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from the self-defeating-interstate-competition-for-jobs dept.
The Progressive reports:
Wisconsin is now poised to reward Foxconn with a whopping $3 billion "incentive" package--the fourth largest "mega-deal" in U.S. history. (That figure works out to an incredible $231,000 per job, and does not include the local subsidies that are invariably a part of such deals.) The bulk of this subsidy would be paid out in cash.[1]
[...] Wisconsin is jumping into the self-defeating interstate competition for jobs, in which U.S. states spend a collective $110 billion[2] on tax breaks and other sweeteners reserved mostly for the largest and most profitable companies like Foxconn, which raked in $2.26 billion in profits last year.
[1] Paywall after x visits per month.
[2] Link in TFA is just a search: http://america.aljazeera.com/search.html?q=%24110+billion.
(Score: 5, Insightful) by MrGuy on Tuesday August 01 2017, @03:07PM
It's about what's in the POLITICIAN's best interest. That's why this scam works, and why it's common.
The politicians who sign off on the initial deal can claim a win. We created jobs! We're putting people to work! Yes, we gave them some subsidies that reduce the benefit of the deal, but look how if we amortize those over the next 10 years on a set of assumptions that the jobs continue forever and we never pay the company subsidies again ever, then look how we came out $50 million ahead! You're welcome, Wisconsin! We're great job creators!
Of course, if the jobs go away at the end of the subsidy period, or if they have to give back all $50 million (and then some) in new subsidies to keep the jobs, then the state is actually worse off, because all the money they supposedly "created" is wiped out, and they can often wind up in the red overall, because all the benefits that made those subsidies worth it are in the tail of the economic model.
But a.) nobody really follows up on this over the long term (the press has a notoriously short attention span), and b.) even if it does, nobody blames the politicians responsible. First, it's 10 years later and they're not necessarily even in the same job anymore. Second, if anyone gets blamed, it will be "that greedy company!" for holding jobs hostage (even though that behavior should have been predicted). And, third, even if they trace the blame to the original politicians, they can always blame "the current administration" for bungling the deal.
States frequently lose these deals. But they're absolutely a clean win for the politicians responsible. They get a boost as a "job creator," and are almost entirely insulated from blame when the forecasted profits fail to materialize.