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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Auto Bailouts and Auto Subsidies

It’s a familiar story by now that a lot of the Republican Senators who led the charge to kill the Big Three Automaker loan package last week happen to represent states with large, non-unionized, foreign-owned auto plants.
But there’s another aspect to this story that’s not very well known outside the South: these foreign-owned auto plants have vastly benefitted from public subsidies as states have competed fiercely to make headlines by landing them.
Mike Lillis provides the pertinent facts in a very useful Washington Independent piece today:

Shelby’s Alabama, for example, secured construction of a Mercedes-Benz plant in 1993 by offering $253 million in state and local tax breaks, worker training and land improvement. For Honda, the state’s sweetener surrounding a 1999 deal to build a mini-van plant was $158 million in similar perks, adding $90 million in enticements when the company expanded the plant three years later. A 2001 deal with Toyota left the company with $29 million in taxpayer gifts.
Alabama is hardly alone. Corker’s Tennessee recently lured Volkswagen to build a manufacturing plant in Chattanooga, offering the German automaker tax breaks, training and land preparation that could total $577 million. In 2005, the state inspired Nissan to relocate its headquarters from southern California by offering $197 million in incentives, including $20 million in utility savings.
In 1992, South Carolina snagged a BMW plant for $150 million in giveaways. In Mississippi in 2003, Nissan was lured with $363 million. In Georgia, a still-under-construction Kia plant received breaks estimated to be $415 million. The list goes on.

If you will allow me a brief tirade based on my own experience in community and economic development work in Georgia back in the 1980s and early 1990s, this is an old, sad story in the South. In dealing with chronic pockets of poverty and unemployment, southern political leaders have eternally faced a choice between long-range efforts to improve educational levels and “quality of life” measurements to attract high-end jobs and stimulate home-grown entrepreneurship, OR short-term efforts to market the region’s weaknesses (cheap labor, exploitable natural resources, hostility to unions and regulation) to individual investors while offering them subsidies that further weaken the public sector. The battle over these two basic strategies has raged across the region for decades, and I’m unhappy to report that the moolight-and-magnolias, come-exploit-us point of view has largely prevailed, particularly, though not exclusively, in states dominated by Republicans.
There’s always been a beggar-thy-neighbor aspect to the corporate welfare game in auto plants, as wily owners up the ante for each plant location or relocation decision. But it’s become acutely evident in the debate over federal subsidies for the Big Three.
But the real outrage for me isn’t so much the hypocrisy of southern Republicans who lead cheers for the despoilation of state treasuries and the abandonment of public priorities in the pursuit of foreign auto plants, even as they self-righteously oppose emergency aid for Detroit. It’s the damage the South has done to itself by choosing the low and fundamentally self-loathing road to economic development.

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