MULTIBILLION
DOLLAR
% INCENTIVE PACKAGE WISCONSIN GAVE
% FOXCONN WAS MORE
THAN A
BAD
% DEAL.
% IT
COULD
DEPRESS
STATE
ECONOMIC
% ACTIVITY BY
TENS
OF
BILLIONS
OF
% DOLLARS OVER THE
NEXT
15
YEARS.
% THAT'S
ACCORDING
TO A
NEW
% SPECIAL
STUDY
BY
ECONOMISTS
AT% GEORGE MASON
UNIVERSITY
IN% VIRGINIA.
% IN
TONIGHT'S FIRST
LOOK,
WE
TALK
% WITH
ONE OF THE
AUTHORS.
% MICHAEL
FARREN
IS A
RESEARCH
% FELLOW
AT GEORGE MASON.
% HE JOINS
US
FROM
ASHEVILLE
AND
% THANKS
VERY
MUCH
FOR
BEING
HERE.% >>
THANKS SO MUCH
FOR
HAVING
ME.% >>
WHY DID
YOU
RESEARCH
% WISCONSIN'S
$3.6
BILLION
PLUS
% SUBSIDY TO
FOXCONN
IN
% PARTICULAR?%>> SO WE
WERE
DOING AN
ANALYSIS,
% ASKING
THE
QUESTION
DO
ECONOMIC
% DEVELOPMENT
SUBSIDIES
ACTUALLY
% WORK,
CREATE
ECONOMIC GROWTH
AT
% THE LOCAL
AND
NATIONAL
LEVEL.
% WE
DECIDED TO
USE
FOXCONN
AS A
% CASE
STUDY
BECAUSE IT WAS
IN
THE
% NEWS AND THERE
WAS A
LOT
O
F
% INFORMATION ALREADY AVAILABLE
% ABOUT
IT.
% >>
YOUR
PREMISE
AND
CONCLUSION,
% AGAIN, IS
THAT
SUCH
TARGETED
% SUBSIDIES,
ESPECIALLY
GIGANTIC
%
ONES
LIKE
FOXCONN'S,
DO
MORE
% HARM THAN GOOD.
% IN
FACT,
YOU
SAY
THE
SUBSIDY
MAY
% DEPRESS
STATE
ECONOMIC ACTIVITY% BY
TENS
OF
BILLIONS
OF
DOLLARS% OVER
THE
NEXT
15
!
10
TO
15
YEARS.
% HOW
SO?
% >>
MOST
STUDIES
THAT
EXAMINE
% THESE
SUBSIDIES NEVER
COUNT
THE
% COST.
% SO YOU
HAVE
TO
UNDERSTAND
FOR
% EVERY
DOLLAR
YOU
PAY
IN
SUBSIDY,% YOU
HAVE
TO TAKE
THAT
AWAY
FROM
% TAXPAYERS
AND
THAT
HAS A
% NEGATIVE
ECONOMIC IMPACT.
% THE
$3.6
BILLION
OFFERED
TO
FOX
% COX
WOULD
INCREASE
ECONOMIC
% GROWTH
IN
THE
STATE.% >>
YOU
ALSO TALKED
ABOUT
THE
% MULTIPLIER
EFFECT
OF
SPIN-OFF
% JOBS RELATED
TO
FOXCONN.
% WHY
IN
YOUR
RESEARCH DOESN'T% THAT ADD
UP?
% >>
THE
MULTIPLIER
EFFECT
IS
% VALUABLE, BUT MOST OF
THE
TIME
% MULTIPLIERS
TAKE
PLACE
% NATURALLY.
% YOU DON'T
ACTUALLY
NEED
TO
% INCENTIVIZE THEM.
% THAT'S
PART OF
THE
ISSUE
WITH
% ECONOMIC
DEVELOPMENT
SUBSIDIES
% IN
GENERAL, THAT
THEY
ONLY WORK
% IN
THE
CONTEXT
OF
SWAYING
WHERE% A
COMPANY
DECIDES
TO LOCATE
OR
% ON
EXPAND
BETWEEN
2%
AND
25% OF
% THE TIME.
% THAT
MEANS
ABOUT
75%
OF
% SUBSIDIES OR
MORE
ARE
JUST
PURE
% WASTES
OF
PUBLIC
MONEY.
% >>
YOUR
RESEARCH
DISCUSSES HOW
% ELSE
THE STATE OF
WISCONSIN% MIGHT HAVE
USED
$3.6
BILLION.
% LIKE
HOW?
% >>
SO
ONE
HUMOROUS
EXAMPLE THAT
% WE USED IS
THAT
THE
STATE COULD
% HAVE
I
NSTEAD
SUBSIDIZED
SEVEN
% SQUARE
MILES
OF
GREENHOUSES
TO
% MOVE
FLORIDA ORANGE
GROWERS UP% TO
THE
UPPER MIDWEST.
% THAT
WOULD
ALSO
CREATE
% MULTIPLIERS
AND
WOULD
CREATE AN
% EXPORTABLE
INDUSTRY,
BUT
IT'S
% OBVIOUSLY
NOT A
GOOD
USE
OF
% TAXPAYER MONEY.%>>
YOU
TALKED
ABOUT
HOW
THAT
% $3.6
BILLION MIGHT
HAVE
BEEN
% PLOWED
BACK
INTO
TAX
CUTS.
% WOULD
THAT HAVE
BEEN
MORE
% ECONOMICALLY
BENEFICIAL?
% >>
ABSOLUTELY.
% SO
RIGHT
NOW,
WITH
THE
CURRENT
% CORPORATE INCOME TAX
RATE,
I
F
% THAT
SUBSIDY TO
FOXCONN
HAD
% INSTEAD
GONE
TO
ALL
COMPANIES
% THROUGHOUT THE
STATE,
IT COULD
% HAVE
LOWERED
CORPORATE
INCOME
% TAXES
BY
22%.
