Opportunity costs?
You list several benefits, but benefits don't tell us where a choice ranks in the list of possible alternatives.
For example, the alternative where we get all those benefits, but where there weren't any incentives at all, seems strictly better. Why not that?
You'd probably protest that it's not realistic. We can't get there in the current system, where powerful companies can play states and municipalities off of each other and require the best incentives before they are willing to make any useful choices.
But a lot of us think that system sucks.
When the powerful have opportunities to rewrite local policies on the fly, it doesn't feel right. Doesn't matter how many benefits there are.
This isn't a new or irrational ideal. Much of the Western canon on governance obsesses about the importance of the rule of law: the idea that the laws should apply to commoners and kings (or powerful companies) equally.
It's a principle a lot of people hold very dearly, and are unwilling to sacrifice for a few temporary benefits that we might have been able to achieve anyway, if we just had a better system in place in advance.
Does it mean that everybody has the same taxes and the same governmental benefits/incentives? For examples, if somebody buys an electric car (in California), they get government subsidy and the benefit of unrestricted use of a carpool lane. I don't get this if I don't buy that car. Should I protest this? How about if I put my money in 401k/IRA, it doesn't get taxed, but if I invest it in my own brokerage account, it does? Isn't it laws not applying equally to all people?
You can say - well, the government wants to encourage certain behavior and thus different behaviors have different tax consequences, different benefits and so on. Well, what if the government wants to encourage behavior of commercial mega-corporations investing in specific areas?
I personally would gladly give up all encouragement of behaviors in favor of simple, plain and transparent tax system that is not being used as social engineering too. Good luck passing that through the legislature. And if this doesn't happen, targeting specifically Amazon deal makes little sense.
If carpool lanes were built for the exclusive use of Patrick Stewart, widely loved though he may be, as an inducement to live in California, then yes, we would have the same problem.
> Good luck passing that through the legislature.
Social change is hard, it doesn't mean it's not worth discussing.
There has been periodic political interest in fixing this, and some regions have actually opted out:
https://www.washingtonpost.com/news/wonk/wp/2014/09/15/shoul...
I don't think they've nailed the right formulation yet for a broader fix. Definitely a hard problem. But if economists universally oppose some practice, and it's also widely unpopular, it's not the craziest thing to imagine a potential for change.
> And if this doesn't happen, targeting specifically Amazon deal makes little sense.
I'm not targeting one deal specifically, all of these arrangements bother me. But if that's the incentive that happens to dominate the news it will frame the conversation. If the media blitz was about the breaks Tesla got in Nevada, that would be the backdrop here.
Amazon created this media circus with the competition, it gets to be the poster child for the broken system. It's not that big of a hardship, no one is calling for Amazon to be broken up or fined to fix this broader issue.
That's not true - a lot of companies get such kind of deals, all the time. Some even mentioned in this thread.
> If carpool lanes were built for the exclusive use of Patrick Stewart, widely loved though he may be, as an inducement to live in California
If Patrick Steward would bring California several billions in income by living there, then maybe giving him private lane would be a good deal.
> Social change is hard, it doesn't mean it's not worth discussing.
It's worth discussing, but nobody would listen to a proposal for reducing government economic meddling. Everybody love to pile on Amazon and such, but when they go to vote, they ask politicians "bring us jobs". How do you think that would look like? It looks like this - politicians hustle so they can say they brought jobs. In the next election the New York mayor - if Amazon thing works out - would say to his opponent "ok, I brought X thousands of jobs and Y billions of income to New York, here's the list of deals I arranged. What did you do for New York?". And the electorate would listen and support that. So how could they not do it?
> But if that's the incentive that happens to dominate the news it will frame the conversation.
That's the problem. The government meddling happens all the time, but we only discuss it in "outrage of the day" format. But in this format it can never be fixed. Even if somehow enough people become outraged that the deal falls through - Amazon has a long line of mayors willing to do the same. And vast majority of people outside of the "outrage of the day" format think that's exactly what the government is supposed to do. So what's the point of being outraged here? Nothing would change, because that's what people want!
