Another red flag: The to-be-sure paragraph stuffed toward the bottom:
Utah isn’t out of the woods. Despite its job growth, the state’s unemployment rate in October rose to a 25-year high of 7.6%, up from 6.7% a year ago, according to the BLS. Utah Chief Economist Juliette Tennert attributed the rise to an economic upturn that has prompted long-term unemployed workers who gave up looking for jobs to get back into the hunt, which has made the jobless rate go up. Utah’s unemployment rate remains below the national average of 9.6% in October.
Maybe Tennert is right. But let’s look at the BLS data ourselves. Last October, Utah had 1.188 million workers on nonfarm payrolls. This October it had 1.195 million. In other words, it’s added 7,000 jobs in the last year. That’s a 0.6 percent increase, not much for a population growing as quickly as Utah’s. Next-door neighbor Wyoming saw a 1.1 percent increase, Arizona was up 1 percent. New Mexico tied at 0.6 percent.
Nor does the Journal bother to mention that this business haven and economic star’s wages rose just 0.3 percent over the past year while the nation averaged a 0.8 percent gain, according to the latest stats from the first quarter.
In other words, there’s not much of a story there to begin with, much less a “corporate-welfare rocks!” one.
But it appears the flacks at the Utah Economic Development office have been busy little beavers lately. Two weeks before the Journal’s story, Newsweek dropped a piece touting “Utah as the new economic Zion.” At least the Journal’s piece didn’t include this jaw-dropping (and boneheaded) elitism:
Why Utah? Founded by Mormon pioneers, the state, which has been called “a quasi theocracy” by the editor of its largest newspaper, is overwhelmingly white (93 percent) and Mormon (60 percent). Those demographics make for a socially conservative mind meld—no gay marriage, mixed acceptance of women in the workplace—that might seem hostile to the idea-swapping associated with a go-go economy. Mix in a thin coffee-and-booze culture, and you might expect Utah’s economy to be listless as well.
Yeah, because no coffee, no booze and lots of social conservatives = listless economies. For that paragraph, Newsweek ought to send the responsible editors and reporters in wagons to create its new Provo bureau.
Newsweek also touts the Adobe move, but doesn’t bother to tell its readers that it was lured by $40 million of taxpayer’s money.
At a time of budget deficits and high unemployment, that’s inexcusable.
Ryan,
I enjoy your posts, but this one is no better than the article it criticizes. You don't like the fact that the story cherry-picks the facts that make Utah's deal look great, but you simply assume that all the facts that are omitted probably point to why it's evil corporate welfare. I would have been more impressed if you'd taken two minutes to Google the story. I did (maybe more like one minute) and found this article which lays it out nicely:
http://www.sltrib.com/sltrib/money/50059123-79/adobe-utah-state-incentive.html.csp
The incentive will be paid out over 20 years (which makes your $40k/yr number a little misleading), contingent on the wages being well above the average wage in the county where the facility is based ($60-$70k/yr). Officials expect other benefits to accrue; namely attracting a skilled workforce that will make the area attractive for other high tech businesses.
On the other hand, Adobe is expanding an existing business that already operates in Utah, so even they acknowledge that they can't say if the credit was necessary to secure the deal. It seems reasonable to conclude they simply decided that they would get more than $40 million in tax revenue out of the deal, and that other states would be willing to offer more.
All good facts you could have offered, if, unlike WSJ, you weren't so hell-bent on your own mission to bash "corporate welfare."
Well done, Salt Lake Tribune.
#1 Posted by Steve Rowley, CJR on Mon 29 Nov 2010 at 05:03 PM
Steve,
I don't quite understand what you're getting at.
First, I didn't mislead anybody with "$40k/yr number." Here's what I said:
"So, Utah’s government bribed Adobe to come with forty million bucks to create “up to 1,000 new jobs over the next 20 years”? That’s $40,000 of taxpayer money per job, and the Journal doesn’t tell us if these are low-paying call-center jobs or high-paying software-engineer ones."
Second, you're falling for the ol' "these tax credits pay for themselves" argument. But it's not true. Somebody is losing money, as I said, whether its Adobe's home state of California or whomever the company would have picked had there been a level playing field.
It's beggar-thy-neighbor economics and it all comes back around in the end. Presumably, Utah has lost out on other factories/offices because another state was willing to give a company more money. The end result is poorer taxpayers nationwide and richer corporations.
#2 Posted by Ryan Chittum, CJR on Mon 29 Nov 2010 at 05:56 PM
Yeah, I meant "/job," one of a half-dozen typos, thanks for kindly ignoring the others. I'm not falling for anything, however, for two reasons.
To begin with, the premise of the article you originally decry is that Utah's tax policies are beneficial for Utah, relative to other states. It's a bit much to take them to task for not unilaterally disarming, so to speak - they have to operate within a climate wherein other states have the ability and will to offer incentives as well.
