Obama, tea party should agree: Stop state corporate welfare

May 23, 2011|By Jay Hancock

Last week's party for GM's electric motor plant in White Marsh had all the ingredients for the start of construction of a major U.S. factory: a ceremonial groundbreaking, anodyne political speeches — and millions of dollars in free money from taxpayers.

General Motors is paying for barely half of the $244 million plant. The automaker is relying on $105 million from the Energy Department and more than $10 million from the state of Maryland and Baltimore County.

It's the kind of payoff that has become fashionable again now that the economy is growing and corporations are committing some of their hoarded billions to capital projects and relocations.

Motorola Mobility just shook down Illinois taxpayers for $100 million they can ill afford by threatening to move headquarters to Texas or California. Navistar got Illinois to promise $65 million in emoluments last year after engaging in similar intimidation.

Now Sears, knowing that appeasement is the gift that keeps on giving, is laying ground for its own Illinois payoff, saying it might leave the state after existing commitments expire next year.

This kind of thing has been going on for decades, to the mutual benefit of the companies that pocket the money and the state politicians who claim credit for "saving" jobs. Maryland has given large amounts of money to Marriott, GM, Morgan Stanley, the Sparrows Point steel mill and many others.

But the climate has never been better to outlaw state bribes made in the name of job creation. The tea party, opposed to corporate welfare by temperament and declaration, should join Democrats and the Obama administration to stop governors from underwriting their ribbon-cutting photo ops with taxpayer dollars.

Federal corporate welfare will probably always be with us, as demonstrated by the futility of the recent attempt by congressional Democrats to end ridiculous subsidies for oil companies. But Congress can do states a favor by stopping them from eroding each other's budgets by engaging in bidding wars to see which can offer the most lucrative corporate giveaways.

The National Labor Relations Board under President Barack Obama has earned deserved scorn for intervening in an interstate jobs dispute between Washington and South Carolina. The NLRB filed a formal complaint against Boeing, saying its 2009 decision to open a nonunion 787 Dreamliner plant in Charleston was an illegal retaliation against union workers in Washington state.

By that standard, the government should sue every Fortune 500 company that put a factory not just in the South, where right-to-work laws make it more difficult to organize workers, but in China, Mexico or anywhere else unionization is unlikely.

What the tea party should understand is that state and city "incentives" to retain or attract employment represent the same kind of government meddling.

Incentives are politicians picking economic winners and losers, something every libertarian should oppose. Incentives for companies such as Sears or General Motors obliterate the principle of equal treatment under the law, which small-government types should abhor. Incentives distort the free market by inducing companies to make investments they might otherwise reject.

States and cities should compete for jobs on their broad economic merits, not with fussy, expensive deals for political favorites and whining CEOs.

"Don't cut taxes for one company," the late Republican Del. Robert H. Kittleman, who hated targeted economic development incentives, told me once. "Cut taxes for everybody and let them go compete."

Or, if you're a Democrat, perhaps, raise taxes for everybody, if you believe worthy programs need the revenue and if you think higher taxes will help or at least not significantly harm the business climate.

What liberals should understand is that state corporate welfare is not "pro-business," as is often claimed by chamber of commerce types. It doesn't create jobs. It costs states billions just to shuffle jobs from one place to another. On a national basis it does nothing to boost employment.

Lefties have opposed state economic development subsidies for years. Tea party types in South Carolina, Illinois and elsewhere have figured out that one-time blandishments for favored corporations go against what they believe.

The problem is that reform can't be achieved in state capitals. States and governors can't help themselves. Corporations know they can pit state against state. Unilateral disarmament in the corporate giveaway game is not an option.

The solution has to come from Congress, which can save states from themselves by outlawing tax breaks, grants and other bribery aimed at only one or a few companies. It's something Democrats and Republicans should be able to work on together if they can jointly reject the objections from big business.

So the next time General Motors contemplates a new Maryland plant, it can choose the state based on its considerable overall merits, not a special payoff. (Except maybe from the federal Energy Department!) The governor can still have a ribbon-cutting party, but the bill sent to taxpayers won't be nearly so large.


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