Large retail companies are ubiquitous in our society. It takes a certain degree of socioeconomic privilege to be able to choose not to buy things from them.
Amazon is a great company in a lot of ways, not great in some other ways, and none of that has anything to do with my opinions on local governance.
Or as Yogi Berra might have put it, this Amazon story isn't really about Amazon anyway.
Now if you weren’t a price or convenience-sensitive consumer who didn’t shop on Amazon out of moral conviction, I would at least respect your perspective. But if you shop on Amazon, I’m not sure you get to quote Yogi Berra.
This is about the game, not the player.
Though now I'm misquoting Ice T too...
A trillion dollar company is getting subsidies, when they should be helping to build and grow the society that created them.
Healthcare in America is disgraceful. Absolutely the worst in the developed world. Tens of millions of people in your country live on food stamps. Tens of millions work multiple jobs and are still considered "in poverty". Higher education is so expensive it's prohibitive or puts people in crushing debt for a very long time. General infrastructure is horrendously bad.
The whole point of a society is that everyone contributes to make it better for everyone. When a trillion dollar company gets to pay less that they're supposed to, it makes society worse, not better.
The goal of the society should be to make life better for everyone living in it NOT to raise the stock price of what is already one of the biggest companies in existence.
> When a trillion dollar company gets to pay less that they're supposed to, it makes society worse, not better.
That's where you went wrong. A trillion dollar company is not supposed to pay anything to New York. The minimum NY was getting is $0. That's the starting point. Amazon is free to locate HQ in any other place and NY gets $0 from it. Now, NY can negotiate and get more than $0 - or not, and get $0. It's not like Amazon has already build headquarters and paid taxes and then NY decided to give them back a lot of money just out of the blue. It's like Amazon said "I can bring this much money to the table, but what you can do for us so that we choose you? Lower taxes? Better regulations? Something else?" and NYC considered how much Amazon brings to the table and how much they can do to make NYC their choice and they negotiated.
Now you may want to say "if lower taxes makes the city or state competitive and improves outcomes, how comes not everybody gets low taxes?" Good question. Probably the same reason not everybody gets paid six-figure salaries. Some companies (or people) have more economic clout than others and can demand better compensation in exchange for good their bring to the table. If the city (or employer) doesn't want the goods, they are free to refuse the deal.
Your entire post just described, by definition, a race to the bottom.
Obviously the US is winning that race relative to other developed countries, but I'm staggered you think it's a good thing.
It's absurd to think Amazon is doing NY a favor by bringing more than $0.
That's like if I walk into McDonald's looking for a job and they say to me "Well, you currently earn nothing, so you should be mighty thankful we'll pay you even $1/hr".
There are laws against paying people $1/hr for a very good reason - because if they could corporations would do that to maximize profits. All the employees would suffer. The corporation would make more money.
Which is exactly what's happening with Amazon/NY.
You are right that NY will get more money now that if Amazon had not come, but that's also true that my life would be better getting $1/hr than $0/hr.
But is that a good thing? Do we want people to get paid $1/hr? Does that make for a happy and healthy society? Of course it doesn't, and letting Amazon pay less than they should is exactly the same, and has the same outcomes.
I agree, though in this context we tend to term that "competition". In this case we are watching competition between states and localities to improve themselves and their tax bases. This strikes at the heart of how interstate commerce works and what the rights of the States are.
Sections of the country competing with one another and taking various approaches to the same problems trying to find better solutions and proving them in practice is kinda fundamental to the American Experiment...
Securing infrastructure investments with large corporations is the kind of thing that States are concerned with, and they are supposed to compete for the affection and attention of businesses. Tax code is one of the few levers they can pull in that pursuit.
And I'm really happy when there is competition between Apple and one of their suppliers.
What is really sick about what you're talking about, is that it's competition between trillion-dollar Amazon and regular ordinary tax payers.
When Amazon get the upper hand, they get more money, while the tax payers get crappier schools and government programs.
You are literally talking about a corporation taking ('negotiating') bread from hungry people like it's a good thing.
