Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Please Support CounterPunch’s Annual Fund Drive
We don’t run corporate ads. We don’t shake our readers down for money every month or every quarter like some other sites out there. We only ask you once a year, but when we ask we mean it. So, please, help as much as you can. We provide our site for free to all, but the bandwidth we pay to do so doesn’t come cheap. All contributions are tax-deductible.
FacebookTwitterGoogle+RedditEmail

Corporate Welfare Fails to Deliver the Jobs

For several decades, state and local governments have been showering private businesses with tax breaks and direct subsidies based on the theory that this practice fosters economic development and, therefore, job growth. But does it?  New York State’s experience indicates that, when it comes to producing jobs, corporate welfare programs are a bad investment. This should be instructive to state and local officials across the US.

In May 2013, New York Governor Andrew Cuomo, with enormous fanfare, launched a campaign to establish Tax-Free NY — a scheme providing tax-free status for ten years to companies that moved onto or near the state’s public college and university campuses.  According to Cuomo, this would “supercharge” the state’s economy and bring job creation efforts to an unprecedented level.  It was “a game-changing initiative,” the governor insisted, and — despite criticism from educators, unions, and some conservatives — local officials fell into line.  Reluctant to oppose this widely-touted jobs creation measure, the state legislature established the program — renamed Start-Up NY and including some private college campuses — that June.

After that, Start-Up NY moved into high gear.  A total of 356 tax-free zones were established at 62 New York colleges and universities, with numerous administrators hired to oversee the development of the new commercial programs on their campuses.  New York State spent $47 million in 2014 — and might have spent as much as$150 million over the years — advertising Start-Up NY in all 50 states of the nation, with ads focused on the theme:  “New York Open for Business.”  Nancy Zimpher, the chancellor of the State University of New York, crowed:  “Nowhere in the country do new businesses and entrepreneurs stand to benefit more by partnering with higher education than in New York State, thanks to the widespread success of Governor Cuomo’s Start-Up NY program.  With interest and investment coming in from around the globe and new jobs being created in every region, Start-Up NY has provided a spark for our economy and for SUNY.”  This was, she declared, a “transformative initiative.”

But how “transformative” has Start-Up NY been?  According to the Empire State Development Corporation, the government entity that oversees more than 50 of the state’s economic development programs, during all of 2014 Start-Up NY generated a grand total of 76 jobs.  Moreover, the vast majority of the 30 companies operating under the program had simply shifted their operations from one region of the state to another.  The New York Timesreported that, of the businesses up and running under Start-Up NY, just four came from out of state.  Indeed, in some cases, the “new” businesses had not even crossed county lines.  One company moved one mile to qualify for the tax-free program.  Furthermore, when it came to business investment, there was a substantial gap between promises and implementation.  As the Empire State Development Corporation noted, companies promised $91 million in investments over a five year period, but only invested $1.7 million of that in 2014. Thus, not surprisingly, during 2014 the companies operating under Start-Up NY created only 4 percent of the new jobs they had promised.

Actually, Start-Up NY’s dismal record is not much worse than that of New York’s other economic development programs.  According to a December 2013 study by the Alliance for a Greater New York, the state spends approximately $7 billion every year on subsidies to businesses, including “tax exemptions, tax credits, grants, tax-exempt bonds, and discounted land to corporations, ostensibly in the name of job creation, economic growth, and improved quality of life for all New Yorkers.”  But 33 percent of spending by the state’s Industrial Development Agencies resulted in no job promises, no job creation, or a loss of jobs.  In fact, “with little accountability, businesses often take the money and run.”

A recent report by state comptroller Thomas DiNapoli reached similar conclusions. According to DiNapoli, in 2014 the programs overseen by the Empire State Development Corporation cost the state $1.3 billion (not including the voluminous tax breaks granted to companies) and helped create or retain only 14,779 jobs — at a cost to taxpayers of $87,962 per job.  The comptroller’s scathing report concluded that there was no attempt by the state agency to ascertain whether its programs “have succeeded or failed at creating good jobs for New Yorkers or whether its investments are reasonable.”

