The Great American Job Scam

By Lakshmi Chaudhry, AlterNet. Posted July 27, 2005.

We increasingly live in a Wal-Mart America, where the hours are long, wages low, and benefits non-existent. Where have all the good jobs gone? The debate over jobs has for the most part been obscured by partisan rhetoric, corporate spin and media hype. Screaming headlines about outsourcing jostle those of corporate fraud. But in the end we're none the wiser about how to create a better future for ourselves and our children.

Greg LeRoy's new book, "The Great American Job Scam: Corporate Tax Dodging and the Myth of Job Creation," offers at least part of the answer in exposing a system that subsidizes corporate greed at the expense of the taxpayer. Today, states, counties, and cities cannibalize their own communities in the name of "attracting business," which entails competing with one another to waste vast amounts of precious taxpayer dollars in the form of corporate subsidies. As LeRoy demonstrates in his book, these subsidies are not just "unfair" but also entirely useless. Companies routinely pocket the money -- all $50 billion of it each year -- without delivering either the promised jobs or tax revenues.

LeRoy spoke to AlterNet from his office in Washington DC.

Lakshmi: So what is the "great American job scam"?

Greg LeRoy: It's an intentionally rigged system that enables companies to get huge tax breaks and other taxpayer subsidies by promising good jobs and higher tax revenues -- and then allowing them to fail to deliver and suffer no meaningful consequences.

And this is a system that costs the American tax payers $50 billion a year?

Right, that's the estimated total spending by states and cities.

One of the points you make in the book is that it is very hard to get this data, right? There is no disclosure, with these corporate deals being negotiated behind closed doors. So the very heart of your argument -- that corporations don't deliver on the increased tax revenues, increased jobs, etc that they promise in return for these tax breaks -- is obscured by this lack of disclosure.

People who develop these estimates at the state level are dealing with broad aggregate numbers. It would tell you nothing about any specific company, whether it did or did not create jobs, did or did not generate tax revenue. In most states, we are completely in the dark.

Having said that, 12 states now have some form of annual company-specific disclosure. We're very excited because just recently Illinois, just began reporting data. There are four states now that disclose some of their data on the web and we think Illinois is the best.

Whose interest does this secrecy serve? It obviously serves the interest of the corporations, but it's surprising that state governments have not pushed for more disclosure.

It obviously serves lots of peoples' self-interest to hide what's going on: the companies who get the big tax breaks and don't want people to look carefully at the outcomes; the politicians who often frankly know this is bad public policy and don't want to own up to it. Often the effects of these tax breaks play out over many years. So you have one governor hand off budget potholes to the next governor and so on. So there's lots of buck-passing going on. There's lots of self-interest in these things being hidden.

One of the most striking things in your book is this ridiculously lopsided power relationship between public officials and corporations. The politicians are almost like members of a harem vying for the king's attention, or in this case, a company's favor.

A lot of the scams that you describe -- as in extorting these huge subsidies without delivering any kind of return -- comes from the fact that different states are competing with each other to land a corporate deal. Have we always had this war among the states, almost a kind of mutual and assured destruction?

That's really the nub issue. It's the power dynamic both among states and companies and among suburbs and companies -- because this harem/king dynamic, as you put it, plays out at the regional level as well as at the multi-state level.

No, it was not always like this, and I tried to sketch the major kind of milestones along the way where I think the dams really broke. There's the birth of a site location consulting industry we got with Fantus, and its growth in the '50s and '60s is part of the story. The secretive consulting industry hides in the shadows and specializes in playing states and cities against each other on behalf of the companies it represents. By the '70s, we had done this thousands of times.

Lakshmi Chaudhry is the former senior editor of AlterNet.

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