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EU slams Starbucks and Fiat advanced tax rulings as state aid; Is Apple next?

The European Commission decided two of its major tax subsidy cases on Wednesday, October 21, and the rulings could not have been worse for Starbucks and Fiat (h/t Chillin’ Competition). These cases can be seen as a barometer of what is to come in the legally similar but much larger case of Apple, where potentially billions of euros could be at stake.

The gist of the three cases is that tax haven subsidiaries of each company (Starbucks in the Netherlands, Fiat in Luxembourg, and Apple in Ireland) were given advance tax rulings by each country that were so removed from economic reality as to constitute illegal subsidies (“state aid” in Euro-speak) under EU competition law. In the Commission’s decision, it was emphasized that the artificially low tax bills created by the rulings gave them an unfair competitive advantage over competitors, especially small business (“small and medium-sized enterprises” or “SMEs” in Euro-terminology).

Since the alleged subsidies were not notified to the European Commission in advance as required by EU law, the Commission has ruled that Starbucks and Fiat have to repay the illegal aid to the granting countries, with interest. The decision states that each company will owe € 20-30 million in aid repayments.

Of course, both of these cases will be appealed to the European court system, all the way to the Court of Justice of the European Union (CJEU), the highest court in the EU. Tax haven shenanigans are built into the economic structure of both Luxembourg and the Netherlands, and the two countries will do everything they can to maintain the status quo. The Apple case is much bigger, because it goes back all the way to 1991, and some estimates have put its tax savings at billions per year. If Apple loses, and I think it will, we can again be assured that the case will be appealed to the CJEU.

If the Commission makes these decisions stand up on appeal, it will dramatically change the shape of tax havens in Europe (including Switzerland, which the EU holds as being subject to the state aid rules through its free trade agreement). It won’t put them out of business, because the decisions pertain to corporate income tax rather than personal income tax, but the amount of revenue lost on the corporate tax alone is a very big deal.

Cross-posted from Middle Class Political Economist.

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Obamacare hasn’t killed full-time jobs, either

When we last looked at Obamacare as an alleged “job-killer,” Matt Yglesias had just pointed out that 2014, the first full year of insurance on the exchanges, was also the best year for job creation since 1999. But recently a non-blogging friend reminded me of a related anti-Obamacare meme, the idea that employers have been cutting their workers below 32 hours per week so they would not have to provide them with health insurance. His argument was, logically enough, that this would mean a loss of full-time jobs.

As with so many other anecdotal Obamacare horror stories, this one does not stand up to even simple inspection. Just like total job creation, it turns out that full-time (BLS uses 35 hours/week, not 32, by the way) job creation has quickly increased since December 2013, just before exchange insurance went into effect. Not only that, part-time employment has fallen slightly. The Bureau of Labor Statistics’ monthly “Employment Situation” (Table A-9 in both cases) tells the tale.

Date            Full or Part Time     Not Seasonally Adjusted Jobs          Seasonally Adjusted Jobs

December 2013   Full-time          116,661,000                                      117,278,000

July 2015             Full-time           123,142,000                                     121,589,000

Change                                                 + 6,481,000                                      + 4,311,000

 

December 2013   Part-time           27,762,000                                        27,372,000

July 2015             Part-time            26,850,000                                        27,265,000

Change                                                     – 912,000                                          – 107,000

I included both seasonally adjusted and not seasonally adjusted data for completeness sake, but when we are comparing a summer month to a winter month, surely the seasonally adjusted figures are the correct ones to use. For those of you keeping score at home, then, full-time jobs have increased by 4.3 million since Obamacare exchange insurance went into effect, whereas part-time jobs have fallen by 107,000. Neither of these fits the anecdotes of workers being shunted from full-time to part-time work to avoid providing insurance. This increase in full-time work has been accomplished in the span of just 19 months, or an average of over 226,000 new full-time jobs per month.

Of course, it’s theoretically possible that using sophisticated statistical controls might uncover a hidden negative relationship; that we’d have even more full-time jobs than we do if the exchanges hadn’t gone into effect. Even if that were true, it’s obvious that everything else going on in the Obama economy is having a much bigger effect on full-time employment, so there’s no justification for using the epithet “job-killing” on the off chance that it’s true.