As GP stated, the alternative is that NY doesn't get Amazon's HQ, and gets 0% of $0.
>You are literally talking about a corporation taking ('negotiating') bread from hungry people like it's a good thing.
If you're going to make such an argument, you might as well claim that they should pay 99% in tax, because any lower a tax rate would be "taking bread from hungry people". Of course, this would be stupid: you'd make more money in year 1, the business would go under, and you're now making squat, and all the poor folks go hungry once more (plus the additional of everyone who just got fired). The percentage is not what matters here.
You could argue instead that the overall country is worse off, but the US is a one that encourages state-level competition, and thats how it goes (ideally, states should be efficient with their limited funds, and taxes should be as low as possible to support their various infrastructures; state-competition encourages this, in the same fashion as any other part of the US economy).
And yet lots of companies pay people more than the minimum wage, for some reason. Doesn't that by itself disprove the "race to the bottom" narrative you are suggesting?
A company can't simply dictate how much it pays you, any more than you can dictate how much it pays you. It's a market - in the best case scenario, both sides have lots of alternatives, and the price you get paid is the best that both of you can do (lowest for them, highest for you).
That's a pretty bad comparison. Why would I take the $1 job? I got way more currently. The only reason I would do it is because I'm trapped and I NEED this $1 to live.
Does NYC is trapped right now? Does they NEED that $1 to live? Not at all, they are perfectly fine, they are the definition of not needing that $1.
So it's more like, you are making 75$/h, Amazon is looking for some part time employee and you do happen to have a few hours left in your week that can fit that. They want to know what you can do for them for theses few hours and you accept after a few rounds of negotiation. It's a 2 ways street, Amazon give to the city and the city give to Amazon. What Amazon offer has a value to the city but what the city offer to Amazon has a value too.
There's no regulation for wage increase, is it? There's only a minimum, because it's when you are at the bottom that it can be abused. Once you are not at the bottom, you can negotiate as much as you want. It's the same here.
The big question is how can we make sure we don't abuse that minimum, but that's a whole other issue.
I grew up in Seattle. I know what Amazon will do, but again, your $1 analogy needs a citation. This is beyond hyperbole.
Every negotiation is "race to the bottom" for the side that is paying - they want to pay as little as possible. However, there is the natural bottom for it - as soon as the deal costs more than it brings in - in fact, as soon as the deal costs more that what it brings in, including reasonable profit - the side that is dissatisfied would refuse to make a deal. What would be the point?
> It's absurd to think Amazon is doing NY a favor by bringing more than $0.
Why is it absurd? If Amazon is doing NY a disfavor, why NY wants it? Do they hate themselves? Are they gluttons for punishment? Were they forced into the deal by a secret Amazon ninja army? No, I don't think so - I think they want the deal because the think the deal is good for them. Of course, you know better, but I think for most people your argument is not exactly obvious. Or correct.
> they say to me "Well, you currently earn nothing, so you should be mighty thankful we'll pay you even $1/hr".
They can. And you can say "go fish, I won't work for $1". And then they'd say "well, how about $10 - would you work for $10?" And you'd say "now you're talking!"
> The corporation would make more money.
No they won't - people wouldn't work for them, and corporation rarely are able to make money when having no employees. That's why only about 2% of the workforce earns minimum wage. One would expect the greedy corporations to pay absolute minimum, right? But they pay way more. You'd have to find a theory that accounts for that. I have one, but looks like you do not.
> Do we want people to get paid $1/hr?
We want people to get paid whatever they can get paid. As we can see, it's in about 98% of cases more than both $1 and minimum wage.
> and letting Amazon pay less than they should is exactly the same, and has the same outcomes.
No it does not. I welcome you to consider why business-to-business transaction is different from person-to-employer relationship (hint: people can go hungry and sick, but corporations rarely die from not being able to locate headquarters in New York). It's a business transaction, one that NY made voluntarily, and one that they expect would be very profitable for them. Of course, as everything in life, they might be wrong - sometimes business transactions go bad - but declaring this transaction is wrong because you could've gotten everything and more for free makes no sense. You couldn't have gotten it for free, and dreaming about it doesn't make current transaction destructive for society, quite the opposite - it brings jobs and investment.