Of course, instead of shoveling billions of dollars into the coffers of private, profit-making companies, New York could invest its public resources in worthwhile ventures that generate large numbers of jobs — for example, in public education.  In 2011, as a consequence of severe cutbacks in state funding of New York’s public schools and a new state law that capped local property tax growth — two measures demanded by Governor Cuomo — 7,000 teachers were laid off and another 4,000 teacher positions went unfilled.  Overall, 80 percent of school districts reported cutting teaching positions.  Today, with New York’s schools severely underfunded — more than half of them receiving less state aid now than they did in 2008-2009 — this pattern of eliminating teachers and closing down educational opportunities for children has continued.  But what if the billions of dollars squandered on subsidizing private businesses in the forlorn hope that they will hire workers were spent, instead, on putting thousands of teachers back to work?  Wouldn’t this policy also create a better educated workforce that would be more likely to secure employment?  And wouldn’t this shift in investment have the added advantage of creating a more knowledgeable public, better able to understand the world and partake in the full richness of civilization?

It’s a shame that many state and local government officials have such a limited, business-oriented mentality that they cannot imagine an alternative to corporate welfare.

Lawrence S. Wittner is Professor of History emeritus at SUNY/Albany and is syndicated by PeaceVoice. His latest book is a satirical novel about university corporatization and rebellion, What’s Going On at UAardvark?

More articles by:

Dr. Lawrence Wittner is Professor of History emeritus at SUNY/Albany and the author of Confronting the Bomb (Stanford University Press.)

October 17, 2018
David N. Smith
George Orwell’s Message in a Bottle
Patrick Cockburn
When Saudi Arabia’s Credibility is Damaged, So is America’s
John Steppling
Before the Law
Frank Stricker
Wages Rising? 
James McEnteer
Larry Summers Trips Out
Muhammad Othman
What You Can Do About the Saudi Atrocities in Yemen
Binoy Kampmark
Agents of Chaos: Trump, the Federal Reserve and Andrew Jackson
Karen J. Greenberg
Justice Derailed: From Gitmo to Kavanaugh
John Feffer
Why is the Radical Right Still Winning?
Dan Corjescu
Green Tsunami in Bavaria?
Rohullah Naderi
Why Afghan Girls Are Out of School?
George Ochenski
You Have to Give Respect to Get Any, Mr. Trump
Cesar Chelala
Is China Winning the War for Africa?
Mel Gurtov
Getting Away with Murder
W. T. Whitney
Colombian Lawyer Diego Martinez Needs Solidarity Now
Dean Baker
Nothing to Brag About: Scott Walker’s Economic Record in Wisconsin:
October 16, 2018
Gregory Elich
Diplomatic Deadlock: Can U.S.-North Korea Diplomacy Survive Maximum Pressure?
Rob Seimetz
Talking About Death While In Decadence
Kent Paterson
Fifty Years of Mexican October
Robert Fantina
Trump, Iran and Sanctions
Greg Macdougall
Indigenous Suicide in Canada
Kenneth Surin
On Reading the Diaries of Tony Benn, Britain’s Greatest Labour Politician
Andrew Bacevich
Unsolicited Advice for an Undeclared Presidential Candidate: a Letter to Elizabeth Warren
Thomas Knapp
Facebook Meddles in the 2018 Midterm Elections
Muhammad Othman
Khashoggi and Demetracopoulos
Gerry Brown
Lies, Damn Lies & Statistics: How the US Weaponizes Them to Accuse  China of Debt Trap Diplomacy
Christian Ingo Lenz Dunker – Peter Lehman
The Brazilian Presidential Elections and “The Rules of The Game”
Robert Fisk
What a Forgotten Shipwreck in the Irish Sea Can Tell Us About Brexit
Martin Billheimer
Here Cochise Everywhere
David Swanson
Humanitarian Bombs
Dean Baker
The Federal Reserve is Not a Church
October 15, 2018
Rob Urie
Climate Crisis is Upon Us
Conn Hallinan
Syria’s Chessboard
Patrick Cockburn
The Saudi Atrocities in Yemen are a Worse Story Than the Disappearance of Jamal Khashoggi
Sheldon Richman
Trump’s Middle East Delusions Persist
Justin T. McPhee
Uberrima Fides? Witness K, East Timor and the Economy of Espionage
Tom Gill
Spain’s Left Turn?
Jeff Cohen
Few Democrats Offer Alternatives to War-Weary Voters
Dean Baker
Corporate Debt Scares
Gary Leupp
The Khashoggi Affair and and the Anti-Iran Axis
Russell Mokhiber
Sarah Chayes Calls on West Virginians to Write In No More Manchins
Clark T. Scott
Acclimated Behaviorisms
Kary Love
Evolution of Religion
Colin Todhunter
From GM Potatoes to Glyphosate: Regulatory Delinquency and Toxic Agriculture
Binoy Kampmark
Evacuating Nauru: Médecins Sans Frontières and Australia’s Refugee Dilemma
FacebookTwitterGoogle+RedditEmail