Saturday, December 1, 2012

Corporate welfare alive and well and surviving austerity budgets across the US

This is fascinating, and isn't it a bit amazing that it isn't a common measurement undertaken by the government?
The New York Times spent 10 months investigating business incentives awarded by hundreds of cities, counties and states. Since there is no nationwide accounting of these incentives, The Times put together a database and found that local governments give up:
  • $80.4 billion
    in incentives each year
  • 1,874No. of programs
An interactive map follows, which shows which states give what amount and for what projects.  Big bubbles over Texas, the most generous state when it comes to corporate welfare.

Considering how much budget trouble most of the states are in--most have significantly cut social spending--the $80B figure seems astounding, especially if the incentives don't pay off. For example, here's a paper that shows tax incentives aren't typically worth their high cost even if they play a role in securing an investment (itself a dubious proposition).

Here's a fun part of the Times story:
The Times identified 48 companies that have received more than $100 million in state grants since 2007. Some 5,000 other companies have received more than $1 million in recent years.
And they provide this handy visual guide:

No one shoud be surprised to see this list (does anyone NOT own or use any of the products or services of these companies?), and yet it ought to be universally shocking just how much welfare the world's most fierce proponent of the free market gives to its top companies, and this is only on the state, county and city level. Consider some of the top welfare recipients:
  •  General Motors: Awarded at least $1.77 billion ($1.76 billion since 2007) from 208 grants in 16 states. 
  • Amazon: Awarded at least $348 million ($304 million since 2007) from 22 grants in 9 states. The online retailer has been building more distribution centers across the nation, which have created thousands of jobs. In several states, has used those jobs as a tool to negotiate delays in online sales tax collection. 
  • Microsoft: Awarded at least $312 million ($232 million since 2007) from 20 grants in 4 states. The Fortune 500 corporation benefits from a state program in Washington that allows high-tech companies to waive sales tax on many purchases. It has also benefited from local incentives aimed at data centers, which do not tend to hire many people. 
  • Dow Chemical: Awarded at least $217 million from 187 grants in 7 states. When the longtime Michigan-based company decided to build a solar factory, the state kicked in $140 million and the federal government $20 million. The total aid is around the same amount Dow is spending on the project.
This draws a pretty clear picture about the shifting of state resources: because of declining tax revenues, states have moved away from health care (cut by 31 states), services to the elderly and disabled (cut by 29 states and DC), K-12 education (cut by 34 states and DC), higher education (cut by 43 states), etc (all discussed here).  The Times report shows clearly that corporate welfare has emerged on top in terms of state budgetary priority.

Oh, so much more at the links.

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