#cronyism

Some New York and Virginia workers will be winners from the Amazon deal, but business subsidies are a loser for citizens overall…

Amazon has chosen New York City and Arlington, Virginia, for new corporate headquarters after the cities ponied up more than $2 billion in subsidies to the retail giant.

As with much of government spending, the costs of corporate pork to society are large but diffuse, while the benefits to the recipients are direct and visible.

Workers in the two cities will be winners as labor demand gets boosted, but business subsidies make losers of taxpayers, other businesses and good governance.

Ten Harmful Consequences of Handouts for Amazon

1. Fairness. Subsidies give Amazon an unfair edge other tech firms in New York City and Northern Virginia.
2. Alternatives.New York and Virginia would have generated more durable growth by cutting business taxes across the board by $2 billion. That would have boosted investment by many businesses, and thus created more balanced prosperity.
3. Diversity. Industry clusters such as Silicon Valley are successful not because they have big companies, but because they have a start-up culture that nurtures growth companies with venture capital. Rather than favoring big companies, state and local politicians would better spur growth by reducing tax and regulatory barriers to spawn a diversity of new companies.
   
4. Corruption. Allowing politicians to hand-out business subsidies at their discretion generates corruption because the hand-outs get swapped for campaign cash and outright bribes.
   
5. Bureaucracy. Amazon-style subsidy deals are jobs programs for accountants and lawyers.
   
6. Lobbyists. The high-profile Amazon win will inspire more companies to shake down politicians for subsidies. 
7. Dependency.Just as welfare undermines individual productivity, corporate welfare undermines business productivity. 
8. Bad Decisions. Subsidies induce companies to make bad decisions that backfire.
   
9. Politics. High-profile subsidy deals are politically risky. 
10. Priorities. State and local governments face serious problems that may sink their economies in coming years such as large unfunded pension costs. They should fix those problems rather than trying to micromanage the economy.
    

Rather than subsidizing big businesses, the states should aim to create a diverse business ecosystem — an Amazon, if you will — by cutting taxes and regulations for all types of investment. If states adopt low tax rates and repeal unneeded regulations on zoning, licensing, and other activities, growth will take care of itself.

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My Little Crony | Sophie E. Hill