Cross-posted from Middle Class Political Economist.

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The basics of tax increment financing subsidies

Last week I made a presentation to the Colorado Assessors Association on tax increment financing (TIF) subsidies. With the organization’s permission, I am sharing the PowerPoint presentation for my talk, as well as adding this introduction.

The talk begins by putting TIF in the context of subsidies generally. As a subsidy, TIF is subject to the three main potential drawbacks of their use: Inefficiency, inequality, and environmental harm. These differing harms often call forth coalitions that prove the adage that “Politics makes strange bedfellows.” One example was a joint appearance by Ralph Nader, Rep. John Kasich, and Grover Norquist in 1997. I was in a similar coalition in 2003 fighting a TIF that would have leveled downtown O’Fallon, Missouri, then the fastest-growing city in the state. Our leadership included people from liberal Democrats to future Tea Party members. Similarly, the mayor and TIF-supporting council members were bipartisan. It’s easy to find single-party governments that abuse subsidies, too, whether it’s now-Governor Kasich offering $400 million to move Sears from Illinois, or Democratic stronghold Kansas City, MO, offering multiple multi-hundred million dollar TIFs.

I then go on to discuss the legal particularities of TIF, which gives it another level of controversy. Tax increment financing typically allows governments to capture the property tax revenue of other districts (something especially hard on school districts), and these revenue fights are matched by the intense hatred the use of eminent domain usually brings forth.

The very first state to adopt TIF (in 1952), California axed TIF in 2011 due to its budget crisis, caused in part because the state reimbursed property tax revenue that school districts lost to TIF. Last year, a new version of TIF was passed, but it completely removes the option to take money from school districts, and lets other taxing jurisdictions opt out as well (see below).

 

Also of note in TIF history is the constant pressure to expand the locations able to use it (i.e., progressively less economically deprived areas want it in their subsidy arsenal) and the gross overuse of TIF for retail projects. As I mention in the link, St. Louis-area municipalities gave $2 billion in retail TIF from 1990 to 2007, creating all of 5400 jobs, no more than we’d expect on the basis of the area’s income growth. That’s why the relevant slide says $2 billion = 0 jobs.

Thanks to Karen Miller of the CAA for inviting me and agreeing to let me post the PowerPoint.

Cross-posted from Middle Class Political Economist.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Final subsidy accounting rules published!

On Friday, the Government Accounting Standards Board (GASB) published the final version of its new rules requiring governments to make reporting on subsidies a standard part of their financial reports (known as Comprehensive Annual Financial Reports, or CAFRs). Since GASB determines the content of “Generally Accepted Accounting Principles,” its new rules will have to be widely adopted.

Subsidy reformers such as Good Jobs First did not get everything they wanted in the new rules, but their publication represents a gigantic step forward in subsidy transparency. In particular, every government that gives tax-based subsidies will be required to report the amount they give each year. Moreover, every government that loses revenue to subsidies given by another government must report the amount as well. Most commonly, this will be school districts and other political units that lose property tax revenue to tax increment financing (TIF) or property tax abatements.

GASB continued its incomprehensible use of the term “tax abatement” as its catchall for all tax-based subsidies. As I pointed out in my own GASB comments, the term properly only refers to property tax abatements, a smallish proportion of local subsidies used in fewer states than TIF (see Greenbaum and Landers, “The TIFF over TIF,” 2014, no ungated version available). On the plus side, as Good Jobs First points out, the final rules make clear that subsidies such as tax increment financing are included in their definition of “tax abatement,” although a strict reading of the draft definition might well have excluded it and other subsidies. I considered this a worry in my GASB comments, because too much focus on legal fictions (TIF recipients are legally deemed to have paid their taxes, for instance) would obscure the fact that a subsidy exists. Happily, GASB opted to be inclusive in the definition, which will make it more difficult for governments to evade the new rules.

