NY Times and corporate welfare

It must be fun to be an editor at the NY Times.   Obama’s auto bailout was a grand, principled effort that saved an industry.  State and local handouts to the auto industry is the terrible corporate welfare.  It is true that Obama’s auto bailout could have been worse for the U.S. taxpayer but there is a strange kind of duplicity in the reporting.

I was asked to comment on the broad investigation that the NY Times has done on corporate welfare with is a theme they revisit every couple of years.

There are a few points to make here.

One, as I have said every time this issue comes up I would be fully supportive of a North American wide ban on ‘incentives’ however that would end up being defined.   However, I think it would be enomously challenging to get agreement and I also believe it ‘could’ lead to an even more pernicious race to the bottom.   The logic of this is simple.  If all states, provinces and local governments agreed to no more tax abatements or grants, they would just move to reducing tax rates for all in an effort to be more competitive.  That would end up with even less revenue coming in the door.

It is also true that it ‘could’ lead to governments spending more on what really matters to foster positive economic development such as infrastructure, talent development, immigration, etc.

In my opinion, places like New Brunswick would be better off in a zero incentives world.  If you look closely at the data, you will see that the larger urban centres tend to give out the largest incentives.  This applies in Canada as well as long as you expand the range of ‘incentives’ to include support for the life sciences sector (Toronto), aerospace (Montreal) and video game development (Vancouver).  Tax breaks to incentivize oil sands development have been worth billions but only indirectly to the urban areas in Alberta.

In the end, I cannot advocate this region unilaterally disarming from the incentive wars.    If we can show a clear ROI from a public investment and if the project is being wooed by other jurisdictions offering the gravy train – I don’t think we have the luxury to walk away.

I’ll make a final point.  The NY Times sets the standard for ‘word smithing’ in the US but I think they fall prey to using inappropriate language in this instance.

I am not sure how ‘property tax abatements’ can be considered a ‘grant’.  Again my knowledge of the English language may not be up to snuff but in my understanding a ‘grant’ in a cash payment of some kind while a foregone tax is a foregone tax.    You wouldn’t say General Motors got a ‘grant’ if Michigan reduced its corporate property tax rate to zero but the benefit to GM would be exactly the same.

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