How "economic development" makes us poor

[JeepHammer]

You can't explain to people that a capitol economy is a false economy.

 

[jamil]

You can't explain to people that a capitol economy is a false economy.

 

[jamil]

I lived for six years in Louisiana courtesy of the USA.
Louisiana is a corrupt and strange place to live they use Napoleonic code.
The average tax revenue for property taxes is .0479% of assessed value the Lowest in the nation and it shows, the homestead exemption is the first $75,000 so if your house value is less than $75,000 you pay no tax.
Trust me the corruption is widespread and comprehensive often local communities are controlled by just a few families.
They are poor always have been and always be poor will be often you will see a new 50k pickup in front of a trailer from 1972.
No way to compare Indiana to Louisiana different culture and people you really have a upperclass and underclass. The forms of government are far different and infested with nepotism and payoffs.

The tax cap was a win down here it stopped a city Council from spending and taxing. They were hell bent on building a new school the tax cap and the referendum getting voted down three times in a row helped.

Missippi is the same. The corrupt abatement system Louisiana has needs to end, but that’s not gonna fix houshold poverty there.

 

[mmpsteve]

There's two different discussions here: The general wisdom (lack thereof) of race to the bottom development practices, and Louisiana's specific and highly corrupt practices.

https://www.npr.org/templates/transcript/transcript.php?storyId=476799218

In some parts of the country, businesses literally jump back and forth across a state border every few years, racking up ever higher tax incentives every time. They get to play both sides: Demand incentives to move, and extort incentives under threat of taking jobs away. Sometimes it does go national-scale, as we saw with Amazon and the sickening rush by cities and states to grovel at Amazon's feet and offer them all the freebies and exemptions in the world.

You give away all this stuff to get companies in, and then a few years later they're gone, leaving your community with the social costs of the newly unemployed and the environmental costs of whatever the company left behind. It is exactly a loss leader with no follower. The problem is that elected people are the ones making these decisions, and elected people have one overriding incentive: Get re-elected by any means necessary. When jobs come to town, people cheer for you and reelect you and don't look too hard at the costs. When jobs leave town, you can curse the evil companies for betraying the people and...get re-elected.

The companies win, their lawyers win, the elected officials win (temporarily), and everyone else loses. As long as states and municipalities are allowed to set all these policies for themselves, I don't think there's a solution. It's a classic collective action problem. What's needed is for every state and city to say "No, we won't give you freebies anymore, your company will pay its fair share" together, at the same time, with no spoiler communities cutting deals for their own short-term benefit. That's probably not going to happen.

In the meantime, we'll keep footing the bill for corporations to get their welfare, because we need jobs and they have all the power.

I don't believe that Exon-Mobil invests billions into a refining facility, only to jump ship a few years later. These heavy industries have been there for decades, and aren't going anywhere, regardless of their abatement status. The video did make a powerful argument that something is amiss in Louisiana's abatement program. I'm sure there are a lot of well-greased palms.

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[AtTheMurph]

Property tax abatement should be illegal and viewed as completely un-American.

Why does a specific business get a tax break that competitors in the community do not? Why does a specific business get subsidized by other businesses and citizens in the community?

Let's say the local county, city, town etc is trying to attract a widget manufacturer by offering a large tax abatement and subsidy in the form of infrastructure grants to lure a that business.

Those foregone taxes then will be made up on the backs of the existing businesses and citizens and any new ones who happen to move into the taxing zone.

Now let's assume that I already have a widget business in this area, or supply a widget maker in another area. My municipality has just unfairly altered the competitive landscape in favor of my competition. And that competitive advantage will be in effect for usually at least a decade.

It's BS of the largest order and a power that government is not supposed to have.

When you break it down it is simply another form of centralized planning.

 

[Ark]

I don't believe that Exon-Mobil invests billions into a refining facility, only to jump ship a few years later. These heavy industries have been there for decades, and aren't going anywhere, regardless of their abatement status. The video did make a powerful argument that something is amiss in Louisiana's abatement program. I'm sure there are a lot of well-greased palms.

.

An oil refinery is a different investment than a corporate cubicle mill or an auto plant.

Louisiana is ground zero for crony capitalism. Dunno what exactly transpired when they moved there in the first place, but a company like Exxon shouldn't get a dime in tax abatements or incentives. There's only a couple of places in the country those facilities can be built, so there's no reason to act like Exxon gets to shop around.

