, and Dictionary of Free Market Economics. He edited and contributed to Beyond Neoclassical Economics and, with Dan Klein, The Half-Life of Policy Rationales. Foldvary's areas of research include public finance, governance, ethical philosophy, and land economics.

Foldvary is notably known for going on record in the American Journal of Economics and Sociology in 1997 to predict the exact timing of the 2008 economic depression—eleven years before the event occurred. He was able to do so due to his extensive knowledge of the real-estate cycle.