Charlie Bagli takes a nice look in The New York Times at the corporate-welfare machine that is Chris Christie’s administration in New Jersey, and reports that the governor has approved a record $1.6 billion in handouts to companies to date.
Prudential Financial made $3.7 billion in net income last year. Christie gave it $251 million to move into a new building four blocks away.
Panasonic dutifully played the game that most companies seem to play these days when their lease is coming due: Threaten to jump across state lines and extract cash from the government to stay (for ten years). It got $102 million, which is more money than the company earned in 2011.
The press reported at the time that New Jersey’s deal with Panasonic would save 800 jobs in the state and possibly add another 150 positions over time. But the Times talks to the chairman of Panasonic North America, who admits that moving would have been quite the headache:
But Mr. Taylor conceded that he had to take into account that “probably 80 percent” of the company’s 900 employees wouldn’t have made the trip to California, Georgia or other competing locations considered by the company.
It’s surprising that Panasonic admitted this. It’s not surprising that it did so after its $102.4 million handout was already secured. It shows that states have more leverage than they think they do.
But Christie and New Jersey aren’t just forking over hundreds of millions of dollars to companies already in the state. They’re actively trying to poach companies from across the Hudson River too, including Fresh Direct and the Hunts Point Terminal Produce Cooperative.
It’s pretty low when you try to steal jobs from the Bronx, much less from Hunts “Hookers at the” Point, which is one of the poorest places in the country. That the Bloomberg administration has tried to more or less disarm in the tax-subsidy game makes it worse.
When Jersey offered FreshDirect $100 million to move from Queens, New York felt it had to counter to keep the grocery-delivery company in the city. It succeeded, naturally. End result: Christie and New Jersey don’t get the company or its jobs and New York City government and its taxpayers spend $120 million they otherwise wouldn’t have spent, and almost all the benefit goes to the owners of a private interest.
Meantime, other private interests get hurt by the city’s largesse. Bagli, in a February story on the FreshDirect deal, wrote this:
Michael Eberstadt said he was dismayed by the city’s decision to “subsidize my competitor’s advancement over me.” Mr. Eberstadt started Monster Savings, a relatively small online food and supply service in Manhattan. But just as his company is starting to grow, government handed his larger rival another advantage.
“There’s something fundamentally unfair about that,” Mr. Eberstadt said. “They’re huge. I’m tiny, but starting to grow.”
Of course, Eberstadt isn’t the only businessman getting squished by the free marketeer’s government largesse. Every bricks-and-mortar grocery store and bodega in the city that’s not getting similar corporate welfare, which would be just about all of them, is put at an unfair disadvantage by the subsidization of a competitor.
If direct government spending distorts markets, then so do tax expenditures. And these handouts raise other issues:
Hartz-Mountain, Panasonic’s landlord in Secaucus, sued the state over the deal last year. It dropped the suit after New Jersey created another tax credit program for suburban developers.
What are the net results of these policies so far?
Despite Mr. Christie’s efforts, New Jersey has recovered only 20 percent, or 51,500, of the 261,000 jobs lost during the recession, compared with 80 percent in New York City.
Good coverage by the Times.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at email@example.com. Follow him on Twitter at @ryanchittum. Tags: Chris Christie, Corporate Welfare, New Jersey, race to the bottom, The New York Times