November 20, 2019

The Real Welfare Queens

Guest Column
By Amy Kerr Hardin | Aug. 24, 2019

It’s rare that I agree with the Koch brother-funded conservative think tank Mackinac Center for Public Policy. Hen’s teeth come to mind. After all, they’ve had a hand in shaping some of the worst public policies in Michigan’s recent history. Their boondoggles include vigorous support of the Emergency Manager law, which resulted in the Flint water crisis. They have also backed disastrous privatization schemes in state prisons and public schools. They advocated for the union-busting Right to Work law. They oppose environmental protections, renewable energy, and are climate deniers.  
 
But last month they published a spot-on opinion piece calling for an end to corporate subsidies in Michigan. These are tax breaks and other incentives offered to companies in exchange for the hope that they will stay in the state, help grow our economy, and create jobs.
 
According to a subsidy-tracking database maintained by the watchdog group Good Jobs First, Michigan is third worst in the nation for doling-out mostly unnecessary corporate giveaways. The good news is, the state previously clocked-in at second place, but recently got bumped by Louisiana which forked-over $25 billion to corporate extortionists. New York leads with $34 billion in strong-armed largesse, and Michigan dealt nearly 18 thousand individual subsidies totaling $15.5 billion. It’s worth noting that Good Jobs First readily admits that their data collection system has some holes in it. Local-level subsidies often fly under the tracking radar.
 
They also track a special category they term “megadeals” which are subsidies exceeding $50 million. They typically are a patchwork of multiple state and local subsidies negotiated as a package deal. For example, General Motors scored a $2.3 billion whopper of a megadeal in 2009 from multiple sources. Automakers are frequent shoppers in the megadeal business in this state, and elsewhere. The bulk of the big breaks have gone to Ford Motor Company, General Motors, Fiat-Chrysler, and DowDuPont. Over the years, these four entities have netted a combined unearned total of $9.4 billion in Michigan taxpayer cash.
 
General Motors, who has taken more than $3.3 billion in handouts from Michigan’s workers, announced last month the closure of their Warren and Hamtramck plants leaving thousands jobless. Next time we hear someone whine about “buying American” we can honestly say “we already did, but just don’t have the car to show for it.”
 
Once these companies know a state or municipality is extortable, they come back time and again demanding more money or they threaten to move to another state. Far too often, each job they "create" costs taxpayers more than the worker's salary. If we choose to provide a tax break incentive, it should also carry a proviso that they must pay it back in treble damages if they close-up shop and leave the state or if they cut jobs merely to window dress their quarterlies for investors. Corporate subsidies rarely produce results for local economies.
 
Why do states and municipalities put up with the unending extortion then?

Termed an “economic war on states”, it’s a corporate ploy to pit state-against-state and community-against-community in competition over development projects. And what’s worse is state and local officials know that they will be blacklisted if they are caught communicating among themselves. The entire bidding process, and the resulting deals are a blackbox operation. Corporate operatives have ramped-up their taxpayer-funded racketeering enterprise since the Great Recession with full knowledge it’s all done behind closed doors.
 
Good Jobs First provides some solid policy insight through an in-depth report which reaches beyond the Mackinac Center’s simplistic solution of just ending the corporate largess without thought to the ancillary impact. They cite a well-known ugly state-against-state battle: “The recent auction staged by Amazon.com, Inc. for its second headquarters, or “HQ2” location, has rightly outraged many Americans. How is it, many ask, that a company valued at almost $1 trillion and led by the world’s richest person could be allowed to stage a public relations blitz that caused hundreds of politicians — Democrats and Republicans alike — to publicly grovel, many of them offering undisclosed, multibillion-dollar subsidy packages?”
 
What’s to be done to stop this runaway subsidy train?
 
They suggest we may start with cease-fire agreements between states. This idea is particularly compelling when a business is located near a border and can leverage the fact that it provides employment across state lines. Another thought is to establish legislative subsidy caps and for limitations to be placed on governmental bodies, but that only works if implemented at the federal level. States have to be on the same page in keeping corporate welfare in check. Federal incentives to prevent state-to-state job piracy would similarly go a long way toward creating employment stability. Unfortunately, President Trump has headed in the opposite policy direction, and is actually encouraging “job wars” between states. An additional legislative initiative that would certainly help is the disinfectant of a little sunshine on the entire process. Let’s make all subsidy agreements subject to open records laws in all 50 states.
 
Currently there is a bipartisan push in the Michigan House to curb these excesses. Their budget calls for a $55.6 million cut to corporate welfare — that’s slightly north of 50 percent of what they normally set aside for tax breaks and subsidies. The budget process is messy and typically involves lots of horse trading in the form of tax breaks, so don’t expect any changes any time soon.

Amy Kerr Hardin is a retired banker, a regionally known artist, and a public-policy wonk and political essayist at www.democracy-tree.com.

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