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Because They Can

February 24, 2019 (692 words)

I live and work in a well-off suburb that is a Republican stronghold, with “Democrats Need Not Apply” signs posted prominently at most every polling place come election season.

Each acquaintance and co-worker, friend and neighbor – literally every single person I come in contact with – is of the opinion Amazon was recently ambushed in Queens (NYC) by a motley crew of tax-and-spend liberals who don’t know the first thing about generating legitimate economic activity.

Among various items of concern for these deplorable progressives, a major sticking point of the proposed HQ deal was the elaborate package of tax incentives and subsidies being offered to the tech giant by state and local government, to the tune of $2.8 billion.

Conservative distain for government is so great, and the unthinking admiration for that story-book concept known as free-market capitalism so reflexive, these otherwise sensible folk never question why we, the general public, in the guise of our state and local government, must provide financial incentives so as to entice successful conglomerates into locating a brink-and-mortar facility in our communities.

…taking their ball and going home

If the free market is about open competition and keeping government out of the way, what are we to make of the “geography sweepstakes” major corporations have been conducting in recent years, pitting struggling states and municipalities against each other?

In this scenario, government is not just “picking winners” – something free-market enthusiast have long distained – it is bestowing those already-crowned winners with publically-funded largesse.

So it’s a paradox of the highest magnitude that conservative Republicans and libertarian think-tank scholars are lambasting progressive Democrats over Amazon’s decision to “take their ball and go home” regarding the Queens HQ deal.

Once we digest that ideological contradiction, however, we are still left with a highly unappealing situation. It’s one thing for successful corporations to seek out a skilled workforce, an efficient and well-maintained system of roads and public transportation, good schools, public parks, cultural and recreational amenities – everything that contributes to important “quality of life” considerations.

But when did throwing in juicy tax breaks become part of the picture?

This is another example of the eroding social contract that once existed between business and the surrounding community. The “changing economy” has left countless states and municipalities in a precarious financial position, hanging on by a thread.

In response to this dire state of affairs, corporations have selfishly chosen to think of themselves as rootless free agents, available to whatever geographic location can offer the most lucrative package of financial incentives.

…might makes right, as always

It is painfully obvious successful corporations have all the leverage in these negotiations. They coyly demand rebates and subsidies from the public trough, simply because they can. This is where our enlightened, rational, democratic ethos has led us.

Conventional wisdom justifies these lavish concessions with the promise of windfall tax revenues that will accumulate in the future, once said facility is up and running. These projected revenues are always presented as paying for the up-front concessions many times over.

This was again the case with the Amazon HQ project in Long Island City, Queens. We were told the $2.8 billion in tax incentives would eventually generate some $27 billion in tax revenue.

But experience has shown the alluring math doesn’t always add up. We have all read many a follow-up story by respected journalists who publish their findings in the mainstream media, detailing how those rosy tax revenue projections often fail to materialize, for one reason or another.

There is little public accountability, in any case. It’s as if the politicians are just relieved to have one less empty building or decimated block in their city, regardless of whether the initial five or ten year plan regarding tax revenue ever pans out.

Since there is no alternative economic development plan to be had, struggling municipalities have no choice but to enter into the next hostage negotiation with fingers crossed and eyes shut, hoping this time, finally, the proposed deal might actually pan out for the good of the locals.

Robert J. Cavanaugh, Jr.
February 24, 2019

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