The real drawbacks of the new rules are that they don’t require that the recipients, even the largest ones, be identified (this is optional); they don’t require governments to say how many subsidies are in place (just the total cost of subsidies for that year); and they don’t require a listing of future subsidies already committed. In addition, as I pointed out in my comments, they do not require a cross-listing of non-tax subsidies such as grants and loans so that people reading a CAFR can determine how much a government is spending and committed to spend on total subsidies.

Still, the new rules represent a tremendous advance over the status quo. Every state and local government will now have to report the value of the subsidies it gives every year. CAFRs are audited reports, meaning that multiple sets of eyes will look at the documents even before the public sees the reports and can cross-reference them with everything else known about a government’s subsidies. Good Jobs First will be expanding its Subsidy Tracker database to include the new data in governments’ annual reports. I’m looking forward to all these developments, and you should be, too.

Cross-posted from Middle Class Political Economist.

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Is trade zero-sum between workers in different countries?

Vox.com had a long, interesting interview with Senator Bernie Sanders covering a large number of political and economic issues. In this post, I want to focus on just one issue he raised: Whether rising incomes for Chinese workers have to come at the expense of U.S. workers. Here is what Sanders told Vox’s Ezra Klein:

I want to see the people in China live in a democratic society with a higher standard of living. I want to see that, but I don’t think that has to take place at the expense of the American worker. I don’t think decent-paying jobs in this country have got to be lost as companies shut down here and move to China.

What Sanders doesn’t mention is that the market, left to itself, will indeed force a tradeoff between U.S. and Chinese workers. We can see this via the Stolper-Samuelson Theorem, which says that increasing trade will raise the real incomes of a country’s abundant factors of production and reduce the real incomes of the scarce factors of production. The reason is that abundant factors of production (relative to the rest of the world, of course) will find new markets abroad as trade increases, while scarce factors of production will face increased import competition. Since China is a labor-abundant country and the United States a labor-scarce one, the theorem implies that real wages will rise in China and fall in the United States as they increase trade (all trade, not just with each other). And this effect can be sped up if U.S. companies close factories in the United States and open them in China, just as we have seen happen.

To disable the tradeoff requires political intervention in the market. If you want to preserve gains from trade that are predicted by the theory of comparative advantage, and you want to not worsen income inequality in the United States, you need to find a way, as Ronald Rogowski pointed out, for the winners to compensate the losers from trade. This isn’t easy: As Rogowski also noted, the winners increase their clout in the political system while the losers see their influence decrease (look at the long-declining influence of unions here). As I’ve discussed before, the increased mobility of capital exacerbates this problem in the U.S., since capital is much more mobile than workers. And so we have seen a steady decrease in the tax burden paid by corporations and the rich, more trade agreements signed, and a constant drumbeat to cut Social Security (despite the coming retirement crisis) and “phase out” Medicare.

What would compensating the losers from trade look like? Most obviously, and most focused, is trade adjustment assistance, which is often criticized as inadequate. Yet it does not really make sense to compensate only those who lose their jobs directly to foreign competition, because those workers then spill into other sectors of the economy, driving down wages as they go. Thus, we need to go beyond trade adjustment assistance.

To raise wages in the economy more generally, we need broader measures. One would be to raise the minimum wage: It pushes up workers’ pay, but it also reduces turnover and training costs for employers, and puts money into the hands of people with a high propensity to consume, creating multiple channels to counteract the seemingly self-evident fact that raising something’s price means people will buy less of it.

Another broad-spectrum approach to raising wages is to restore the power of unions. As I have pointed out before, the United States has the fifth-lowest union density in the 34-member Organization for Economic Cooperation and Development (OECD). Senator Sanders, in the interview linked above, notes that the increased power of unions in Nevada’s gambling industry has enabled house-cleaning staff in the state’s casinos to earn “$35,000 or $40,000 a year and have good health-care benefits.” Having a National Labor Relations Board that is not in the pocket of industry is critical for us to see this take place.

