Tuesday, December 11, 2018

The Shell Game

I am exhausted with the endless discussion about the Amazon announcements of two new headquarters and the third operation for excellence that tagged onto the principal ones.  Why have one when four will do.  Yes four headquarters, the main one in Seattle, the two satellite ones in New York and Virginia and the third one in Nashville.  And all of them with average wages of 150K which again will put their salary payroll in the billions in order to attain said average.  Really one company with that high of an investment in human capital.   Do not forget that Amazon runs warehouses across the country and have claimed to raise those wages to $15/hr.  That again has its own issues that have been neglected to be mentioned that many of those "employees" from pickers to delivery agents are not actual Amazon employees but contractors paid via a third company or agency in order to circumvent health care, pension, stock options and my personal favorite - workman's comp.  Given the state of some of the warehouses and the accidents that have occurred this one is even more distressing.   And this one is centered around the use of robots which is central to the future of employment in Amazon facilities (and that may include Whole Foods) and delivery as well, so that may explain the wages to hire the right type of code writers and scientists needed to calibrate this but the reality is that they will work them to death and be replaced by the robots they created.

Amazon is becoming massively out of control and in turn I suspect what they are now transtitioning too is shipping and receiving and hence the outlier here in Nashville as it is smack between the two dominant players in this industry - UPS in Kentucky and FedEx in Memphis.

The idea that these tax incentives were or are necessary to get Corporations to locate to a region is laughable.  The prime reason Amazon located in Seattle was the lack of a income tax and the proximity to Microsoft the then largest software provider in the country and in turn the skilled employees whom Bezos could poach to build his empire.  That is why Google and Facebook and others set up shop adjacent to Seattle and in turn the same philosophy behind the Silicon Valley.  The idea that anyone is going to examine the landscape of America and locate to Cleveland or St. Louis, cities once the largest in America is laughable.   That takes vision and capital as these are places that while the infrastructure and they have the Governments that would sign the arch or the rock and roll hall of fame over they don't have the "it" factor when it comes to pop culture.  They have "it" and that is massive urban decay aka black people and crime.  Now Nashville does as well but it again is a second tier city and this center of excellence will never be anything more than an ability to tax dodge for executives to set up residency to avoid income tax and move out when it suits.  In other words when the summer hits or when its boring, which again is all the time unless you are a drunk.

The current figure being tossed for the improvements needed to upgrade just the functional infrastructure - water, power and roadways - is 15 Billion.   This does not include flood prevention in the region affected by the 2010 flood or any other issues centered around weather damage from Tornado's, rain, etc.   There is some irony there that is about the same figure given to Amazon among the three states vying for their special kiss.  In the Mafia that kiss is usually followed by a hit so it never ends well.

The regions that most corporations have relocated to this past decade is due to the incentives aka extortion and in turn the legislators willing to sell out the taxpayers and their constituents in the process by circumventing their labor protections, creating right to work laws which decimate employees right to organize, strike or collective bargain.   Nowhere fits this better than Tennessee.  The reality is that this state has gone out of its way to ensure that the workforce is marginalized and segregated in ways that are not just about race.  The inferior education which feeds into the martyr complex enables those to barely finish school, test the kids to death to the point they are again pushed out without any real intent of resolving the long term issues that exist in the community are again contradicted by the endless stream of bullshit by the elected officials. Haslam has tried to convince everyone he is a Governor for Education but frankly I don't see it.  And he admits it.

The reality is a lot of students show up to a college campus and haven't been prepared for a post-secondary situation," said Haslam, who noted earlier in the event that students needing remediation work are less likely to graduate.
"We have made a lot of progress," he said. "We are the fastest improving, but all we've done in reality is go from the 40s to the mid-30s."

 Dude your schools are shitholes that comes from the funding or in this case the lack thereof.   How else can you pay Amazon, that money doesn't grow on trees!   And then there is  the culture here which eschews the value of being anything but hard working and that does not include  being intelligent while doing so.   It may also explain the lack of empathy or compassion I see in the schools, which I experience and witness on a daily basis.  It's a hard knock life so start the abuse early and that way you will never learn about caring for and about others.

But when it comes to business and doing whatever it takes or more importantly costs the sky's the limits.  What.ever.  It is a shell game.

Taxpayers Always Lose Industry’s Shell Game With Jobs

G.M. is the latest example of a company getting incentives based on empty promises.

By The Editorial Board The New York Times

Dec. 7, 2018

When General Motors announced that it was idling five plants in the United States and Canada last week, there was shock in two American cities.

One was Warren, Ohio, where G.M. builds the Chevrolet Cruze at its Lordstown assembly plant. Folks in the industrial heartland are no strangers to this kind of betrayal. But after forking over $60 million in state and local incentives in the last decade, they believed they had done enough to get G.M. to maintain Lordstown, which has built 16.3 million vehicles since 1966.