I have little trust in city officials and corporations to be forthright about the deal. The bidding process is hidden and full details are slow to come out to protect the deal.
Payouts to corporations has been a pattern and it should be fixed at the federal level. Companies don’t make a bidding war to help local communities, it’s for their own bottom line.
This is a great point. Politicians obfuscate the legislative deal-making process and tech companies sneak all sorts of clauses into EULAs and employ dark patterns in their software. Why should we assume this deal, birthed from the intersection of politics and technology, be any better?
The ink was hardly dry when they turned around and lobbied the Illinois legislature to let them out of their side of the deal -- while keeping the incentives.
The current Foxcon deal in Wisconsin is looking more and more like Foxcon won't be coming through on all their rosy prognostications. Meanwhile, the SE corner of Wisconsin is all torn up, being rebuilt to accommodate them. In addition to all the other incentives.
And again, it will end up a struggle as to how much they get and what their ultimate deliverables will be.
And often as not, the public side of the equation is far outgunned in terms of very expensive and specialized lawyers.
I'd prefer my communities not even engage in this. Don't open that door. Focus on the people and businesses you already have, and on not screwing them for the sake of some outsider's "vision" -- especially when that "vision" is making said outside, and the local "development" talent they've recruited, very much richer.
Are you talking about the Ameritech/SBC merger?
They subsequently acquired the remains of AT&T; a few other things, and the name with which they subsequently rebranded themselves.
My point was more the "money for nothing" aspect; I merely don't remember off the cuff what exact name/branding they had at that point in time. Ameritech got bought out by ("merged with") SBC. Then the "merged" SBC bought the remaining piece of AT&T that included the name. A lot of the tech stuff, that had ended up in Lucent, went instead to Alcatel, IIRC (making a hole in the Omaha tech scene, among other things).
P.S. That's how I remember it, now. I wasn't involved -- well, other than being rather thoroughly shafted by then Ameritech/SBC (and now I seem to recall their carrying such a combined name, during the transition) on a home DSL deployment. I ended up learning from their own rather thoroughly demoralized tech support that almost all of that was outsourced: Installations, IT, etc. One actual Ameritech/SBC employee (or was it before the SBC "merger"?... sigh) told me that all they could do was file tickets. Those went to third parties, and they couldn't do a damned thing about following up on them.
Doing a tracert showed over ten hops -- sometimes well over, before your packets even left their "network" to the wider world. And that was the least of the customer's problems...
I mean it could be some other program, of course. I'm just trying to figure out the history.
"Money for nothing" was my quip, regarding the company's apparent attitude. The company agreed to it all, then started lobbying to get out of their commitments under the deal -- while not giving up the tax breaks and other concessions they'd gained by making said commitments. The agreement bound them to do these things; they turned around and lobbied the Illinois legislature to "unbind" them, while leaving the rest in place.
Anecdotally, even in Chicagoland, they continued to drag their feet until the cable TV companies starting deploying wholesale. Depending on location, this often was some years later. Then, suddenly. the now-AT&T would get serious about their own deployment. Well, kind of serious: Technically, it often still sucked, by comparison.
This is, in my view, analogous to the failures of big ISP's, in various states, until they face competition, for instance by communities finally just rolling their own municipal and/or cooperative broadband. Then, these big ISP's go to the legislature of whatever state and cry (i.e. lobby), "Unfair competition!"
One has to keep telling these stories, so that maybe voters will pay enough attention to their state politics to vote out their elected officials who participate in these giveaways, that someone at sometime conveniently nicknamed "corporate welfare".
Maybe even vote in and support a state attorney general willing to initiate investigations and, where evidence of corruption can be found, send a few of those officials to jail.
From a regulatory economics point of view, telecom deregulation was one of the big success stories, along with airlines and trucking. For the most part, Western Europe copied it. But our wireline infrastructure is still better than every big European country, because we have invested massively in it: https://www.akamai.com/fr/fr/multimedia/documents/state-of-t... (see page 12).
