Wednesday, December 2, 2015

Another example of corporate welfare run amok

Again and again, local and state governments have chosen to give millions in handouts to multi-national corporations so they will come and bring jobs. But repeatedly those efforts have failed.

The latest example is featured in a fine piece by The Washington Post looking at the practice in the Deep South, where the tax breaks have been large and the jobs have largely paid little. Workers there (and elsewhere) pay for these deals on the front end and then get screwed on the back end!

The article details the decision by Chinese company Golden Dragon Precise Copper Tube Group to build  and open a factory in Wilcox County, Ala. last year after much lobbying from local officials. Oh yeah, and approximately $200 million in corporate welfare tax breaks, infrastructure improvements and cash payments.

When the deal was announced in 2013, the average worker was expected to make $15 to $17 an hour. But even the company itself only places that rate at $13 an hour. Meanwhile, those throughout the state are paying the price, as the article explains:
Company executives visiting the region were greeted with imported Chinese tea and Mandarin video messages. Alabama’s state workforce team explained how, if chosen for the job, they would visit Golden Dragon’s Chinese headquarters, study the process, and make videos and training courses for the new U.S. employees. In Alabama, Golden Dragon wouldn’t pay taxes for 20 years; it would get free roads and land. 
Alabama also did something no other state was willing to try: Its legislature passed the “Made in Alabama” act, a tailored law that allowed the state to reimburse Golden Dragon for several prior years of tariffs. A version of the law had first been drafted by [company consultant Raymond] Cheng and a lawyer, according to Cheng and a lawmaker who sponsored the bill. 
Ultimately, the company was given the choice of the reimbursements or an extra $20 million in cash. Golden Dragon chose the cash.
This grand payout, mind you, takes place against the backdrop of a community that is undereducated and impoverished. And elected officials there seem to take advantage of this fact, as the Post noted:
In wide swaths of the Deep South, public schools struggle, turning out workers who lack basic skills. Agricultural work has long faded, while job opportunities in once-prosperous industries such as textiles and timber have been lost to cheaper options in Latin America or automation at home. Politicians say they must give freebies to lure companies here, or offer nothing at all and watch the region — which already lags behind the rest of the country on most measures of well-being — fall even further behind.
So what was the answer in the case of Golden Dragon? Workers late last year voted to unionize. Obviously, they must know that union jobs pay better and provide a real path towards a middle-class lifestyle.

The real solution, however, is to stop giving sweetheart deals to rich corporations. Investment in people, not the powerful.