But you probably dispute that premise on its face. If everyone unilaterally disarmed, then taxpayers win! That idea has problems, though. First of all, what exactly is "corporate welfare," and what is simply tax policy? Does the lack of cap-and-trade programs in states with carbon-intensive power supplies and heavy industrial sectors constitute a tax break that California has decided to no longer provide? Or is California's cap-and-trade program "corporate welfare" because it could have the effect of introducing de facto efficiency standards that raise costs for vehicle manufacturer and consumers (costs that are really profits in the eyes of California technology companies)?
This particular policy simply makes that connection clear. And there are some good arguments for why it could indeed pay Utah taxpayers, which is the standard by which Utah officials should be making their policy decisions.
#3 Posted by Steve Rowley, CJR on Mon 29 Nov 2010 at 07:02 PM
You say this is "just one way corporations suck money out the public treasury." That assumes that private money belongs to the government. The money belongs to the corporation. Any tax break is simply letting them keep more of what is theirs in the first place. And, considering the big picture, those in business are creating all the jobs, and the economy itself, off of which the government feeds like a parasite. If you had ever created any significant business of your own, and watched the government steal from you, at rates of 50 percent and more, you would get this. It's easy to sit in a journalism school and whine about corporations. Go out and create jobs instead in the real world.
#4 Posted by Sam Lewis, CJR on Mon 29 Nov 2010 at 07:16 PM
The second paragraph in the above confuses cap-and-trade and fuel efficiency standards with respect to the effect on vehicle manufacturers and consumers.
Tough to post coherently with a three-year old demanding to watch Dora on Netfllix whilst you have incredibly important arguments to construct - an as yet not-fully-explored problem with the convergence of television and the Internet.
But you get the idea.
#5 Posted by Steve Rowley, CJR on Mon 29 Nov 2010 at 07:20 PM
Sorry - one last (long) thing.
As for "what I'm getting at." Aside from the single argument you framed in your reply - namely that if no one offered tax incentives to businesses, they would pay more taxes (yes, that is a tough one to debate). I'm simply saying that you seem dissatisfied with the WSJ article because it comes across as cheerleading the practice of offering tax breaks to companies for locating in a particular place. Then you talk about all the problems with this practice and use a loaded phrase like "corporate welfare" to describe it. The problem I have with that criticism is that, like the WSJ writer, you were either too lazy or too militant to present some of the additional facts described in the Trib article that at least raise the spectre of reasonableness for an alternative point of view.
In particular, one thing I like about CJR in general, and some of your posts in particular, is your emphais on (in)numeracy, but then you throw out a number like $40k/job as an outrage, when, if you read the article, is arguably a pittance. Utah is paying the $40mm credit spread out over 20 years only if Adobe delivers 1,000 jobs that pay at least $30k more than the prevailing wage, each, per year. When you also consider the multiplier effect that will have on other local businesses, as well as the impact it will have on the quality of the regional workforce, it sounds to me like a reasonable deal.
Certainly you can argue that Adobe had to go somewhere, and might have gone to Utah with no incentive. That's what I like about the Trib article. It addresses that question quite seriously, without the rhetoric we saw in your post. I would argue that Utah is at a serious disadvantage in attracting tech businesses due to workforce quality issues, but that's up for debate. And of course you can say we all lose when we don't unilaterally disarm, but we already went through that above. The Trib doesn't address unilateral disarmament, to be sure, but to be honest, that seems ok to me because it is simply not going to happen - it's a story better left to the opinion pages (but maybe not the media criticism blog, in my book).
#6 Posted by Steve Rowley, CJR on Mon 29 Nov 2010 at 07:57 PM
"But it’s certainly not “unusual” for states to dole out millions of dollars in tax breaks and outright grants to corporations playing them against each other to get the highest bid."
--- Thank you Ryan, nice to see that someone's catching on to this. Next time you hear some Republican windbag insist that we "handle things at the state level," keep this in mind.
What they're really saying is "The employers of my lobbyist friends want to isolate, corner and mercilessly rape each state one by one, in a secluded place where no Washington bureaucrat can hear 'em scream, and if any of 'em dares say anything we'll take food out of their mouths and offer it to some other poor, desperate state that has 15% unemployment."
#7 Posted by Hardrada, CJR on Tue 30 Nov 2010 at 04:05 PM
The most important point is this: those jobs gained are job losses somewhere else.
Our new governor is talking about luring industry from neighboring states. I take cold comfort in new jobs here that come at the expense of another state/municipality that was unable to come up with the ransom.
People in Indiana have families to feed just like people in Ohio.
#8 Posted by Kellie, CJR on Wed 1 Dec 2010 at 08:50 AM