Call it, if you will, the crack cocaine of state and local governments' economic-development
practices — their endless flow of tax breaks and outright gifts to private
corporations they want to land, or figure they have to pay off to stay put.
Today, the practice runs so deep, pervading such a huge number of corporate
location moves, that officials — even those who privately admit it's an
insane, zero-sum system — keep on forking out the cash, no matter how
incredibly costly the addiction.
For years, Greg LeRoy has been America's chief whistle-blower on the subsidies,
which he now estimates add up nationally to an eye-popping $50 billion a year.
LeRoy's just-published book, "The Great American Jobs Scam" (Berrett-Koehler)
tells the story in full and colorful detail.
There's the story of how Raytheon, threatening to move defense operations
out of Massachusetts in the '90s, got the Legislature to give it tax breaks
of some $21 million annually — and then proceeded to reduce its Bay State
payrolls by 4,100 people, or 21 percent, anyway.
In New York a few years ago, Mayor Rudolph Giuliani offered $940 million
to keep the New York Stock Exchange and its 1,500 jobs in town — even
though many of its member firms had already been subsidized to stay in Manhattan.
The payoffs continue. North Carolina, for example, recently offered
Dell, one of the nation's most successful technology companies, $225 million
in tax incentives over 15 years to bring 1,500 jobs into the Piedmont Triad
When Los Angeles was hit by aerospace-defense cutbacks and civil disturbances
in the early '90s, economic development officials in a dozen Western states,
like sharks sensing blood in the water, mounted aggressive job-piracy efforts
to capture L.A. industries with public subsidies.
As for Wal-Mart, the world's biggest corporation, LeRoy has totaled
up more than $1 billion it has received from municipalities in brick-and-mortar
subsidies for its stores and warehouses — which end up throwing Main Street
merchants out of business and feeding the sprawl machine that befouls our air
and drives up government costs.
A good chunk of the payoffs to Wal-Mart, Home Depot, Target, et al., LeRoy
reports, are based on enterprise zone and "tax increment" district
financing that were originally designed for lagging older cities, but are now
turned into subsidy machines to eviscerate historic communities even further.
So what's to be done? First, says LeRoy, "disclosure-disclosure-disclosure";
when the public is informed, the jobs blackmail diminishes. Then set up "clawback"
recapture provisions when a subsidized firm doesn't fulfill its job-producing
promises. Stop all subsidies for retail deals, except in truly depressed inner-city
But the really fresh ground LeRoy plows is a big reminder to us that the scramble
for jobs that ignited the subsidy wars will soon be pointless — and simply
With baby boomers headed toward retirement, we're likely to face an enormous
shortage of skilled workers. From 1980 to 2000, the pool of prime-age (25-to-54-year-old)
workers increased by 35 million; from 2000 to 2020, the expansion will be just
3 million. Teachers, nurses, expert workers of all sorts will be in desperately
short supply. Huge new efforts (and spending) for work-force development will
be critical to stop a slide in the United States' standard of living.
At the same time, America's physical plant is suffering from serious disinvestment
and deterioration. Traffic congestion is costing our economy $67.5 billion a
year; thousands of bridges need replacement; wastewater systems are in bad shape;
more than 3,500 dams are now deemed unsafe; transit spending is far below what's
needed to maintain even the inadequate systems we now have. The American Society
of Civil Engineers totals the repair bill at $1.6 trillion. Discount that 50
percent and the pending bills are still staggering.
The bottom line, says LeRoy: "We need reinvestment, not disinvestment."
It's time to take a "fine-tooth comb" to the $50 billion states and
cities are now spending for corporate promises of jobs. Any subsidy that doesn't
serve compelling public need by creating more skilled labor, or doesn't provide
a "carrot" for companies to invest in new skills development, should
go on a list for likely elimination.
It's time, LeRoy concludes, for sweeping reform of the subsidy policies and
to recognize them for what they are: "wasteful handouts we can no longer
He's right: When will we ever learn?