% THAT
WOULD
DO A
LOT
MORE
FOR
% BROAD-BASED
ECONOMIC
GROWTH% RATHER THAN
PICKING
ONE
FAVORITE% AND
ROLLING THE
DICE
ON
IT.
% >>
NOW,
YOUR
REPORT
PILES
ON
% WITH THE
IDEA
THAT
SUBSIDIES
% ACTUALLY
REDUCE
COMPETITIVE
% PRACTICES AMONG
COMPANIES
THAT
% RECEIVE
THEM
BECAUSE
BASICALLY% THOSE
COMPANIES ARE
PLAYING
WITH
% SOMEBODY ELSE'S
MONEY?
% >>
ABSOLUTELY.
% SO
SUBSIDIES
ESSENTIALLY
GIVE A
% MONOPOLY ADVANTAGE
TO
THE
% RECEIVER OF THE
SUBSIDY.
% ONE OF THE
SAYINGS ABOUT
THAT
IS
% THE BEST PART
OF
MONOPOLY POWER
% IS
HAVING AN
EASY
LIFE.
% SO
ESSENTIALLY IT
ALLOWS
THE
% COMPANY THAT
RECEIVES
THE
% SUBSIDY TO
BE A
LITTLE
BIT
LESS
% ATTENTIVE
TO
CONSUMER
DESIRES,% TO
BE
LESS
COA
!
FOCUSED
ON
% EFFICIENCIES RATHER THAN
% COMPETITION, WHICH
FORCES
% COMPANIES TO
FOCUS
ON
PLEASING
% COMPANIES
AND
ELIMINATING
WASTE
% FROM
THEIR
PRODUCTION.
% >>
IT
ALMOST
GOES
WITHOUT
SAYING
% THAT YOU
AND
YOUR
FELLOW
% ECONOMISTS ARE
NOT
GOOD
WITH
% THESE
KINDS
OF
TARGETED
% SUBSIDIES,
BUT
YOU
SAY
THAT
% STATES
DON'T
EVEN
NEED
TO
OFFER
% THEM
BECAUSE OTHER
FACTORS
FOR
% WHERE
COMPANIES MIGHT
LOCATE
ARE
% MORE
IMPORTANT,
LIKE
LABOR
% COSTS.
% BUT WOULD
FOXCONN
HAVE
EVER
COM
E
% TO
WISCONSIN
W
ITHOUT
THE
% BILLIONS IN
TARGETED
SUBSIDIES?
% >> SO THAT
IS AN
OPEN QUESTION
% AND NO ONE
CAN
REALLY ANSWER
% THAT.
% THE FACT OF
THE
MATTER
IS
% THAT
MOST
SUBSIDIES
DON'T
MATTER
% AND
EVEN
AMAZON
HQ2,
WHICH
WE
% ALSO
STUDIED
LAST
YEAR,
WAS
--
% ITS
FOCUS
WAS
ON
TECH
TALENT.
% THAT'S THE REASON
WHY
IT
CHOSE
% ARLINGTON, VIRGINIA
AS A
PLACE
% TO
LOCATE.
% THEY
ONLY
ALSO
CHOSE NEW YORK
% CITY BEFORE
PULLING OUT
OF
THAT
% DEAL
LATER
ON
BECAUSE
THEY
% WEREN'T
SURE
THAT
ARLINGTON,
% VIRGINIA
COULD
PROVIDE ENOUGH
% TALENTED
WORKERS
FOR
THEIR
TECH
% INDUSTRY.
% SO
THE END OF THE
DAY,
IT'S
ALL
% ABOUT
P
RODUCTION
AND
ACCESS
TO
% CUSTOMERS.
% SUBSIDIES
ARE A
SECONDARY
OR
% EVEN
TERTIARY CONSIDERATION.
% >> AND
AGAIN
YOU
SAY
THAT,
% QUOTE,
SUBSIDIZING
GOVERNMENTS
% ARE
WASTING
THEIR
MONEY" AND
% PRESUMABLY OUR
MONEY.
% WHAT'S
BEEN
THE
REACTION TO
YOUR
% PAPER,
FROM
POLICYMAKERS OR
% OTHER
ECONOMISTS,
WHO
TOUT
SUCH
% SUBSIDIES?
% >> SO
GENERALLY
THE
RECEPTION% HAS BEEN
VERY
GOOD.
% AND
WE'RE
ONLY
SAYING SOMETHING
% THAT
ECONOMISTS HAVE BEEN
SAYING
% FOR A VERY LONG
TIME.
% WE'RE
JUST
TRYING
TO
GET
THE
% MESSAGE OUT
INTO
THE
BROADER
% PUBLIC
UNDERSTANDING A
LITTLE
% BIT
MORE.
% AND
IT'S
VERY
WELL-UNDERSTOOD
% THAT A
LOT
OF
POLICYMAKERS
WOULD% GET
AWAY
FROM
OFFERING
THESE
% SUBSIDIES IF
OTHER
POLICYMAKERS
% ALSO PROMISED TO DO SO.
% WE
WASTE
ABOUT
$45
BILLION A
% YEAR IN
STATE
AND
CITY
TAXES
ON
% THESE SUBSIDIES
THAT COULD BE
% REPURPOSED TO
TAX
CUTS,
TO
GROW
% THE
ECONOMY
OR
OTHER
VALUABLE
% PUBLIC SERVICES.
% THAT WOULD BE
DEFINITELY% SOMETHING THAT
WOULD
GROW
THE
% ECONOMY RATHER
THAN SHRINK
IT.
% >> ALL
RIGHT.
% WE
NEED
TO
LEAVE IT
THERE.