Wed
Sep 8 2010
08:09:am

We have to throw in some corporate welfare to sweeten the deal. State and local governments gave VW $577.4 million ($288K per job) in incentives. No wonder Tennessee ranks so highly among relocation consultants.

There will be other economic benefits in addition to the 2000 jobs. But at some point you have to wonder how far $577.4 million would go towards, for example, developing an educated workforce ready for the jobs of the future.

Bonus extra credit question: Are auto manufacturing jobs a shell game? Remember Spring Hill?

150
vote
T Knight's picture

Green Welfare

As a conservative, I am against that type of corporate welfare. That is why I am so against all of this "green jobs" and "green economy" nonsense. It is just another form of corporate welfare. Manufacturers and producers of "green" products get government welfare to make the products, then lobby Congress to pass laws to force us to buy the products. That is the ultimate corporate welfare program.

metulj's picture

I have a green economy

I have a green economy business and would like to you to know that you have no idea what you are talking about.

rikki's picture

lobby Congress to pass laws

lobby Congress to pass laws to force us to buy the products

What product have you been forced to buy?

metulj's picture

CFLs in 3.2.1...

CFLs in 3.2.1...

reform4's picture

Still a trainload of incandescent bulbs at Lowe's

I'm just sayin', nobody's forcing nothing.

R. Neal's picture

The "green economy" train has

The "green economy" train has already left the station. The technology will be engineered in Germany and built in China. There will be some lower-level jobs for installers and maintainers, though.

Regardless, the environmental benefits make it a better investment in terms of creating demand and lowering the price. Similar to how government investment in infrastructure, e.g. roads and bridges, created demand for automobiles.

WhitesCreek's picture

So TK

Are you suggesting we end the $9 billion in tax breaks for big oil companies and stop all the wars so we can quit subsidizing defense contractors? I like it so far.

T Knight's picture

I would certainly say end the

I would certainly say end the tax breaks for big oil, big wind power, big solar panel, big bio-fuel, big ethanol, etc.

Our complex tax system is designed to allow those breaks to be handed out by Congress to build power for the ruling elites.

The Iraq war should have ended a long time ago as Pres. Obama promised. He also failed miserably by greatly expanding the ground war in Afghanistan.

Somebody's picture

Incentives

I have no idea how the VW deal is structured, but it is important to understand that tax incentives are not the same as an allocation out of an existing budget. If VW got a tax break to build in Tennessee, you have to remember that those taxes would not have been paid by anyone if no factory were built. As such, imagining what would happen with the same amount of money if it were allocated for education is just a pipe dream.

The only way the incentives are a give-away of money that could be spent for something else is if the factory (or another equivalent thing) would have been built anyway without the incentives. This is a common calculation in business. Every time you use a coupon or go to a sale where discounts are offered, the seller is making the offer of a discount based on the idea that it will draw in people who would not otherwise come to make a purchase. If successful, the discount is a loss leader, and you'll end up buying other things with a profit margin still intact.

R. Neal's picture

In the "but for" v.

In the "but for" v. "opportunity cost" argument, we've invested more on relocation incentives and haven't really made the alternative "human infrastructure" investments so we don't know if it's a pipe dream or not.

What we do know is that whatever we're doing isn't paying off. Tennessee ranks 44th in health, 40th in high school graduation rates, 45th in post-secondary education, 43rd in median household income, 36th in per capita GDP, 36th for employment, etc. etc. We do rank high on poverty (11th) and violent crime (2nd), though.

bobbylife's picture

Awesome!

We do rank high on poverty (11th) and violent crime (2nd), though.

We're pretty good at obesity, too.

T Knight's picture

About 30% of construction

About 30% of construction costs for wind turbines comes from federal subsidies. These same companies are lobbying Congress to pass legislation to force utilities to buy more wind power.

Solar panel manufacturers are receiving large tax breaks and credits to build new plants. Then the Federal government is handing out grants for local governments to buy the products.

Just two examples of corporate welfare in the green economy. Another term I would use is crony capitalism.

rikki's picture

So you are not being forced

So you are not being forced to buy anything, but utilities are. That's a big difference. Utilities are by necessity monopolies, so they've always been subject to greater governmental regulation and control than ordinary corporations. They are forced to do many things, like submitting proposed rate hikes for government approval or instituting energy efficiency programs for consumers, so forcing them to add renewable generation to their power portfolio is just another example of how government must treat a monopolistic entity that is not subjected to market forces.

With solar power, most of the panels are actually being bought by businesses, not government, though there are certainly arrays owned by local government, the new Knoxville bus station for example. Mostly though, state and local governments dispense federal grant money to local businesses.

In both cases, these investments can be justified by the resulting decreases in air and water pollution, which impose cleanup costs on governments and health costs on the general population.

There are certainly similarities between public investments in green industries and corporate welfare, but there are big differences as well. Crony capitalism is a much more insidious problem, and your use of that term here suggests that you probably misunderstand it.

marytheprez's picture

Ah, yes, government subsidies!

Do you work for TVA? The BIG Coal Companies? The Coal Ash Association?

Or are you not aware of the billions in subsidies paid out to giant electric power, coal and oil and gas companies and NUKE power plants for "research and development"?

These are the corporate secret raiders of our tax dollars for slush funds...plus all their tax breaks every year. And these are the folks crying the loudest about funding and support for new, green, clean, non-toxic sources of electric power. Are any of these cronies you talk about being paid for lobbying for the coal fired power plants? Or the NUKE plants? Just wondering.

reform4's picture

Don't forget the Energy bill from about five years ago...