 

[Hohn]

There's two different discussions here: The general wisdom (lack thereof) of race to the bottom development practices, and Louisiana's specific and highly corrupt practices.

https://www.npr.org/templates/transcript/transcript.php?storyId=476799218

In some parts of the country, businesses literally jump back and forth across a state border every few years, racking up ever higher tax incentives every time. They get to play both sides: Demand incentives to move, and extort incentives under threat of taking jobs away. Sometimes it does go national-scale, as we saw with Amazon and the sickening rush by cities and states to grovel at Amazon's feet and offer them all the freebies and exemptions in the world.

You give away all this stuff to get companies in, and then a few years later they're gone, leaving your community with the social costs of the newly unemployed and the environmental costs of whatever the company left behind. It is exactly a loss leader with no follower. The problem is that elected people are the ones making these decisions, and elected people have one overriding incentive: Get re-elected by any means necessary. When jobs come to town, people cheer for you and reelect you and don't look too hard at the costs. When jobs leave town, you can curse the evil companies for betraying the people and...get re-elected.

The companies win, their lawyers win, the elected officials win (temporarily), and everyone else loses. As long as states and municipalities are allowed to set all these policies for themselves, I don't think there's a solution. It's a classic collective action problem. What's needed is for every state and city to say "No, we won't give you freebies anymore, your company will pay its fair share" together, at the same time, with no spoiler communities cutting deals for their own short-term benefit. That's probably not going to happen.

In the meantime, we'll keep footing the bill for corporations to get their welfare, because we need jobs and they have all the power.

Indeed.

It would be nice to see civic leaders who CLAIM their fair city is has a lot to offer (other than tax $$) would start acting like they need to outbid some other locale. This is a race to the bottom.

Our local leadership here in C-bus has been really pushing hard into "affordable housing". On one hand, they're right-- we're attracting people here and some money. And they have rehabilitated some parts of town that sorely needed it. But how much economic value is this really? The housing units are almost never locally owned. They can't be, because they are largely funded by pass-through money from the State or Feds, and you know that the State has bigger dollar lobbyists getting those grants and handouts. So we're bring more residents here, yes. But they rental money leaves the area, and the jobs created are generally low-wage service industry type jobs (with a handful of jobs like nursing).


In theory, a tax abatement works because it forfeits tax revenue (temporarily) on additional property value that otherwise wouldn't occur.


In practice, the abatements are handed out has icing on the cake long after the decision has been made to build a project. They fail the "but for" test. Instead, they are showering flower petals on the departing train.


Above all, the groveling to large corporations is not only unseemly, but also counterproductive in many cases.


I remember reading once about a small town that was trying to lure a large company to replace the primary employer that left. A large meat packing concern shows some interest, and local leaders trip over themselves to attract it to make use of a massive, but idle industrial facility.

Funding is secured to renovate-- state and local tax incentives are awarded post haste.

Meat packing company arrives and creates over a thousand jobs. Town sees influx of people (largely of dubious legal status in this industry, but let's put that aside for now). It's very soon recognized that the sewage plant is under capacity, as are the local schools which are being flooded with (largely Spanish speaking) children. Town fathers borrow to build larger Sewer and Water plants, and more schools.

A decade or so later, the plant is idle again, and the remnant of people are now in debt up to their eyeballs paying for a water and sewer plants twice as large as they need, and schools that are half empty and relatively new. They bulldoze one of the old schools because of massive over capacity.

Now-- what to do with that eyesore of a site from the old school? Hmm? OH LOOK! A "DEVELOPMENT OPPORTUNITY!"



Columbus did something in this vein with Nusun. Pretty sure the net loss to our town was about $440k or just about $80 per resident. Chump change when there's "progress" to make, right?

"[FONT=&amp]Nusun was offered up to $2.25 million in performance-based tax credits by the Indiana Economic Development Corp. and $825,000 of incentives from the city of Columbus and Bartholomew County."

[/FONT]https://www.ibj.com/articles/32726-columbus-manufacturer-to-begin-solar-panel-production
[FONT=&amp]

[/FONT]

 

[jamil]

An oil refinery is a different investment than a corporate cubicle mill or an auto plant.