The other shocked town was Washington, D.C., where President Trump learned that thousands of the manufacturing jobs he had promised — a promise that had helped him win the state of Ohio in 2016 — were being killed. Mr. Trump reminded G.M.’s chief executive, Mary Barra, that the federal government had propped up the company to the tune of $50 billion in loans and other assistance during the Great Recession. He told her to shut a factory in China and move the work to Ohio.

Ms. Barra made it clear that G.M. has to operate on behalf of G.M. shareholders, not Mr. Trump. The company has excess manufacturing capacity — sales of sedans like the Cruze and the Impala are falling — and it has to invest in autonomous cars and other technologies. Somewhere else.

Federal, state and local governments have gotten into the habit of providing corporations with incentives to move, incentives to stay, bailouts to stave off failure and tax benefits to build on success and create more jobs. All are based on promises about job creation and economic development that more often than not prove hollow.

The Republicans promised that last year’s tax cut would prompt investment that creates jobs — G.M. got a $157 million tax bonus through its third quarter — but corporations have also used that money to cover the expenses of closing plants. (So far this year, companies in the United States have cut about a half million jobs, 28 percent more than at the same time last year.)

Corporate incentives tripled between 1990 and 2015, according to the W.E. Upjohn Institute for Employment Research. The trend seemed to slow a bit after that, but then Nevada changed the game, plunking down $1 billion for Tesla’s battery plant. Wisconsin topped it with a $4 billion offer for a Foxconn plant. This year Virginia and New York rang up $6 billion for Amazon’s benefit. “There is now a new normal,” says Amy Liu, vice president and director of the Metropolitan Policy Program at Brookings Institution, “among Tesla, Foxconn and Amazon, we are breaking the billion dollar bank for the first time.”

By paying incentives, governors, mayors and other politicians feel they’re “winning” jobs from competitors. As New York City mayor, Bill DeBlasio, put it, at the end of the day, 25,000 jobs are going somewhere. Why shouldn’t the city have them?

The Foxconn deal might hold part of the answer to that question. Foxconn, an Apple components supplier, plans to build an electronics plant south of Milwaukee that would employ 13,000 people. But its incentive agreement works out to an astonishing $230,000 per job, which defies a reasonable return on investment.

The auto companies are particularly good at the incentives game because they can offer relatively high-paying manufacturing jobs that don’t require four-year college degrees. Remember that G.M. pioneered the auction approach in 1985 when it ran a national beauty contest for a site to produce its new Saturn brand cars. Spring Hill, Tenn., was the winner, and agreed to cough up decades of tax revenues. The United Autoworkers agreed to reduced wages. (“Today’s Jobs at Yesterday’s Wages,” declaimed one headline.) Saturn production died in the downturn, and Spring Hill’s manufacturing lines were closed in 2009. They reopened in 2012 after, yes, more concessions from Tennessee. To be continued?

For a corporation looking to move, site selection specialists are good at identifying multiple locations that can meet their needs. Amazon’s search for a second headquarters sent economic development agencies around the country into peak insanity. The reality, though, Ms. Liu said, is that most job creation comes from the expansion of existing companies and from start-ups, not by luring companies from other locations.

Still, the game goes on. In 2015, the conglomerate Honeywell took a $40 million tax credit from New Jersey (Chris Christie, proprietor) to induce it to remain based in Morris Plains, N.J. Then the tax credit ran out, and so did Honeywell. Honeywell will soon be based instead in Charlotte, N.C. — after getting $46 million to grease the move south, plus added incentives that could amount to as much as $16,000 per job. North Carolina is so hungry for corporate headquarters that its legislature passed a bill that directly underwrites Honeywell’s move. Honeywell is also moving jobs to Charlotte from South Carolina, which had used incentives in the past to grab them from other states.

In leaving metropolitan New York for Charlotte, Honeywell cited the ability to recruit talent, which is, oddly enough, the same reason Amazon cited to choose metropolitan New York, in the form of Queens, for its HQ2. That, and as much as $3 billion in incentives.

In announcing the move, Honeywell’s chief executive, Darius Adamczyk, tried to smooth any ruffled feathers in the Garden State, saying his decision “does not reflect any issues with the quality of our experience in New Jersey … New Jersey will remain a substantial employment center for us.”

Of course it will, until a better offer comes along. And that’s exactly the problem with our corporate welfare system. Companies like G.M. know that if they dangle a new plant like a piece of meat — perhaps the one that will make autonomous vehicles — the political and economic development dogs will come running. And they will always find lawmakers ready to provide tax breaks with a wispy hope that they will make everyone’s life better.

Like G.M., they’ll behave as if the Lordstown plant never existed. And soon, it might not.

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