Corporate America's Jobs Scam
By Lawrence Wallack, Dean of the College of Urban and Public Affairs at Portland State University and a Senior Fellow at the Longview Institute, a California-based think tank. (Editor's note: The author of the book reviewed below, Greg LeRoy, will be speaking in Portland on August 19. Details here.)
Congressman Earl Blumenauer is my congressional representative in the 3rd district and a guy I really respect. A while back I was at a meeting with him and he was providing a candid assessment of some of the craziness going on back in Washington (one of my favorites was a random factoid regarding aircraft carriers that get 10 feet to the gallon). I remember thinking, “Boy, it must be scary to know the stuff that the congressman knows.”
Well, Greg LeRoy’s book, The Great American JobsScam: Corporate Tax Dodging and the Myth of Job Creation, is the kind of book about stuff you really need to know but wish you didn’t. It is scary to know this stuff goes on every day and it’s good to have a book that provided the documentation and ideas about what to do to stop it.
LeRoy is the founder of Good Jobs First, an organization promoting corporate and government accountability in economic development. He has a long track record in monitoring corporate welfare issues and his book provides a fairly sordid photo album of the worst examples of corporations feasting at the public trough courtesy of the taxpayers.
Remember Ronald Reagan’s frame of the welfare queen who drove a Cadillac? Well, if LeRoy had the same PR people behind him that Ronald Reagan did maybe national corporate icons such as Dell, Wal-Mart, ConAgra, Raytheon, Fidelity Investments and many others would have some tarnish on them as the new welfare kings.
This book is about how the “who’s who” of the corporate world get money thrown at them to relocate where they are inclined to relocate anyway and to create jobs that never seem to be created, or are created at an exorbitant cost, or even sometimes lose jobs. It is hard to tell whether city and state officials are just stupid or actually corrupt, but one thing is for sure – there is a scandal of monumental proportions going on and LeRoy is blowing the whistle.
In a kind of crazy world where everything is reversed LeRoy explains how the poor pay more, the schools get less, and jobs, despite the best economic modeling, just don’t seem to materialize as promised.
LeRoy provides lots of examples and through nine chapters makes his case about a huge public policy investment that makes things worse, not better; tilts the playing field more, rather than levels it; and, ignores lessons from empirical research that could provide some rationality to the process. Unfortunately, you will get depressed reading about the private deals allocating huge pots of public money where the details are kept from the public. You will learn new terms such as “single sales factor,” “Certified Capital Companies” or CAPCOs, and “tax increment financing,” and “property tax abatements.” You will also learn new meanings for “enterprise zones” and “blighted areas.” Is was Woody Guthrie who wrote, “Some will rob you with a six-gun and some with a fountain pen.” Unfortunately JobsScam shows how communities, and in some cases entire states are being robbed by public policy gone silly.
While the entire book is clearly written (though it is easy to get lost in some of the details) I found the chapter on sprawl to be particularly interesting in the context of some of the issues we face here in the Portland metropolitan region. Perhaps nothing sums up the craziness of providing incentives for developers in suburbia as much as this quote from Lyle Wray, a Minneapolis Citizens League member cited in the book, “Subsidizing economic development in the suburbs is like paying teenagers to think about sex.”
Despite the depressing aftereffects of public policy gone amuck and public officials blinded by some kind of crazy faith in a mystical “business model” that can solve problems, LeRoy does provide a glimmer of hope. His final chapter, Building a New Consensus for Reform, provides a series of 12 specific recommendations that are clear, simple, compelling and make a whole lot more sense than the scams and giveaways that promised jobs and prosperity. Some examples include: disclosure of the deals, accountability so that if a company doesn’t deliver the taxpayers get some of their money back, any job created has to have a living wage, school boards need to vote on give-aways that erode the tax base that goes to support the schools (by the way, this was one of the most shocking aspects of the book – corporations that complain about poor school systems but don’t want to pay their fair share), and other recommendations that leave you scratching your head and muttering, “of course.”