Louisiana is ground zero for crony capitalism. Dunno what exactly transpired when they moved there in the first place, but a company like Exxon shouldn't get a dime in tax abatements or incentives. There's only a couple of places in the country those facilities can be built, so there's no reason to act like Exxon gets to shop around.

Louisiana has this program which gives tax breaks to anyone who wants to come in to do business, yet few industries are breaking down the gates to grab up the subsidies. There's a reason why Exxon does and not a lot of other companies do. Like you said, not many other places for Exxon to set up shop.

The local workforce cannot supply a demand for a lot of skilled and professional employees. Most of the local workers from the state that are employed by companies like Exxon are general laborers. A lot of the skilled and professional level employees are transplants. This is a problem throughout the Deep South, not just Louisiana. It's the same in Missippi too, but they don't have nearly the subsidy program that Louisiana does. The video in the OP mischaracterizes the problem in Louisiana. It IS crony capitalism, but it's not causing the problem they say it's causing.

 

[AtTheMurph]

 

[mmpsteve]

Louisiana has this program which gives tax breaks to anyone who wants to come in to do business, yet few industries are breaking down the gates to grab up the subsidies. There's a reason why Exxon does and not a lot of other companies do. Like you said, not many other places for Exxon to set up shop.

The local workforce cannot supply a demand for a lot of skilled and professional employees. Most of the local workers from the state that are employed by companies like Exxon are general laborers. A lot of the skilled and professional level employees are transplants. This is a problem throughout the Deep South, not just Louisiana. It's the same in Missippi too, but they don't have nearly the subsidy program that Louisiana does. The video in the OP mischaracterizes the problem in Louisiana. It IS crony capitalism, but it's not causing the problem they say it's causing.

That was my point. The video mischaracterises the poverty problem. Heavy industry in the deep south still pays good wages, regardless of the tax abatements. There are many other things going on that perpetuate the poverty. I've not done a thorough review of the causes, but having lived there and worked there, the causes of poverty are much more complex.

One thing would be the lack of Unions, but when I think about it, have the Unions served the Great Lakes Region the best? Seems we lost millions of jobs to foreign companies, or our own companies moving out, when the Unions went push-to-shove.

.

 

[jamil]

That was my point. The video mischaracterises the poverty problem. Heavy industry in the deep south still pays good wages, regardless of the tax abatements. There are many other things going on that perpetuate the poverty. I've not done a thorough review of the causes, but having lived there and worked there, the causes of poverty are much more complex.

One thing would be the lack of Unions, but when I think about it, have the Unions served the Great Lakes Region the best? Seems we lost millions of jobs to foreign companies, or our own companies moving out, when the Unions went push-to-shove.

.

Wages/salaries there are low for a lot of reasons. When I took a job in Missippi, I had negotiated a salary that was in line with the national average for my level of experience in the position, but turned out it was a lot more than the company usually paid for engineers. They had to hire out of state because they couldn't find qualified engineers locally. They had to pay the natioanl going salaries. So yeah, pay is definitely depressed even in jobs that require degrees. They treated the other guys like ****. But they treated me pretty well.

This is how ****ty they were. My second day on the job my manager stopped by my office and said I need to go to a meeting with him. All the other guys were standing around glaring at me. I'm like WTF did I do? Me and the manager were the only ones invited. He told me it was a benefits meeting for everyone who made over $x/year. I'm like, do the other guys know that? Yep. Oh ****. Have they never heard of discretion?

So now, not only am I the n00b damn Yankee transplant, I'm the n00b damn Yankee transplant making more than everyone else in the department except the manager. Eventually I got to be friends with a lot of them, but it started off pretty rough. I think eventually they realized it wasn't my fault they got paid ****. But companies could get away with it. I told those guys they could go just about anywhere else in the country and make and make a lot more money. They didn't want to leave the place they grew up. So they stayed there making ****. And that's all they'll ever make there.

 

[Hohn]

When someone won't move, there's a huge elasticity of supply for labor. The demand can rise a bunch without driving up wages.

 

[BugI02]

Wages/salaries there are low for a lot of reasons. When I took a job in Missippi, I had negotiated a salary that was in line with the national average for my level of experience in the position, but turned out it was a lot more than the company usually paid for engineers. They had to hire out of state because they couldn't find qualified engineers locally. They had to pay the natioanl going salaries. So yeah, pay is definitely depressed even in jobs that require degrees. They treated the other guys like ****. But they treated me pretty well.