Third, less targeted still but having the political benefit of universal coverage, an expansion of the social safety net would make it possible for people to simply refuse to take crappy jobs. Yes, this is about bargaining power! It would also encourage entrepreneurship because failure would not mean the loss of one’s health insurance, for example. Medicare for all has long been one of Senator Sanders’ standard prescriptions, a program that benefits from having far lower overhead costs (it avoids outrageous executive salaries, the need for profit, and does not have to advertise much) than private insurance. We could do a lot worse than considering it — and we have.

Finally, to pay for these programs, it’s necessary to raise taxes on corporations and rich individuals. Thomas Piketty, in his monumental Capital in the Twenty-First Century, suggests that the top marginal income tax rate should be 82% for individuals in the top 1/2% or top 1% of income. He notes that this will not raise much money, in part because it will reduce various lucrative but economically unproductive financial shenanigans. Instead, he thinks a tax of 50-60% on the top 5% of incomes would produce substantial revenue to create what he calls a “social state” for the 21st century. One could go further, of course, by adding a financial transactions tax (I hope to write about this soon) and shutting down tax havens.

To return to our original question, there is no reason that Chinese workers and U.S. workers can’t both prosper from trade. But to make it possible in the United States requires a great deal of rule rewriting that will not be achieved overnight.

Cross-posted from Middle Class Political Economist.

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Impending disaster in Greece

Paul Krugman analyzes the debacle in Greece. Although Greeks voted barely a week ago to reject the bailout terms offered by the EU, which called for uninterrupted austerity, Prime Minister Alexis Tsipras proposed to the EU to accept almost all of the terms if there was some true financial relief. Instead, what the European Union, spurred by Germany, proposed today demanded all of the pain, and none of the gain that Tsipras sought. Indeed, Germany has essentially demanded regime change in Greece, even though Tsipras only came to office in January. As Krugman says, “It is, presumably, meant to be an offer Greece can’t accept.”

The Germans, it would appear, have decided to push Greece from the eurozone. But demanding an end to Greek sovereignty and austerity as far as the eye can see is simply evil. Moreover, it negates the long-successful stand of European Central Bank (ECB) president Mario Draghi that the ECB would do “whatever it takes” to keep the eurozone intact. The ECB’s reputation would be damaged greatly should crisis recur in Spain, Portugal, Ireland, etc., now that the world knows the ECB will not do “whatever it takes.” This is a recipe for a new recession in Europe spreading from the EU periphery.

The German demands are particularly “grotesque,” as Krugman says, when you consider that Greece has already endured 25+% unemployment for three years (see chart). This is an unemployment rate that the United States never saw even at the height of the Great Depression in 1933, when it peaked at 24.9%.


source: tradingeconomics.com

However, I believe Krugman’s argument actually overlooks an important point. He writes:

But still, let’s be clear: what we’ve learned these past couple of weeks is that being a member of the eurozone means that the creditors can destroy your economy if you step out of line.

His point is that eurozone membership has removed Greece’s ability to exercise monetary policy autonomy and respond to its specific conditions, including via currency devaluation. Indeed, there can be no doubt that monetary union was flawed from the start. But Krugman overestimates the ability of devaluation to fix an economic crisis. At the same time, he underestimates the ability of creditors to destroy a government whose economic policies they disapprove of.

 The mega-example of this, of course, is the Latin American debt crisis of the 1980s. Mexico, Brazil, and all the other victims of this crisis (caused primarily by the U.S. Federal Reserve cranking up interest rates to astronomical levels in the late 1970s and early 1980s, which in turn caused an unprecedented rise in the value of the U.S. dollar and a global recession) were “bailed out” by the International Monetary Fund (IMF) in order to prevent the collapse of creditor banks in the United States, but were subject to strict austerity, with the same results we’ve seen in the EU. Indeed, in virtually every Latin American country income per capita was lower in 1990 than at the start of the crisis in 1982, giving rise to the term “lost decade of development” to describe these events.

Supposedly, the IMF learned its lesson after the Asian financial crisis that austerity packages didn’t work. Krugman has argued this many times (one example here). Indeed, the IMF has seemed to be more of a voice of sanity in the current crisis than in either the Latin American or Asian crises. Yet, in the endgame of the Greek crisis, this seems to have fallen away, with the IMF going along with the EU on Greek austerity. Something is seriously wrong here.