The bottom line for LeRoy -- we should be investing in developing skills and supporting infrastructure, not making it easier for corporations to disinvest in the communities where they are located, “By getting our taxpayer dollars out of private deals and into public goods, and by integrating our jobs strategy with land-use planning, we can spend less and get more.”
The bottom line on this book is that is should not only be read but studied by community activist, planners, and public officials. If just one “deal” could be prevented it would be a life achievement. In addition, it would be wonderful book to use in a wide range of courses on government and public policy. Unfortunately, to understand the world we live in, we need to understand the points that Greg LeRoy put before us. Fortunately, he has done his work well.
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July 18, 2005
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11:19 a.m.
Jul 18, '05
LeRoy's smart, he's focused, and he's taking on a huge cultural misunderstanding. It's an uphill battle against business folks who can simply say "Give us subsidies -- you want jobs, right? -- or we'll go elsewhere." People grok that. It's harder to show, although LeRoy does his best, that there's no need to give all sorts of hand-outs to most companies in such a short, intiuitive way.
Read up. Be smart. Tell your legislators and your city and county commissioners. Buy 'em the book. Give 'em summaries. This is a great chance for labor, social service and schools advocates, environmentalists, etc. to work together.
Jul 18, '05
Oregon is demure and lovely, and it ought to play a little hard to get. And I think you'll all be just as sick as I am if you find it is nothing but a hungry hussy, throwing herself at every stinking smokestack that's offered.
Jul 18, '05
I am a little puzzled by this note from the book and included above -- "and by integrating our jobs strategy with land-use planning"
I believe that the jobs jobs jobs moniker is subject to abuse without regard to who is promoting the isolation on the nominal jobs counts over some actual and real beneficiary.
Our land use planning models already try to accommodate jobs, at least to the extent that it might be relevant to land use planning, by assuring a mix of zoning so that jobs can be close to places to live. It prevents the jobs from all going to one side of town and housing on the other, where rush hour traffic would be an even worse nightmare.
I tend to look at the disparity in access to capital between mom and pop shops versus huge outfits (that in the retail context are characterized as big box stores). Many European countries tried to hold off the onslaught of big box stores, but ultimately failed due to the demands of forming the Common Market.
The jobs jobs jobs moniker should be substituted with a more encompassing public goal that embodies individual choices related to occupations and the real American Dream of opening up some sort of mom and pop shop that one can pass on to one's kids. A job is just a job, and is by definition a fleeting thing. A job is like a job helping to construct the Timberline Lodge. Once the project is complete the job itself goes away. The jobs jobs jobs thing sounds a whole lot like a plan to build then tear down and then rebuild Timberline Lodge as if we were in the movie Groundhog Day.
One key obstacle is the capital market distortion favoring huge companies that are recipients of capital from huge investment trusts. The tax laws pertaining to retirement accounts siphon off local savings to these far away decision makers and thereby destroy all mom and pop enterprises.
The jobs-only goal in relation to land-use planning context is no more appropriate than was the use of land use planning as the mechanism to try to halt the Rajneeshes and their alternative lifestyle.
When the state and federal government allow investment within ones own mom and pop shop to be accorded the same tax treatment as that now favoring the delegation of investment decisions to remote trustees then we might improve the economic and entrepreneurial prospects of local folks against the big box advocates.
Imagine the effect, for example, of perhaps prohibiting the Oregon Investment Council from making investments in any company with a market cap of 25 million dollars that does business in Oregon. This is the opposite end of the investment choice spectrum. The 2003 legislative authorization to Credit Suisse to take a measly 100 million and invest it locally in small business is so laughable that I can only laugh at it. It cannot come close to overcoming the negative effects of OIC sponsored leverage buyouts of Fred Meyers or PGE, and the OIC aid-through-investment in Wal-Mart, for example. (I can think of the OIC as a stand in, or analytical proxy, for the collective efforts of like entities across the entire country.) The significance of investment choices and tax laws have so much more influence upon jobs and occupational and entrepreneurial choices that the resort to land-use laws to affect jobs is like a gnat, and a politically subservient gnat at that.
