Tag Archives: governing

Home Advantage

I’m not ready to move on from the subject of yesterday’s post, which was triggered by the efforts of numerous cities to lure Amazon’s second headquarters.

Let me just share two additional observations, one from a recent study reported in Governing, and one emerging from a recent argument in Indianapolis’ City-County Council.

The Governing article shared a study done by the Urban Institute.

In choosing New York and D.C., Amazon opted for two cities that have led the economic expansion since the end of the last recession in 2009, far outpacing the rest of the nation in job growth. The decision drew the ire of politicians at the state and federal levels, along with others who had called on the tech giant to place its second headquarters in a city where it could play a more transformative role in the economy.

Yet a new study from the Urban Institute suggests that landing such a large corporation isn’t actually the best way to build a local economy and spur job growth.

If give-aways massive enough to “steal” large employers–to lure them from City A to City B (in what certainly seems to be a national zero-sum game) isn’t a sound growth strategy, what is?

Instead, the report says, cities should focus on growing existing local firms, not trying to lure out-of-town companies and poaching firms from other cities. “Most job expansion and contractions come from birth and deaths of homegrown businesses or expansion or contractions of existing home-based businesses,” says Megan Randall, a research analyst with the Urban-Brookings Tax Policy Center and a co-author of the report.

According to Randall, when so-called “marquee companies” locate in a new city, they tend to displace existing businesses, especially mom-and-pop stores. Supporting and expanding homegrown enterprises has been a more successful strategy for adding job growth.

Worse, giving up tax revenues to lure a new company puts a strain on local services, particularly schools.

As New York University business professor Scott Galloway put it in an email to Barron’s on Tuesday, the tax incentives from New York amount to “an elegant transfer of funds from municipal school/fire/police districts to Amazon shareholders.”

Cutting into services and school budgets makes the local workforce less attractive in the long run, and the location less alluring, the Urban Institute report notes….

Cities would be better served, according to Randall and other economic policy analysts, by improving schools and public services, and focusing on nurturing their existing network of businesses.

When a city offers tax giveaways to lure a company, the government goes into the negotiation with a marked disadvantage because of what economists call “information asymmetry.” The city doesn’t have all the information about what the company is looking for. In some cases, a company may choose a city it would have moved to anyway, pocketing the tax incentives even though they weren’t a deciding factor.

“Firms are in a advantageous position,” Randall says. “They know cities want to attract jobs and create opportunities for their residents. They know they are in the position to leverage a public benefit from what they have to offer.”

What the article calls “negotiation” is more often–and more accurately–described as extortion. And that brings me to a recent dispute in Indianapolis’ City-County Council.

Corteva is a company formed last year, as part of Dow Chemical’s mega-merger with DuPont. Delaware-based Corteva—which includes the local operations of Dow AgroSciences—is set to be spun off as a public company in June 2019, and it employs about 1,400 workers in Indianapolis.

The City-County Council approved 30 million dollars to “incentivize” the company to maintain operations in Indianapolis.  Most Councilors weren’t happy about it.

The incentive deal authorizes the issuance of $30 million in economic development revenue notes to Corteva from the city of Indianapolis, which would be paid back with about $5 million annually in tax increment financing funds that the city had been passing through to government units such as schools, libraries, parks, police and fire protection. Those entities would no longer receive those funds while the notes are being paid off.

The council voted 18-7 to approve the deal. Democrats Zach Adamson and Stephen Clay voted against the plan as did Republicans Jeff Coats, Danielle Coulter, Janice McHenry, Jefferson Shreve and John Wesseler.

Even council members voting yes weren’t happy.

“It’s not the best deal; I’m not excited about it,” said Democrat Jared Evans. But he said the long-term benefit of keeping the jobs in the community outweighed the short-term harm to the taxing units.

Zach Adamson characterized the incentives as “nothing short of extortion;” he was exactly right. Far too much of what passes for “economic development” is better described as bribery and/or blackmail. “What will you pay us to come?” and “What will you pay us to stay?”

These deals steal money that would otherwise be used to improve the local quality of life. And as the Urban Institute study reaffirmed, the quality of life–good schools, good parks, convenient transportation, effective public safety, etc.–is what really drives job growth and economic development.

When you rob Peter to pay Paul, you just make both of them poorer.

 

Another Last Straw

Every morning since January 20th, Americans have awakened with foreboding: what new attack on reason and sanity has our tweeter-in-chief launched today? And what excuses for inexcusable behavior will spineless GOP Senators and Representatives offer this time?

Optimists wil predict that this (insert latest outrage) will be the final straw. Realists respond that, given the invertebrates in Congress and the ship  of fools that is the cabinet, it won’t be.