But there is another important example to mention, where the IMF was not involved. This, too, was a result of the Fed-caused global recession, this time in France. After Francois Mitterrand and the Socialist Party swept to power in 1981, among the government’s many policy changes was an attempt at Keynesian stimulus. However, this was met by massive capital flight. The problem was that the French franc was losing so much value that the government had to reverse its policies. For example, the franc was 4.6453 to the dollar in January 1981, but fell to 8.0442 by August 1983, 9.3041 by September 1984, and 10.0933 in February 1985. The takeaway is that even having floating exchange rates does not guarantee that you can maintain your policy independence.

Events are moving very rapidly; perhaps the EU will find a way to prevent this disaster. But at the moment, things look very grim.

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Will the US keep winning indefinitely? ISDS, that is

Now that Congress has given the President fast-track Trade Promotion Authority, the first agreement to be considered under these rules (no amendments allowed, up or down vote in 90 days) will be the Trans-Pacific Partnership (TPP). As you know from previous columns, one of the most worrying aspects of the TPP is its expansion of investor-state dispute settlement (ISDS), wherein private firms can bring their disputes with governments not to courts, but to international arbitration (usually through units of the World Bank or the United Nations), where legal precedent doesn’t matter and appeal is all but non-existent. Moreover, as the Consumers Union has long argued (recent example here), arbitration has a well-known pro-business bias. That’s why so many of your agreements with cable TV providers, financial services companies, and many more have fine print requiring mandatory arbitration, keeping you from getting your day in court if something goes wrong.

The response from the U.S. Trade Representative’s (USTR) office has been, “Not to worry! The United States has never lost an ISDS case.” The linked document goes on to claim that worldwide, only 1/4 of corporate plaintiffs have won cases against governments. But a new analysis by the International Institute for Sustainable Development (IISD),* using the same data source the USTR cites, comes to a very different conclusion based on its most recent update, the 2015 World Investment Report from the United Nations Conference on Trade and Development (UNCTAD). Moreover, we can see that countries with even more trustworthy court systems than that in the U.S. have lost ISDS cases. The Rule of Law Project, an initiative of the American Bar Association, has ranked 102 countries on the administration of justice and freedom from corruption, and puts the United States at #19 with a score of 0.73. Yet #14 Canada (0.78) has already lost ISDS cases, and both Canada and #10 Australia (0.80) are currently on the hook for major new cases (Eli Lilly and Philip Morris, respectively), that would overrule decisions by the countries’ respective Supreme Courts. So, even if governments have only lost 25% of ISDS cases, it’s unlikely U.S. luck will hold out indefinitely, if countries with better court systems are losing.

But it’s worse than that. UNCTAD’s database of known ISDS cases and their outcomes shows that in all cases decided through the end of 2014, the investor won 27% of the cases compared to 36% won by the state (see Figure III.10, p. 116). But another 26% of the cases are listed as “settled,” which often (but not always) means the respondent agrees to make some payment to the plaintiff to keep the case from going to arbitration. Public Citizen has a list of ISDS cases under prior U.S. trade agreements with examples of settlements that do and do not contain payments (see, for instance, NAFTA cases against Canada).

Moreover, as IISD attorney Howard Mann argues, if we separate out cases between jurisdictional determinations and determinations on the merits of the case, things look even worse for states. While only 71 of 255 cases (this excludes the “settled” cases) were concluded by a decision of the tribunal having no jurisdiction, Mann points out that all 255 cases effectively had decisions on jurisdiction, i.e., cases with final decisions had to have rulings that the arbitrators had jurisdiction. In that case, Mann says, “Investors, therefore, have won 72 per cent [184/255] of jurisdictional determinations.” And of the decisions on the merits of the cases, investors won 111, or 60%, of the remaining 184 cases. This calculation suggests that states are losing ISDS disputes at a much higher rate than normally portrayed. As if that’s not bad enough, the new World Investment Report finds that in 2014, of the 15 ISDS cases decided on their merits, states lost 10 (2/3) of them. In 2013, it was even worse for states, with investors winning 7 of the 8 cases decided that year (p. 126). If these higher proportions continue, obviously the proportion of investor victories will increase beyond the current 60% total.

