When Amazon was showered with offers by the cities and states of the Union for a new job-creating second headquarters, it was clear all along that comparative backwaters — e.g., Louisiana — would never be competitive.
The overall framework of the HQ2 competition was based on the factors that states and cities rarely invest in, and are not successful in providing: urban quality of life, public transit, technology-proficient populations, quality universities and so on. Those are the places that are always going to win in the new economy.
The only surprise was that HQ2 ended up split between metro areas of northern Virginia next to Washington, D.C., and Queens in New York City. And that was a big win for the Louisiana folks who helped spearhead the Virginia bid, headed by Stephen Moret, Louisiana’s former economic development chief, and others including Jason El-Koubi, the former head of One Acadiana in Lafayette, now at the Virginia Economic Development Partnership.
Not surprising, perhaps, as they had demonstrated the leadership qualities through many posts here, including the Baton Rouge Area Chamber.
But one surprise was that New York City raised such a ruckus over the $3 billion in subsidies to Empire Amazon that the company backed out of the deal. Thus, northern Virginia might do even better. Score another for Moret and El-Koubi.
But as much as business does not want to hear it, what the NYC deal ought to show is how unpopular is the whole notion of “incentives.”
And that has tripped up Amazon, despite the support of the liberal establishment of New York, but it has also tripped up ExxonMobil and other companies in Louisiana, despite the support of the conservative business establishment. The issue in Louisiana is that a modest level of local decision-making has been introduced lately into what was essentially an automatic Industrial Tax Exemption program in our state.
From companies’ perspective, subsidies are amply justified by the jobs and wealth created, Amazon's 25,000 good jobs in Long Island City, for example, or the fewer but still high-paying jobs at a refinery or chemical plant in Louisiana.
Also from the industry’s perspective, subsidies make up for states and cities’ anti-business tax codes. The Louisiana Association of Business and Industry produced a report bemoaning those issues here. Alas, not much has been done to fix Louisiana’s tax code, although business groups like the Committee of 100 for Economic Development have tried.
Unfortunately for business, the fact is that “incentives” are damaged politically by the same grassroots insurgency that produced Donald Trump in 2016, a revolt of the little guy against the big guys receiving corporate welfare.
What is more true to the theme of “draining the swamp?” A multibillion-dollar subsidy for a petrochemical plant in Louisiana — an obvious location for same — or for Amazon HQ2 in New York — another obvious location — is considered economic lunacy by the left and the right. The biggest critics of Amazon subsidies included writers in such far-left precincts as National Review and The Wall Street Journal.
Congress has not acted to restrain the beggar-thy-neighbor competition with tax dollars, but there needs to be some rethinking of the notion that incentives are good politics, particularly for politicians taking credit for lavishing subsidies on companies with taxpayers’ money. Ask Andrew Cuomo.
Email Lanny Keller at firstname.lastname@example.org.