I'll look later for some old articles, if I don't get too distracted.
I'll consider what you describe and what you linked. From memory and off the cuff, it reminds me of all the fiber investment around that time that seemed to undergo a value implosion and leave substantial "dark fiber" waiting for new projects/investments to pick it up. MCI and Wordcom (?) come to mind. (And the bath that some investors took.)
If I was understanding one of them correctly, a year or two ago, my German friends could get high speed wireless Internet (from T-Mobile) at their newly purchased country home in the middle of the Eifel "Mountains" rural... "farmscape", I'll call it, for I think 40 Euro / month. Fast enough to stream, and no data cap.
Meantime, here I was still reduced to just Comcast, as AT&T had over the course of a decade and a half never upgraded my block's line that was so old and poor quality that it wouldn't even reliably support DSL. And I'm in the middle of suburbia in a fairly dense sub-division. Comcast wanted $95/month for their high-speed Internet (with basic cable TV, the way they price their packages; gotta keep their cable TV demographics up). And that was after arm-twisting one of their reps for a discount. In the meantime, that number's up to about $135/month.
Whatever the state of our technology, it's not translating here to effective competition and prices that compare to what friends are getting in Europe. Not even close. In my limited experience.
P.S. On the other hand, I'd hate to buy an expensive laptop over there.
Which is really remarkable when you think about it. There is no other infrastructure that the U.S. does better than Germany or France. Our trains, subways, and roads are shameful compared to theirs. But our internet access is better. That's a real testament to the success of the 1996 deregulation.
"A Year After Merger With Ameritech, SBC Still Hasn't Met FCC Conditions" https://www.barrons.com/articles/SB971041139934224266
I didn't look much for articles about when, if, or how SBC got out of these FCC requirements.
Will Amazon help to pay for the transit and housing required by their move? Because they're sure paying less than they would have if not for the incentives.
In a sense, it will, in the form of the salaries it will pay to the employees using said housing and transit.
One might say that MTA operates at a loss and is subsidized, but this is a known problem of MTA being anything but frugal.
Realty prices in NYC / Brooklyn / Queens are not exactly low, and new construction is incessant everywhere (which is good). Paying renters or even buyers, the new Amazon employees, will finance their part of that.
"About 71 percent of tech employees in the Valley are foreign born, compared to around 50 percent in the San Francisco-Oakland-Hayward region, according to a new report based on 2016 census data."
Implicit in the appeals to diversity is that women and non-Asian minorities are mostly the target as far as increased representation.
LIC was mostly warehouses at one point and you're right a lot of the new units are housing for people moving away from Manhattan. But the concern is not just about LIC; it's about Corona, Astoria, Jackson Heights. These are areas with a lot of immigrant communities, communities that'll start getting pushed out once the Amazonians move in.
Seattle's always been a one horse economy.
(Something like 15% of workers in Seattle are Amazonians.)
Doing some googling:
Amazon Aug 2017 had 40,000 workers in Seattle:
https://www.seattletimes.com/business/amazon/thanks-to-amazo...
Workers in Seattle are currently 425,827
https://datausa.io/profile/geo/seattle-wa/
So the 15% figure is plausible.
Google says that Seattle has a population of ~725k. Let's say that half of them are working. 725k * 50% * 15% ~= 54k.
54k Amazon employees in the city limits sounds at least in the ballpark.
A trillion dollar company does not need subsidies.
I'll try.
It distorts the competition, ESPECIALLY in the case of Amazon which more or less competes with every retailer everywhere.
It sets a bad precedent (yes, yes, water under the bridge) of big corporations expecting these benefits any time they feel like moving around.
NYC has better uses for the money.
It doesn't need the goddamn money, because it's one of the most successful companies in the entire world, ever. It can finance its operations by itself with absolutely no problem whatsoever. It's ridiculous they're even asking for public assistance.
This is a race to the bottom. Sports stadium construction incentives are good examples of this.