Yesterday, we woke to discover that Trump unilaterally and abruptly ended the Obamacare subsidies that make health insurance affordable for millions of Americans. Every single health-care organization in America opposed this action, but if there’s one thing we’ve learned about Donald Trump, it’s that he’s a know-nothing unwilling to listen to people who actually know something.

Congress failed to “repeal and replace” the ACA, so Trump has evidently decided to simply destroy it. The fact that many people will die is obviously of no importance to Mr. Me Me Me. In his zeal to destroy the ACA (and all vestiges of Obama’s legacy), he had already cut the enrollment period for 2018 in half, cut 90% out of the advertising budget and eviscerated the so-called “navigator program” that helps people through the ACA enrollment process.

At the Washington Post, Catherine Rampell warns that Trump’s sabotage is likely to destroy the system.

President Trump has made a lot of promises on health care.

Somehow, though, I don’t remember him promising stadiums of cheering fans that he’d take away protections for preexisting conditions, increase deductibles, spike premiums, eliminate basic coverage requirements and, more generally, destabilize the individual health-insurance market.

After explaining what yesterday’s Executive Order will and will not do, Rampell concludes that this impulsive and destructive act was “pretty much on brand for this nihilistic president: When you can’t come up with a new system that works, just blow up the old one.”

One of the most maddening aspects of Trump’s Order is that withdrawing the subsidies will actually cost the federal government money. A lot of money. The Kaiser Family Foundation has estimated that “savings” of 10 billion dollars would be offset by a rise in premium tax credits to 12.3 billion. In other words, the federal government will be paying  2.3 billion dollars more by making health insurance unaffordable once again for untold numbers of Americans.

The CBO projects that cutting off the subsidies will cause premiums to rise 20 percent by 2018 and 25 percent by 2020, and will increase the budget deficit by nearly $200 billion by 2026.

It’s really expensive to screw over the American public, but don’t expect the man with the tacky gold toilet to worry about budgets.

A number of people have compared Donald Trump to Richard Nixon. Admittedly, there are parallels:  Nixon was also mentally ill, also a bigot, and also willing to sacrifice American lives for political advantage.  However, despite his paranoia and some truly unforgivable–even treasonous– decisions, Nixon was intelligent and informed. He knew how government worked and what it was for, and he made some good decisions, including creation of the EPA and opening relations with China.

Trump is profoundly ignorant of government and policy, is clearly uninterested in learning, and is the loosest of loose canons. In ten short months, the man Rex Tillerson has (accurately) described as a “fucking moron” has made America an international laughing-stock, and his irrational behaviors toward North Korea and Iran have brought us dangerously close to nuclear war.

With Trump, I worry that the final straw will be a mushroom cloud.

Democratic Heresies

My husband and I have had a long-running argument about primary elections. (Hey–you argue with your spouse about whatever is important in your house, and we nerds will argue about what preoccupies us…)

My husband insists that primaries have contributed mightily to political polarization. It’s unarguable that the people who turn out for primary elections are more partisan and ideological than other voters, and he’s nostalgic for the smoke-filled rooms where party elders chose candidates more likely to appeal to the moderate middle.

My rejoinder has been that more democracy is good, and smoke-filled rooms had their dark side. We just need more competitive primaries, and more people voting in them.

Now, a respected scholar at the Brookings Institution has weighed in…on my husband’s side.

Noting the recent resignation of the Speaker, she writes

John Boehner became Speaker at a point in time when four different reform ideas—all enacted with the best of intentions—interacted in ways that made his job impossible. These are structural and will impede the job of the next Speaker as well.

Primaries. The United States is one of the very few democracies in the world that uses primaries to nominate the members of the legislative branch. That means, for all practical purposes, anyone can become the nominee of a political party simply by declaring, running and winning. It also means that defying the party leader, in this case the Speaker, has very few consequences. While Boehner has been able to strip some of his problem members of committee assignments that has not proven to be a very powerful tool. Unlike leaders in parliamentary parties, Boehner cannot decide to keep someone off the list for bad behavior. And primaries are notoriously low turnout events in which a small group of ideologically motivated voters can control outcomes. Thus it is no wonder that Members of Congress have come to fear being “primaried” more than they fear displeasing the leadership.

She identifies three other “reforms” and their unintended consequences: parties (actually, their loss of power; they have less clout than billionaires with SuperPaks), privacy (which has diminished, taking with it the ability to negotiate in relative confidence), and pork (eliminating the goodies that everyone criticized also eliminated the ability to wheel and deal and actually get stuff done.)

I hate it when my husband turns out to be right….

Andrew Sullivan Nails It

From the once-Republican, always thoughtful Andrew Sullivan, who says it better than I ever could.

The question is: how will this all end? How much damage will be inflicted while we wait for resolution–and on whom?