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Subsidies to Foreign Automakers Built 16 Assembly Plants
As I've mentioned before, given the chronic overcapacity in the North American auto industry, every new assembly plant built has meant that approximately one existing one has closed. Good Jobs First recently added up the damage (www.goodjobsfirst.org). Since Honda first arrived in Ohio in 1980, foreign automakers have built 16 new assembly plants in the U.S. (excluding the GM/Toyota joint venture in California and the Ford/Mazda joint venture in Michigan, both of which preserved existing plants) receiving subsidies of at least $3.3 billion (I'm excluding four engine plants from the GJF total). Of that, $2.8 billion came from southern states, $758 million from Alabama alone. Volkswagen was just given $577 million to locate in Bob Corker's hometown of Chattanooga. As GJF's executive director, Greg LeRoy, emphasizes, these were in the form of tax exemptions and grants, not the loans being discussed in the Big Three bailout.
So just remember that when Richard Shelby and Bob Corker attempt to justify blocking the auto bailout in the Senate.
So just remember that when Richard Shelby and Bob Corker attempt to justify blocking the auto bailout in the Senate.
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December 19, 2008 9:29 AM | Reply | Permalink
Just another tax cut for big business that gets funneled into the pockets of investors and executives. This shifts the local tax burden to homeowners and elsewhere and is also in part why our public infrastructure is crumbilng.
All you need to know is in 1950 49% of federal income tax revenues were from businesses. Today that number is about 16%. States and municipalities have gone the same way. In the past sixty years our system of taxation has been completely changed and now relies upon taxes focused on individuals. The average worker and homeowner has picked up the slack. This is one of the major reasons why the rich keep getting richer.
At the same time workers have suffered through a long period of stagnant wage growth or actually inflation adjusted declines. This is a double whammy brought to you by a corrupt political system that also happens to have been paid for by that same shift in taxation and wage decline.
December 19, 2008 10:23 AM | Reply | Permalink
Yeah, Shelby and Corker are posturing. What else is new.
What gets me is if Chinese Totalitarian Communists were running the factories down there, that would be just fine and dandy.
Pork is when some other state receives government benefit and not your state.
Overspending by the Federal Government occurs after your state has received its share.
We'll see if w's program gets into February when some real transformations will occur in how this country manufactures cars.
December 19, 2008 11:39 AM | Reply | Permalink
Thanks for posting. I would like to see a cost/benefit analysis for these discretionary subsidies for the nation as a whole. When all costs, including negative impact on business and labor all ready in place in other states is taken into account, I suspect the state subsidies are just part of the equation, and the overall result is a net loss to our country.
December 19, 2008 5:04 PM | Reply | Permalink
Good point. Dr Thomas, what is the jury's verdict on state subsidies to overseas business...net plus or net negative?
December 19, 2008 10:05 PM | Reply | Permalink
Good point, Miguel.
I asked a similar question in a recent blog that went to the same point:
As well as a question that begs an answer about "Why this assault on Unions when support for the UAW would instead provide a better solution?"
These and other relevant questions can be found here. As I point out, the answers don't seem to be presently available, leastwise not from Paulson and Bush and the others who are supposedly crafting a strategy to deal with this economic crisis.
Thanks, Kenneth, for the great post and also for the link to www.goodjobsfirst.com. I was unaware of this group and - after visiting their website - plan on using it as a resource.
Keep the faith!
December 20, 2008 12:15 PM | Reply | Permalink
Taken as a whole, the cost is surely negative. Getting a handle on either the costs or the benefits is extremely difficult, however. Part of the problem is that everyone wants to end the cost/benefit analysis at their border, be it city, state, or national. As a result, the costs are always undercounted. Moreover, the methods for analyzing the benefits are pretty squirrely, and of course promised benefits are often not delivered on at all. Therefore, the benefits tend to be overstated, especially prior to the adoption of a given incentive.
I'm not opposed to all economic development subsidies, but until states and the feds get serious about targeting them to locations with objective evidence of economic distress, there are going to be a whole lot of bad development incentives out there. On the issue of targeting, the European Union does the best job, but it is by no means perfect; see my report at www.globalsubsidies.org for some details on EU Structural Funds and U.S. Empowerment Zones.
December 20, 2008 3:51 PM | Reply | Permalink
Thank you for your reply and the link to GSI's website.
December 21, 2008 8:25 PM | Reply | Permalink