Bottom line: The threat to regulation, democracy, and the rule of law posed by investor-state dispute settlement is very real. The U.S. Trade Rep’s  reassurances that the U.S. has never lost in ISDS don’t even make it likely that will continue into the future. We need to pressure Congress to vote down the TPP when negotiations conclude.

* Important disclosure: I have consulted for IISD several times since 2007 on investment incentive issues.

Cross-posted from Middle Class Political Economist.

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Elon Musk has received billions in subsidies

While receiving subsidies is nothing new for the Forbes 400 or even multi-hundred millionaire pikers like Mitt Romney, a recent story in the Los Angeles Times (via Good Jobs First) shows that Elon Musk (#34 in the Forbes 400) is a champion at getting subsidies for his companies. According to the Times article, Musk’s three companies, Tesla, Solar City, and SpaceX, have received a total of $4.9 billion (nominal value) in subsidies over the years. The article says that Tesla and Solar City stand out in the importance of the subsidies relative to the size of the company.

While SpaceX has received only $20 million, both Tesla and Solar City have received over $2 billion each, if you count the value of the subsidies their customers have received for buying Tesla vehicles and Solar City installations. This is more significant in the case of Solar City (about $1 billion) than for Tesla (about $321 million). Even without these sums, the companies have directly received about $3.5 billion, most notably for the new Gigafactory in Nevada and for a solar panel facility in Buffalo, New York.

Regular readers will remember that I have long argued in my books and elsewhere that these subsidies represent a transfer from average taxpayers to the much wealthier owners of the companies involved, worsening the already substantial inequality in the United States. These investment incentives have to be offset by higher taxes on others, reduced government services, or higher levels of government debt. While they are not the biggest driver of inequality, they do their part. Moreover, location subsidies reduce the country’s economic efficiency: It may well have made more economic sense to locate the battery Gigafactory as close as possible to Tesla’s assembly plant in Fremont, California.

While Musk refused to be interviewed for the Times story, he responded the next day on CNBC. Among other things, he argued that it was wrong to report a single figure for subsidies, which makes it seem like he received one big check. This is right as far as it goes. However, I think it would make more sense to give a single present value for the subsidies rather than the nominal value, which overstates the value of multi-year subsidies such as those for Tesla. Moreover, as Good Jobs First points out, it is perfectly necessary for taxpayers to know what their long-term liabilities are for multi-year subsidies in order to properly assess the impact on government finances.

Musk also defended the Tesla subsidies as merely necessary to make the project happen faster, rather than necessary to happen at all. Yet it conducted a multi-state auction in an all-too-common use of its location decision for rent-seeking. As I analyzed at the time, the deal was below average in terms of cost per job and aid intensity compared to other automobile facilities, and it is 13 times larger than Nevada’s previously largest incentive package.

Ultimately, the Musk story is far too familiar on a number of dimensions. Most importantly, it is a tale of rent-seeking and the policy/political drivers of inequality.

Cross-posted from Middle Class Political Economist.

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Why subsidize data centers?

A number of authors (Good Jobs First, David Cay Johnston, me, and me, among others) have pointed out that data centers (aka server farms) in the United States create very few jobs, yet receive state and local government subsidies that routinely exceed $1 million per job. I’m sure you already know that numbers like those make me ill: the typical automobile assembly plant will receive $150,000 or so per job, and require all sorts of component facilities to feed it — though, sadly, economic development officials often given incentives to the supplier plants as well.

So why $1 million or more per job? Data centers pay reasonably well, and the biggest are connected to famous tech names like Apple, Google, and Facebook, but it seems to me that it’s hard to get around the facts that there just aren’t that many jobs, and they don’t require an army of supplier facilities bringing indirect jobs.

But surely the competition for jobs is so steep that governments have no choice but to subsidize them? Actually, no. Aside from the fact that $1 million per job probably gives away more than the value of the investment to the government, my investigations have turned up multiple examples of companies building data centers without incentives.