This is how ****ty they were. My second day on the job my manager stopped by my office and said I need to go to a meeting with him. All the other guys were standing around glaring at me. I'm like WTF did I do? Me and the manager were the only ones invited. He told me it was a benefits meeting for everyone who made over $x/year. I'm like, do the other guys know that? Yep. Oh ****. Have they never heard of discretion?

So now, not only am I the n00b damn Yankee transplant, I'm the n00b damn Yankee transplant making more than everyone else in the department except the manager. Eventually I got to be friends with a lot of them, but it started off pretty rough. I think eventually they realized it wasn't my fault they got paid ****. But companies could get away with it. I told those guys they could go just about anywhere else in the country and make and make a lot more money. They didn't want to leave the place they grew up. So they stayed there making ****. And that's all they'll ever make there.

This brings back memories. As a newly minted ChemE [a number] of years ago, I received some numerically attractive offers from plants in Louisiana and with companies to work in the ME (Saudi Arabia). I made a plant visit to LA. I declined both offers because, for a lad only 5 years away from back east (even though I grew up well upstate in NY) it seemed like setting your watch back 100 years. At the time I couldn't visualize residing in either area as actually 'living'. I wasn't sure if I wanted to do graduate work, and neither area would facilitate that. There was a faint air of desperation that, combined with the offers, seemed to indicate they could be a pathway to entrapment as a plant engineer forever. My understanding is/was the refiners are there for a combination of proximity to shipping and lax environmental regulation

 

[mmpsteve]

This brings back memories. As a newly minted ChemE [a number] of years ago, I received some numerically attractive offers from plants in Louisiana and with companies to work in the ME (Saudi Arabia). I made a plant visit to LA. I declined both offers because, for a lad only 5 years away from back east (even though I grew up well upstate in NY) it seemed like setting your watch back 100 years. At the time I couldn't visualize residing in either area as actually 'living'. I wasn't sure if I wanted to do graduate work, and neither area would facilitate that. There was a faint air of desperation that, combined with the offers, seemed to indicate they could be a pathway to entrapment as a plant engineer forever. My understanding is/was the refiners are there for a combination of proximity to shipping and lax environmental regulation

I worked refineries in the early '80's. There was definitely some lax environmental stuff going on! It wasn't a bad place to live (New Orleans area), but I could see a young engineer getting stuck into a dead-end plant job. I was not an engineer, just a grunt millwright. I moved back north when the bottom fell out of the petrol industry in the mid '80's. I did make, and save, a lot of money during the boom time, and that gave me the capital to get into the print biz.

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[Ingomike]

So The State and local governments providing incentives to companies to relocate to their area is bad? By my thinking, not always.

I would support us offering significant incentives to relocate all the gun industries from blue states to areas like Anderson, Columbus, Marion, etc.

 

[HoughMade]

Oh, and I'm not quite sure why we're accepting the notion that more taxes paid to government benefits the populace as a whole.

I'm not.

 

[Leadeye]

The government likes to see itself as representing the population as a whole, although I think they confuse terms like representing and ruling. Big media tries to convince us every day that we are better off accepting government rule. Reminds me of the Catholic church in medieval Europe explaining to people about the divine right of the aristocracy.

 

[HoughMade]

As to the title of this thread, with a few exceptions, if you are poor (in the U.S.), the fault likely lies with you and/or your progenitors, not economic development.

 

[Ingomike]

As to the title of this thread, with a few exceptions, if you are poor (in the U.S.), the fault likely lies with you and/or your progenitors, not economic development.

So West Virginia coal miners are at fault for being broke after Obummer tried put their entire industry out of business? The LA folks are at fault for being bilked by corrupt politicians?

 

[HoughMade]

So West Virginia coal miners are at fault for being broke after Obummer tried put their entire industry out of business? The LA folks are at fault for being bilked by corrupt politicians?

The salary of coal miners starts at around $30/hr and goes up rapidly from there. They deserve every cent. However, all of us should have marletable skills that we can take to another job if need be. How many coal miners are out of work? How many are poor?

As for L.A......is there a wall keeping them in? Did they not vote for the people in charge?

There are always ways to blame others. In the end, that doesn't get anyone anywhere.