... with a multi-billion $ subsidy for the next 5 nuclear plants to come online.

reform4's picture

Annual Federal Subsidies

Annual federal energy subsidies
ranged from $37 billion to $64 billion, according to a study
prepared for the National Commission on Energy Policy.
Wind energy accounted for less than 1% of the total.

WhitesCreek's picture

TK, I disagree with you...

I'm certainly not opposed to tax subsidies for technologies that improve the conditions for Americans. had we, for instance, never started the Iraq war for oil and spent that money on rail transportation, solar power, and improved battery and other energy storage methods, we could be seeing the end of the oil and coal economies as well as having some hope of preventing the worst of the coming global warming disaster.

Sloganeering, such as what you are espousing TK, is misleading and destructive in the long run. Somehow it has become a bad thing in the minds of some Americans for Americans to pool their resources and solve problems and attack crises. You can make pooling our resources sound like a bad thing with misplaced slogans but it is not. Working for the common good is a good thing. This is the purpose of government and properly participated in, government is a very good thing.

T Knight's picture

Global warming is a hoax and

Global warming is a hoax and therefore there is no emergency that needs massive federal response.

R. Neal's picture

Ok, maybe so. But look out

Ok, maybe so. But look out your window at the ozone. That's very real.

rikki's picture

Even paid climate skeptics

Even paid climate skeptics are giving up their dishonest craft and admitting that climate change is occurring. The atmospheric physics are simply too well understood to deny that carbon gases trap heat. There is no credible debate over the reality of anthropogenic warming, and there is more evidence that warming is occurring faster than predicted than slower.

Claiming that global warming is a hoax is as credible as claiming the Easter Bunny paints and hides millions of eggs one spring morning.

metulj's picture

[sarcasm]Every morning, 10s

[sarcasm]Every morning, 10s of thousands of geoscientists get up and check in with Global Hoax Central to see what they are supposed to say that day.[/sarcasm]

michael kaplan's picture

At least Spring Hill produced

At least Spring Hill produced a domestic design and provided union jobs. Does anyone remember New Stanton, PA?

North American production of the VW Rabbit commenced at a factory in New Stanton, Pennsylvania in 1978. VW's American sales broke 200,000 in 1985 and 1986 before resuming the downward trend from earlier in the decade. Chairman Carl Hahn decided to expand the company elsewhere, and the New Stanton, Pennsylvania factory closed on 14 July 1988.

Here's the full story:

http://www.nytimes.com/1987/11/21/business/volkswagen-to-shut-us-plant.html

As a footnote, some 9,500 supplier and other jobs are expected to be created "over time" due to the VW plant in Chattanooga, "according to the University of Tennessee." That’s in addition to the 2,000 jobs at the factory.

Andy Axel's picture

at some point you have to

at some point you have to wonder how far $577.4 million would go towards, for example, developing an educated workforce ready for the jobs of the future.

Or how about holding the line on the budget deficit, for all those yelping "fiscal conservatism" out yonder?

And how much does the property tax bonanza cost Tennessee taxpayers? (Here's a hint for starters: The 10c added to every grocery dollar in this state.)

Tnmountain's picture

Let me point out here that if

Let me point out here that if you accept that the roughly $850 Billion American Recovery Act "created or saved" "as many as" 3 million jobs, those jobs were "created or saved at a cost of roughly $285,000 per job.

metulj's picture

Or $2850 per taxpayer. A

Or $2850 per taxpayer. A bargain.

Tnmountain's picture

I'm not sure how you're

I'm not sure how you're counting "taxpayers", but if you divide the subsidy given to VW by the residents of Tennessee it comes to $92 per resident. Is that a bargain too?

metulj's picture

See the problem with stupid

See the problem with stupid metrics like that? Thanks for playing.

Tnmountain's picture

So your point is that the OP

So your point is that the OP is attacking the VW subsidies by use of a stupid metric? OK then.

metulj's picture

Thanks for playing.

Thanks for playing.

Somebody's picture

If you prorate that $92 per

If you prorate that $92 per resident out over some number of decades that it would be safe to assume that the plant will operate, it becomes a very small number. For instance, over 20 years, that's $4.60 per resident, per year. Of course, it would be even less than that, assuming that the state's population continues to grow over the next 20 years. Statistics are goofy things, particularly when trying to tally up apples, oranges, and orchard futures all at once.

jbr's picture

4 bright spots in the economy

Is there a record of an economic down cycle anywhere close to what we have, having a recovery faster than what is occurring?

Looks like a few areas are looking good. From Yahoo Finance

"Fortune highlights four bright spots, and assesses what kind of a lasting impact they might have on the economy.

They list: Farming, US Corporate Buying, Detroit and the "Big Three," Manufacturing Growth

The article...
http://finance.yahoo.com/career-work/article/110591/surprise-bright-spot...

reform4's picture

And some people wanted to let the US Auto industry wither...

... on the vine. Thank goodness we have a leader with a long-term vision now. But he'll never get credit for it.

redmondkr's picture

Another little Bright Spot

The Journal of Commerce reports that U.S. railroads carried more bulk railcar loads last month than any time since August 2008.

And CSX and NS report that shipping volumes have risen more than 10% in the current quarter.

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