One I’ve mentioned here before: American Express in 2010 built a $400 million data center in Greensboro, North Carolina, without any incentives at all. The leading explanation has been that Amex had already decided it was going to close a 1900-job call center in Greensboro (announced in 2011), a move it knew would trigger clawbacks of any incentives on the 50-150 job data center — so it didn’t bother seeking subsidies. Did I mention that North Carolina has cheap electricity?

More recently, I have found four Google data centers that opened or expanded without incentives in the last few years. New and expanded facilities in the Netherlands, Ireland, Finland, and Belgium all take advantage of cooler temperatures to reduce their electricity use. While Google did not respond to my email asking whether it received subsidies for those facilities, and IDA Ireland similarly was unresponsive, the Netherlands Foreign Investment Agency did respond with a confirmation that it had provided no “state aid” (EU-speak for subsidies) to the brand-new $773 million, 150-job data center opening in Groningen province in 2017. In addition, a search of the EU’s Competition Directorate case database did not reveal any Google state aid cases for data centers. Thus, it appears that none of these cases received incentives.

So why did Google demand over $140 million (present value) in subsidies from North Carolina back in 2007? I think we’re looking at the “usual suspect” once again, rent-seeking. Of course, North Carolina couldn’t foresee the Amex no-incentive deal that didn’t happen until 2010, but now that we can see how Google and American Express do business when they have to, it’s time economic development officials around the country learned to “just say no” on data centers.

Cross-posted from Middle Class Political Economist.

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Moving the goal posts on ACA success (w/update)

Right. So the the same day that I posted about the substantial fall in the uninsured rate for adults that we have seen since Obamacare went into effect, a conservative writes at the Wall Street Journal making exactly the same arguments that Matt Yglesias had refuted. Cliff Asness writes in the WSJ:

That more people would be insured was never in dispute. If you mandate that people buy something, penalize them if they don’t and give it away to some, more people will end up with it. The proper response to this is: Duh.

So, as I said, Yglesias had already refuted this, giving a number of examples of conservatives who predicted there would be no reduction in the number of uninsured Americans. Today, Paul Krugman takes us to Jonathan Chait’s response to Asness, where of course he piles on more examples of conservatives predicting a failure to improve the uninsured rate. Then he goes further. Asness wrote that a critical issue was “how many people covered by ObamaCare were previously uninsured.” You can probably guess Chait’s answer: “Well, that’s why you measure the net number of uninsured people, not just the gross expansion of coverage under Obamacare.” Which leads us back to the chart showing the substantial fall in the uninsured rate that was in my last post (and Yglesias’, Krugman’s and no doubt many more besides).

The latest round is that yesterday Asness responded to Chait. Here is where the goal post move comes in:

In contrast the rise in coverage is heralded by a myriad of Obamacare supporters as one of two major pieces of proof the law is working. But, how can something we knew before the fact be proof of anything?

Did you catch that? If we predict that something good will happen as a result of a new law, and that good thing happens, it doesn’t count as proof that the law was good. This is silly. We didn’t actually know the insurance rate would fall, but we had economic models that told us it would. So not only is the fall evidence that the law is working, it’s evidence that the models were right!

Somebody wake these people up.

UPDATE: @HaroldPollack points me to a new J.D. Power survey finding that people who signed up for insurance on the exchanges were more satisfied (696 out of 1000) than people with non-exchange plans, usually through employers (679 out of 1000). People re-enrolling on the exchanges scored even higher, with a score of 744 for people who re-enrolled on the Exchanges. Private plans offering multiple options were able to reach the 696 average for Exchange enrolees, which means that companies offering one insurance option had to be doing substantially worse than 679. Not surprisingly, new enrolees for 2015 were a large 55 points more satisfied than 2014 enrolees, who of course went through the disastrous rollout of healthcare.gov.  So people like their subsidies and they like their actual insurance policies, on average. Maybe that’s why Republican Senators are getting antsy that there will be hell to pay if the Supreme Court rules for the plaintiffs in King v. Burwell.

Cross-posted from Middle Class Political Economist.

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