Corporate Welfare Didn't Start with Trump's Carrier Deal: Its Been a Bipartisan Boondoggle for Decades
This article was first posted at Labor Notes.
President-elect Donald Trump achieved something extraordinary when he cut that recent deal with Carrier/United Technologies.
Not the jobs. I’m talking about the torrent of outrage he triggered regarding public subsidies for big business.
In exchange for retaining upwards of 800 jobs at its Indianapolis facility, Carrier will reportedly receive $7 million in tax credits from the state of Indiana. Trump has “set a dangerous precedent that companies can easily shake down taxpayers with the mere threat of outsourcing jobs,” declared the Democratic National Committee. The press howled—“an awful idea,” read a typical editorial. Even Sarah Palin called it “crony capitalism.”
That is all true, but there’s one problem: corporate welfare has been a bipartisan boondoggle for decades. That these tax giveaways have largely benefited hugely profitable companies like Carrier, at the expense of workers and their communities, has failed to garner much media scrutiny until now.
In town halls and statehouses across the country, Democratic and Republican officials are doling out $80 billion worth of incentives to businesses every year. The federal government kicks in billions more.
What’s dubbed “economic development” is often simple extortion with a fancier title. CEOs deftly exploit the desperate desire to create (or merely retain) jobs, reaping the windfall as governors and mayors compete to offer up the best bribes. These payouts are enormous. Struggling West Virginia, for instance, awards incentives equal to one-third of the state’s budget.
In this bonanza, the big winner is big business. At least three-quarters of state and city subsidy dollars go not to local enterprises, but to the uber-profitable corporate 1%: companies like Boeing, Intel, GM, Nike, and Dow Chemical. Foreign operations like Royal Dutch Shell and Nissan rake in big bucks courtesy of American taxpayers as well.
And the deals keep getting bigger. Corporate watchdog Good Jobs First has recorded hundreds of “megadeals,” like the $5.6 billion that New York State gave Alcoa, or the nearly $9 billion that Boeing extracted from the Washington state legislature. These colossal packages carry with them an average cost-per-job of nearly $500,000. So Trump’s Carrier compact, at about $9,000 per job, is a comparative bargain.
Subsidies don't work
Advocates of subsidies insist they create jobs, but at best that’s hard to prove. There’s rarely proper follow-up, so it’s usually impossible for citizens to assess whether the tax breaks they paid for are delivering as promised.
The numbers that can be ferreted out are unimpressive. Missouri’s incentive program, initiated in 2005, promised some 46,000 jobs—but only 7,100 had materialized by late 2012. The state nonetheless doubled down and committed to a record $629 million in tax credits that year. “Missouri’s economic development strategy,” the editors of the St. Louis Post-Dispatch wrote scornfully, “is this: Listen to pitch from guys in suits. Give them money. Promise jobs. Say nothing when jobs don’t appear.”
Or, even worse, subsidies go to corporations that make existing jobs vanish. In 2011 Mitsubishi received $29 million in incentives for pledging to keep its factory open in Normal, Illinois. Four years later the plant closed anyhow, putting 1,200 United Auto Workers members out of work. By the terms of the deal, Mitsubishi was not obliged to pay the state back.
And these subsidies underwrite labor’s biggest antagonists. Union-buster Walmart has received over $1.2 billion in taxpayer assistance. Boeing, when it threatened to move, forced concessions from the Machinists with one hand while pulling in tax breaks with the other. Caterpillar, subsidized in several states, has frozen wages, slashed benefits, and locked out its employees. (Adding insult to injury, Cat’s lavishly compensated CEO frequently complains that his own taxes are too damn high.)
The employees at Carrier, members of the United Steelworkers, are relieved, as we all should be: every good union job matters. But billionaire Donald Trump, filling his cabinet with the Wall Street elite, is no genuine friend to labor. In short order it’s likely that the engines of corporate anti-unionism will hit full throttle, further eroding living standards for the 99%.
Let's demand better
The Carrier deal, though, provides an opening to press for policies that truly would generate well-paying jobs. The billions spent on subsidies would be far more wisely devoted to schools, roads, and mass transit. Such expenditures would create work immediately, and in the process build the environment that businesses, large and small, require to thrive. In your state and your hometown, take a good look at what constitutes “economic development,” and demand that these dollars be spent for the public good.
On the national scale Trump says he wants infrastructure spending. Let’s hold him to that, but fight for government investments that strengthen communities, rather than phony “public-private partnerships.”
We can curb corporate greed rather than reward it. Bernie Sanders called for penalizing those corporations that outsource jobs by ending their subsidies, cancelling their government contracts, and increasing their taxes. Trump has pledged “retribution” against American companies that move jobs elsewhere; if he means that, he should sign on to Sanders’ legislation. All Democrats should too.
For we must reject the argument that manufacturing job loss is the inevitable price paid for “progress.” Companies like Boeing, Caterpillar, and Carrier move or close plants not because they must, but because they can.
Stock prices soar, executive pay skyrockets, and public funds swell corporate coffers—while misery is visited on one factory town after another. That’s not progress, and none of it is inevitable. It happens when business leaders and politicians, in both parties, value profit over people.