Jul 18, '05
When my family members who shop at Wal-mart ask me if I shop there, I say, well, sort of.
I tell them taxpayers pick up more than $1,000,000,000 in annual subsidies to help the biggest company in the world's workers eat, go to the doctor and pay the rent.
http://www.napawash.org/resources/peirce/Peirce_6_6_04.html
It's the suburban, Republican way, I guess. And they won.
Jul 18, '05
Sid,
Could we demand the the OIC divest themselves of any investment in Wal-Mart? It is a component of the S and P 500 which is referenced to make direct stock purchases for the Exchange Traded Fund SPY. The OIC had owned SPY back when Enron was still on the scene and thereby benefited (if you can call it that) through such ownership from anything Enron did to make actual profits or to pump up the resale value of Enron stocks. The OIC would likely have to sell any SPY that they hold in their portfolio in order to effectively divest themselves of Wal-Mart stock. (Thus divesting their investment in other philosophically bad actors.)
I think the anti-wall-mart campaign could be expanded to get our own OIC out of the business of destroying local mom and pops. I could go for that head over heels. But I must be free to criticize the OIC with the same vigor as I would any multi-national from the perspective of a local target in a typical lesser developed country that is the focus of "Economic Development" efforts by the so-called experts.
I really do not see much difference in flooding a foreign market with cheap food so as to destroy the local farmer's profitability and the flooding of the local market, here, with under priced imported stuff. The OIC favors, through their investments, such a flood of under priced imports, which destroys the profitability for any local production. The OIC favors monopolization, but claim that it will be beneficial because they will invest socially responsibly. What a crock!
There is thus a genuine Economic Development based argument to oppose Wal-Martization, but it has nothing to do with land use laws. (Check out the editor of the LUBA Digest from nearly ten years ago if you think I am not fully apprised of the full spectrum of issue's that pertain to land use in Oregon.)
Signed -- The Wild Economist
Jul 18, '05
You can buy Greg's book cheaper at walmart.com, but progressives ought to buy it at Powell's.
Jul 19, '05
Lawrence Wallack: You will learn new terms such as “single sales factor,” “Certified Capital Companies” or CAPCOs, and “tax increment financing,” and “property tax abatements.” You will also learn new meanings for “enterprise zones” and “blighted areas.”
JK: Multnomah county’s lost tax $$ due to “tax increment financing,” and “property tax abatements amounts to over $20 million in abatements and over $50 million in tax increment financing in our urban renewal districts. Details are at www.saveportland.com
Lawrence Wallack: “Subsidizing economic development in the suburbs is like paying teenagers to think about sex.”
JK: I agree, the only thing worse is subsidizing development in overpriced cities like Portland is doing to the tune of $250 million in N.Macadam and did to tune of around $150 million subsidizing the Pearl.
Lawrence Wallack: “By getting our taxpayer dollars out of private deals and into public goods
JK: Good stuff.
Lawrence Wallack: “. . by integrating our jobs strategy with land-use planning, we can spend less and get more.”
JK: What is this? I thought we wanted to end subsidies. Are we to subsidize certain politically correct actions? Why not just cut off ALL corporate welfare and let the private sector spend whatever they want - its not our problem if they don’t “spend less and get more”
JK: Integrating our jobs strategy with land-use planning suggests that we should subsidize something to accomplish this goal. Isn’ this against the basic premise of this book?
Lawrence Wallack: The bottom line on this book is that is should not only be read but studied by community activist, planners, and public officials. . . . If just one “deal” could be prevented it would be a life achievement.
JK: Especially public officials that are giving hundreds of millions to developers to develop the Pearl and the N.Macadam.
Thanks JK
Jul 19, '05
Posted by: Governor Tom McCall | July 18, 2005 11:36 AM
JK: Now you have risen the dead.
Thanks JK