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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

Racing to the Bottom

Yesterday when trolling regional newspaper websites, I ran across an article in the Atlanta Journal-Constitution with this depressingly familiar intro:

State government incentives offered to lure technology company NCR to Georgia are worth at least $96 million, according to an Atlanta Journal-Constitution analysis. That is $36 million more than the state estimated when the deal was announced last week.
The $96 million tally does not include another part of the incentive package, a state grant. Officials confirmed late last week that Georgia has offered the grant but refused to say how much money is involved.

Everything about those two graphs is typical of the game of mega-project competition among the states, where taxpayer subsidies of corporations always seem to creep ever upward as time goes by, and with state officials happy to boast about the payoff (in this case, 2,120 jobs split between two locations) for their pinstriped safaris, but less forthcoming about the costs.
The NCR deal was significant because it was the first big Georgia corporate giveaway under a new law designed to cut special deals for big projects–the famous “mega-deals” that get headlines and provide rich press conference opportunities for pols (usually a trifecta of investment announcements, ground-breakings and ribbon-cuttings where the same relative handful of jobs gets feted repeatedly). As the AJC story noted::

Georgia offered the incentives at a time when the state is desperately in need of cash as the recession depresses tax revenues. But economic development experts said it would have been virtually impossible to attract a major employer without a lucrative package of incentives.

Anyone familiar with this issue knows, of course, that the kind of “economic development experts” who perpetually justify big corporate subsidies are often the very people who are paid to put them together, working for elected officials who don’t much think corporations should have to pay taxes in the first place.
The sad thing is that Georgia used to be very proud of refusing to engage in race-to-the-bottom competitions to thrown public money at high-visibility corporate relocation projects. When I was working there in the 1980s, state officials scoffed at our neighbors in Alabama, Tennessee and South Carolina for trading years and years of revenues for foreign-owned auto plants whose owners demanded massive concessions in multi-state negotiations. Indeed, the state’s tradition of resisting special-interest tax breaks was symbolized by a sales tax exemption for purchases of crab bait by commercial fishermen–which was famous because it was the only such exemption that had ever gotten through the state fiscal watchdogs in the General Assembly.
Those days are long gone. The NCR deal almost looks efficient compared to the $410 million package put together by Georgia in 2006 to get a 2,500-job plant built along the Alabama border (and probably employing many Alabama taxpayers) by Kia.
Worse yet, you get the sense that economic-development-via-corporate-subsidies–a practice so ancient and notorious in the South that opposing it was a primary impetus for the original Populist movement–is getting less controversial, even, or perhaps especially, at a time when state government officials are cutting essential services to balance their books.
A separate AJC article yesterday on the NCR deal ought to come with a Raiders of the Lost Ark sound-track to illustrate its tale of swashbuckling GA bureaucrats outpandering those in Ohio, NCR’s previous home. Wonder how it would all come across if the actual costs had to be reflected: “Yessir, we’ll ante up 5,000 kids losing health insurance, and raise you a freeze in school construction. And have we mentioned we don’t like unions around here?”
Check out this 2007 article by John Sugg in the libertarian magazine Reason for a good if intermittently nauseating account of the use of corporate subsidies as a development tool in the South. He managed to find a number of “economic development experts” who don’t think these giveaways pay for themselves, or are actually necessary for development, or are really much more than an especially perverse form of public financing for the campaigns of the politicians who sign the deals and take the credit.

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