What We Lost: The Amazon deal represents the triumph of shallow rhetoric over economic reality
In the debate over the recent Amazon deal, local leaders focused on the wrong number. They were obsessed with the Number 3, for the $3 billion of incentives that Amazon would receive as part of its package to come to New York City.
Instead, they should have focused on 25 and 27, as in the 25,000 plus jobs that would have been created and the $27 billion in revenue that these jobs would have contributed to the economies of our state and our city.
These local leaders may now feel empowered for having turned back the good and important efforts of our governor and mayor, on the belief that “everyday New Yorkers and their neighbors defeated Amazon’s corporate greed”.
But they can now ponder the number zero — as in zero jobs created and zero opportunity for the workers of New Yorkers. At a time when we need to help workers build greater skills for 21st-century jobs, and just when increasing technological automation is starting to eliminate current jobs, local leaders failed their citizens — and offer no alternative plan.
Moreover, these leaders demonstrate a complete lack of understanding of how tax incentives work. Their so-called “victory” does not mean that there is suddenly $3 billion to be allocated to other projects such as subways. The deal was contingent on the creation of jobs that generate tax revenue. Had Amazon not created any jobs, they would have received zero incentives. Put another way, for every $100 of tax revenue that Amazon generated, it would have paid $90 of taxes.
A comparison of the Amazon deal to Google is inapposite. Amazon was receiving “as of right” incentives for establishing its headquarters in an area that legislators had deemed eligible for such incentives. Any business — not just Amazon — willing to locate in that area of Queens would be eligible for many of these incentives. Google’s expanding in a choice area in Manhattan does not qualify for similar incentives.
This game of states and cities competing with each other to dole out economic incentives to set up shop in a certain city or state is admittedly inefficient and self-defeating. To paraphrase Churchill, it may be the worst form of economic development except when compared to all others.
Until every state changes its ways, this is the field in which local governments are competing. Here, at least, the size of the incentive package that New York offered Amazon was far smaller than what other states offered up, mostly attributable to the emergence of highly skilled and talented tech workers here.
This deal is also not an isolated case. The state and city provide all sorts of incentives and subsidies — over $10 billion and to hundreds of companies over the last several years — to small businesses, film companies, industries locating in certain regions, support for housing and much more. Many of these incentive programs are outdated but were put in place by the state Legislature. The Legislature has the power to giveth and taketh away. If it is now prepared to reassess every type of incentive, so be it.
Residents of Queens were understandably worried about the rising cost of living that would result from Amazon employees locating in their neighborhood. But this should not have meant killing the deal — rather creatively addressing the real concerns of these local residents.
Progressives today want to ensure additional governmental services to enhance the well-being of citizens. Many such programs are critical, such as increased funding for public education. But without sufficient revenue, i.e. monies that this deal generates and which subsequently get pumped into the local economy, local governments cannot sustain the programs that progressive Democrats want to add or even maintain.
We can certainly convince ourselves that we will find other businesses to replace Amazon. And we may very well do so as our city transforms into a more diversified economy that is less dependent on finance jobs. But there is a much greater benefit to the local economy to adding those jobs now and beginning to reap the benefits sooner than waiting for the potential of future jobs which, incidentally, would get similar incentives if locating in the same area.
New York City is a great city. But even great cities and great empires can crumble. Short-sighted decisions have consequences. A mere generation ago, New York City was bankrupt and Detroit was thriving. In today’s technology-driven and interconnected world, things move quickly. Our local leaders should understand that nothing can be taken for granted.