Tag Archives: states

How states subsidize corporations while cutting education

I wrote a bit ago about how states are “tightening their belts” by cutting education. You may think that’s fair, since most states have to balance their budgets. The problem is where they are spending money: big corporations. David Cay Johnston has the newest scoop on the tax incentives states give to corporations:

The fast-increasing use of tax incentives by all 50 states has failed to increase jobs or investment, two respected experts on state tax policy found after reviewing more than 50 years of giveaways.

This year, state government subsidies to corporations, partnerships, and other businesses in New York state alone will total $1.7 billion, triple the giveaways in 2005, according to the new study. That’s $235 taken from the average Empire State household this year and redistributed to business owners on the theory that redistribution will create jobs.

During those years, the number of jobs in New York declined, the state’s official jobs data website shows.2 The total number of New Yorkers employed in 2012 was down 175,000, or 2 percent, compared with 2005.

Think of it this way: Over nine years, the state of New York gave businesses roughly $10 billion, or almost $1,400 from each household, in a jobs program that eliminated 175,000 jobs at an average cost of $57,000. And that’s just state-level subsidies, not those from industrial development agencies.

The 143-page study by Marilyn M. Rubin of John Jay College and Donald J. Boyd, former director of the Rockefeller Institute of Government State and Local Government Finance research group, was prepared for the New York State Tax Reform and Fairness Commission created by Gov. Andrew Cuomo (D). But its findings apply to all 50 states, where tax incentives have been growing like weeds since the turn of the millennium.

Corporations force states to compete to get factories. Matthew Yglesias reports on how insane it’s getting:

It’s no secret that big companies with lots of jobs to throw around try to strike good deals with state and local governments in exchange for deigning to locate there. ButBoeing’s wish list for building a 777X factory is extremely ambitious. For example, they would like to build the factory in a city that will pay for the entire building of the factory, with the following three points listed as desirable:

— “Site at no cost, or very low cost, to project.”

— “Facilities at no cost, or significantly reduced cost.”

— “Infrastructure improvements provided by the location.”

That’s a little nutty. If your strategy for attracting the construction of an airplane factory to your town includes footing the entire bill for an airplane factory, then you might as well just launch an airplane manufacturing company. You can read the whole list here. They are ideally looking for a highly skilled yet low-wage workforce at a location with a dedicated railroad spur and a seaport. Plus low taxes!

The balls on these companies. Seriously.


Corporations Take Battle Against Labor to the States

With gridlock and discord halting the right’s agenda in Congress, corporations have taken the war on labor to the states. The Economic Policy Institute recently released a new report, “The Legislative Attack on American Wages and Labor Standards, 2011-2012,” authored by Gordon Lafer. The report  documents a coordinated corporate attack on unions, workplace production and fair wages led by organizations like ALEC, the Chamber of Commerce and Americans for Prosperity.

Among other rollbacks, “Four states passed laws restricting the minimum wage, four lifted restrictions on child labor, and 16 imposed new limits on benefits for the unemployed.” These laws rarely were demanded by economic circumstances. For instance, Gov. Scott Walker’s famous push to end collective bargaining for Wisconsin’s public workers came after they had assented to “significant benefit reductions.” But the true motivation for Walker’s plan was not closing the budget gap, but rather crushing organized labor.

The report documents a nationwide crackdown on organized labor:

  • Fifteen states passed laws restricting public employees’ collective bargaining rights or ability to collect “fair share” dues through payroll deductions.

  • Nineteen states introduced “right-to-work” bills, and “right-to-work” laws affecting private-sector collective bargaining agreements were enacted in Michigan and Indiana.

Lafer notes that collective bargaining for teachers has been curtailed even in states like New Jersey and New Hampshire that rank in the top ten states for educational attainment.Pension reform, which is too often merely a guise to slash benefits and divert pension funds to expensive hedge funds, occurred in states like Wisconsin, Florida, and North Carolina, where pensions were far from underfunded.

Instead the states all share one thing in common: Republican governors. Similarly, Lafer points to evidence that the states that laid off the most workers were not the states with the highest deficits, but the states with the most far-right legislators. For instance, the 11 “newly red” states (those where the Republican revolution of 2010 gave Republicans total control of the legislature) and Texas accounted for 71.8 percent of the public jobs eliminated in 2011 but only 12.5 percent of the aggregate budget shortfall.

These legislators often follow by the letter the model legislation of organizations like ALEC which are rooted not in economics, but ideology. A recent report by Peter Fisher finds that ALEC, “fails to predict job creation, GDP growth, state and local revenue growth, or rising personal incomes.”

New Hampshire, for instance, repealed the minimum wage over a gubernatorial veto. The House Speaker (who is an ALEC member) cited the need to stimulate job growth – presumably an ALEC talking point. But in truth, economists have found no link between a minimum wage hike and an increase in unemployment, and research indicates that a higher minimum wage can create jobs by stimulating demand.

The attack on unions is incredibly important for national politics. The Organization for Economic Cooperation and Development (OECD) data for 2008 (the most recent year for which all countries are available) shows that the unionization rate for America is far below average. This means that in America we have two parties beholden to corporate interests and no counterbalance. Demos’ report, Stacked Deck, shows how politicians are more responsive to the interests of their wealthier constituents. There should be no surprise thatlower unionization rates correlate with higher levels of inequality. But if the union movement in America remains suppressed by powerful corporations, it’s hard to imagine anything other than ALEC-style legislation winning the day.

Similarly, the cruel austerity practiced by states actually deters growth. Adam Hersh, an economist at the Center for American Progress finds that states that cut public spending face bigger employment losses. After the Great Depression, expansionary federal fiscal policy was undermined by state-level belt-tightening. Across the country, Republican governors pass radical tax cuts and then use the budget hole to justify cuts to public services, which voters assent to feeling they have no other option. But as Lafer notes,

Indeed, if elected officials were simply concerned with closing budget gaps, they had many alternative methods for achieving this end without cutting essential services. For instance, in 2011 the deficits in all 50 states could have been erased entirely through two simple policy changes: effectively undoing the Bush tax cuts for the top 2 percent of income earners by imposing an equivalent income tax at the state level, and taxing capital gains at the same rate as ordinary income.

Instead of pursuing higher revenues, states slashed their most crucial investment: education. Lafer writes, “In 2010–2011, 70 percent of all U.S. school districts made cuts to essential services.” This was coupled with new laws in four states (Idaho, Wisconsin, Michigan, and Maine) rolling back child labor standards.

Lafer argues that rather than being a “localist” strategy tailored to each state, the attack on labor has been a coordinated one, and it has been focused on battleground states: Michigan, Indiana, Pennsylvania, and Ohio. If the corporate money machine can hobble unions and public employees in battlegrounds, they can influence key national elections.