Absolutely incorrect. It's been like this for decades, is essentially universal, and this is barely egregious in comparison to past incentive packages. NoVA and NYC weren't even the largest incentive packages offered for HQ2.
https://info.siteselectiongroup.com/blog/top-10-economic-inc...
https://info.siteselectiongroup.com/blog/top-25-economic-inc...
https://info.siteselectiongroup.com/blog/top-25-economic-inc...
https://info.siteselectiongroup.com/blog/top-economic-incent...
https://info.siteselectiongroup.com/blog/largest-economic-in...
https://info.siteselectiongroup.com/blog/largest-economic-in...
We already have ways to turn corporate money into community services. They're called taxes. I'd much rather we as as a community take Amazon's money and build our own schools rather than have Amazon build an Amazon Education Facility and thank them for their time.
If you believe this, I hear Amazon also has a bridge they'd like to sell you...
[0] https://blog.aboutamazon.com/company-news/amazon-selects-new...
What is progress? How do you measure progress? Many politicians claim that the past decade was progress. I don't see it.
>> 2) The city-level incentives are available to any business. State-level incentives (I think 300m) are not.
Any business? I bet that the average entrepreneur living in NYC would disagree.
>> 3) Amazon has pledged to invest in the local community as part of the deal. There are plans for an elementary school and tech education center.
Of course, because Amazon is such a generous corporation. Just ask politicians in Washington; they've also witnessed that incredible generosity first hand on many occasions.
>> 4) The NYC tech sector is more diverse than SV. 47% of tech workers in NYC are immigrants [0]. Is there any evidence supporting the claim that Amazon will ship in majority groups to displace minorities or immigrants?
This will affect real estate prices and will displace people who are living there right now who can already barely afford it.
>> 5) There is direct investment in tech education for minority groups in the city [1]. Therefore it is reasonable to assume that they will receive a chunk of these jobs in the future. If you support increased diversity in tech, it is inconsistent in your beliefs to not support 25k more tech jobs in NYC.
I don't buy these benevolent corporation arguments. Even if you assume that Jeff Bezos was a saint, I'm pretty sure that the many layers of selfish or apathetic middle-managers working under him will find a way to divert much of the funds back to themselves somehow.
>> 6) LIC built almost 2.8k rental units last year. [2] I think they have built 6k this year so far. 28k units were built city-wide last year [3]
Great in theory; but in practice, NYC is full of homeless people.
If you are unsure how to measure something, surely you shouldn't present a result.
Citation? By most metrics we've improved as a society in the last 10 years.
Donald Trump, Brexit, Facebook, opioids epidemic, cryptocurrencies, increased rents, soul-crushing corporate jobs for all.
The world moves forward just fine, and there hasn't really been many differences between America today and America in the 80s from a broader political standpoint. Maybe our country was a better place when unions mattered and the wealthy had a legitimate fear of a socialist revolution should concessions to the middle class not be made, but the fall of the soviet union in many ways put that fear to rest.
2) The city-level incentives are available to any business. State-level incentives (I think 300m) are not.
3) Amazon has pledged to invest in the local community as part of the deal. There are plans for an elementary school and tech education center.
4) The NYC tech sector is more diverse than SV. 47% of tech workers in NYC are immigrants [0]. Is there any evidence supporting the claim that Amazon will ship in majority groups to displace minorities or immigrants?
5) There is direct investment in tech education for minority groups in the city [1]. Therefore it is reasonable to assume that they will receive a chunk of these jobs in the future. If you support increased diversity in tech, it is inconsistent in your beliefs to not support 25k more tech jobs in NYC.
6) LIC built almost 2.8k rental units last year. [2] I think they have built 6k this year so far. 28k units were built city-wide last year [3]
Please tell me what about this is bad.
[0] https://comptroller.nyc.gov/reports/our-immigrant-population... [1] https://codenation.org/ [2]https://licpost.com/long-island-city-had-more-housing-units-... [3] https://www.wsj.com/articles/amenities-war-breaks-out-in-lon...