Billions for job piracy even as states cut budgets
According to Center on Budget and Policy Priority data cited by Louise Story, in 2011 the states enacted $156 billion of austerity measures, between budget cuts and tax hikes. Despite their budgetary woes, however, this did not stop them from throwing billions of dollars a year into the worst kind of corporate subsidy, relocation incentives that move existing facilities from one state to another without creating any new jobs. A new report from Good Jobs First documents their widespread use, which is far more common than most people would imagine.
One great aspect of this report is that it goes beyond the two examples of interstate border wars we hear the most about, New York-New Jersey-Connecticut and Kansas-Missouri. We learn about Texas and Georgia vs. the world, North Carolina-South Carolina (especially in the Charlotte metro area), Tennessee-Mississippi (particularly with Memphis as target), and Rhode Island-Massachusetts. In addition, we learn more about the flip side of job piracy, retention subsidies, of which Sears’ two in Illinois are the most egregious.
For example, Continental Tire moved its North American headquarters and 320 jobs from Charlotte to Lancaster County, South Carolina, in 2009. Georgia gave Ohio-based NCR Corp. (formerly National Cash Register) $109 million to relocate that same year. In 2010, Hamilton Beach received at least $2 million to move from Memphis to Olive Branch, Mississippi, while in 2009 McKesson received $4 million from Mississippi in addition to local incentives to move from Memphis to neighboring DeSoto County. Rhode Island, in a widely publicized move, gave Boston Red Sox pitcher Curt Schilling’s video game company 38 Studios a $75 million loan to move from Massachusetts in 2009, only to see the firm go bankrupt in 2012. There are many more examples in the report, but you get the idea.
The existence of relocation subsidies makes it possible for companies to demand incentives to stay in a particular state, i.e., retention subsidies. Two of the three largest ones went to Sears in Illinois, $168 million in 1989 and another $275 million in 2012 when the 1989 deal expired. The second largest was $250 million to Prudential Insurance from New Jersey in 2011. But many more states have had to shell out retention subsidies on a regular basis.
The report notes that at least 40 states know how to write no-raiding language into their subsidy programs, because they already have such language banning intra-state relocations from receiving subsidies under various programs. However, as far as I know, far fewer states prevent their cities from giving relocation subsidies to in-state firms, though the report shows that Maine’s Employment Tax Increment Financing rules do provide that.
What is necessary, the report argues and I wholeheartedly agree, is that states need to tweak their program language to stop rewarding interstate job relocation as well. They need to stop efforts to directly poach existing firms, something Texas is heavily engaged in. The report says there is a “possible” federal role here, to withhold some Department of Commerce monies from states that engaged in job piracy. I, on the other hand, think that federal action is the only way it will happen. As I’ve written before, voluntary state efforts in the 1980s and 1990s to end job piracy have been utter failures, and the states clearly need an outside enforcement mechanism, which can only be provided by the federal government.
With such extensive documentation of how widespread relocation and retention subsidies are, hopefully more people can be mobilized to get the federal action we need.
Cross-posted from Middle Class Political Economist.
Well, they don’t have the advantage of being nonunion now, so we use taxes as the gambling chips.
I noted in the past how Fritz Hollings could not see how his promotion of the nonunion south to raid the northeast for jobs was exactly the same as the outsourcing he was railing against.
Well, they have succeeded in removing the unions which has left them without a “market” advantage. Sadly, the reality is that the advantage they saw was actually a disadvantage as we are now experiencing: lack of money in the hands of the many.
The continuation of tax gifts is only making things worse. However, as long as these monster corps can offset the loss of growth in their host nation by creating “emerging” markets, the demise will stay hidden.
Unless the states suddenly have too many jobs and too much economic development, this will continue.
Should we have the federal government micromanage this issue? No.
STR: Should we have the federal government micromanage this issue? No.
Seems to me that is the wrong question. I would ask would fed gov micromanagement be beneficial to “we the people”. If not, NO. If yes, WHY NOT?
The fed does not have to micromanage, it simply has to tie it’s money sent to the state to that which the state decides to give to a business for relocating. Sanders has proposed such and I believe others who have looked at this issue have proposed similar.
Thus, when a state give away money and property along a road the fed helped to build, they simply take back that money because obviously the state has money to waste.
However, the fed could keep it even simpler and require actual numbers as to whether such a give away can truly pay for its self plus produce a gdp gain in the state via jobs created. I’m confident none of these deal can meet that mark.
It really is a simple problem to solve…if we believed in doing as we used to: set the parameters and let the market meet them.
It was a cold rainy boring night so I go to the Good Jobs First website and downloaded their position paper.
Turns out it had very little to do with jobs and a lot to do with every progressive-left position (urbanism, unions, green, sprawl, racism, classism, etc etc) rolled into one weird stew.
Typically they hate on business but then want business to create lots of high paying union jobs in the right place with the right energy sources and diversity and flowers and puppies etc.
I’m not denying the problem but this outfit will not be our salvation.
i would be inclined to agree with you that “issues” are often taken over by “lefty” progressives who forget that, say, half the people who need Social Security are not lefty progressives and proceed to take up every lefty cause and alienate all the non lefties.
but the “pro business” sites are similar… they use “pro business” as a wedge to sell insane right propaganda
and in particular “pro business” often means “i am too stupid to understand that every man for himself ends up costing every man money. money he would have had more of if he used he government to manage the needed cooperation to maximize solutions.
STR: regulating is not micro-managing. As Daniel said, and the report suggests, the federal government can threaten to withhold certain funds if states don’t comply. That is the approach that was used with raising the drinking age to 21 – the feds threatened to withhold highway funds.
Personally, I don’t think the drinking age should have been raised, but for me the tool is the issue. This one is a lot less intrusive than having federal troops come into your state to enforce desegregation, for example.
you have to understand that “micro managing” is code for “letting state officials use taxpayer money to give to corporations in return for “favors” to the officials.
there is probably no constitutional reason why the Feds need to interfere with this game. But you’d think the honest-government states, if there are any, would see a reason to cooperate with each other to avoid being played for suckers in this game.
but that’s hard for them to do as long as “pro business” folks can chant “micromanaging” to themselves while waiting for their next big opportunity.