State Subsidies to Attract Corporate Investment Should be Banned

  December 9, 2012

State Subsidies to Attract Corporate Investment Should be Banned

Gerald Epstein: The money thrown at corporations by states to invite investment is a boondoggle that should be ended by federal law
Members don't see ads. If you are a member, and you're seeing this appeal, click here


Share to Facebook Share to Twitter

No sports, no celebrities, no paid stories, no agendas. Pure integrity. - Steve Dustcircle
Log in and tell us why you support TRNN


Gerald Epstein is codirector of the Political Economy Research Institute (PERI) and Professor of Economics. He received his Ph.D. in economics from Princeton University. He has published widely on a variety of progressive economic policy issues, especially in the areas of central banking and international finance, and is the editor or co-editor of six volumes.


State Subsidies to Attract Corporate Investment Should be BannedPAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network, and welcome to the first edition of The Epstein Report with Gerry Epstein.

Gerry is the codirector of the Political Economy Research Institute, known as PERI. He's also a professor of economics in Amherst, Massachusetts. He's published widely on a variety of economic policy issues and central banking issues, international finance and such. Thanks for joining us, Gerry.

GERALD EPSTEIN, CODIRECTOR, PERI: Thanks for having me, Paul.

JAY: So what caught your attention this week?

EPSTEIN: What's caught my attention is a terrific series in The New York Times by Louise Story (started yesterday, on Sunday, and is going Monday and Tuesday) about tax competition, the way states and localities are giving massive subsidies to corporations to move to them, ostensibly to create jobs, and then the companies mostly just take the money and run. We've known about this problem for a long time, but The New York Times actually has been investigating this thoroughly for the last ten months and gotten a lot of terrific data on this.

JAY: So hang on. What does it mean, "take the money and run"? 'Cause don't they have to sign contracts that require them, you know, to create so many jobs and stay there for so many years and such and such?

EPSTEIN: Well, sometimes they do and often they don't. Even when they do, they're often not enforced, and even when they do, they're meaningless. Like, the company will create one or two jobs. And, for example, Amazon signed a contract or set up a warehouse in Texas, and then within a couple of years closed it down and left 200,000 people without jobs.

So this is a very serious issue, and it's—The New York Times series makes it clear—and there've been other studies—that the states simply are trading away millions of dollars if not billions of dollars of subsidies and getting very little in return. In fact, the number they come up with is that there are about $80 billion of subsidies given out by states and locales to corporations every year.

JAY: So how do you stop this? I mean, that's—it's sort of the whole name of the game when a big corporation is setting up a subsidiary somewhere—they create this competition where states practically bid to get them in. But how would you stop that the way America is organized?

EPSTEIN: Well, they do set up this bidding process, and it's a race to the bottom, and it's become—as the New York Times series makes clear, it's become part of the normal culture of doing business now.

How do you stop it? Well, one way you stop it is you take a proposal from a couple of the economists and the president of the Federal Reserve Bank of Minneapolis about 15 years ago, who said that there ought to be a federal law outlawing this kind of tax competition. Everybody would be better off, and even the states realize that. It's like an arms race. When you get into an arms race, you know that everybody's worse off. So you ought to have a law against it.

There have been attempts by groups of states to cooperate and to have a treaty among themselves that they wouldn't engage in this kind of arms race. There was one in New England about ten or 15 years ago, but that broke down within months because the competition for jobs is just so intense.

JAY: [crosstalk] Sorry. Go ahead.

EPSTEIN: The other way to stop this is to do what we here at PERI have been arguing for a while—Bob Pollin and others—is if you have a full-employment economy, then people aren't so vulnerable to this kind of blackmail by corporations, because they can get decent jobs anywhere.

JAY: And it takes another form, too, not just the subsidies, but also what happens in terms of labor legislation and wages. You have this competition between states that are either what they call right-to-work states, where it's much more difficult to organize unions, and you also have this competition now between which states are helping facilitate these two-tier contracts where you have lower wages for starting workers. And I know in Wisconsin what won those two-tier contracts at places like Harley Davidson was exactly the threat they would go to a state where they could get away with this.

EPSTEIN: That's right. The threat effect is very powerful. And it's not just happening here in the U.S. It's happening all over the world, international competition. I remember when I was doing some research in China about ten years ago on foreign investment and I interviewed somebody who was in charge of a free-trade zone in a northern city called Dalian, and I asked him, well, who's your biggest competition for investment? Is it South Korea? Is it Vietnam? He said no, it's the free-trade zone just down the street, 'cause they can out-bid us. The more you have this decentralization of this bidding process, the more you hand over enormous power to the corporations.

JAY: Alright. Thanks very much for joining us, Gerry.

EPSTEIN: Thank you.

JAY: And thank you for joining us on The Real News Network.


DISCLAIMER: Please note that transcripts for The Real News Network are typed from a recording of the program. TRNN cannot guarantee their complete accuracy.


Our automatic spam filter blocks comments with multiple links and multiple users using the same IP address. Please make thoughtful comments with minimal links using only one user name. If you think your comment has been mistakenly removed please email us at

latest stories

President Maduro Calls on the Pope to Help Resolve Conflict with Opposition
Broken Treaties Central to the Injustice of the Dakota Access Pipeline
The Industrial Agricultural System is Limiting Food Access and Driving Climate Change
TRNN REPLAY: The Real News Town Hall: Should the Community Control the Police? Pt.1
Breaking Through Power: Wendy Fields on Movement Building
How Washington's Money-Machine Stays Ahead of Democracy
Tribes Reclaim Unceded Territories to Block Dakota Access Pipeline
Obama Holding Further Military Involvement in Syria, But Will the Next President?
TRIPS: The Story of How Intellectual Property Became Linked to Trade (2/7)
A Just Transition for Fossil Fuels Workers is Possible
Breaking Through Power: Jordan Estevao on Training for Change
The Right to Housing in Baltimore - TRNN Grand Opening
Tom Hayden on the Obama-Biden Ticket
Clinton's Strategy: Make Obama Unelectable
Prospect of US Arms Shipments to Ukraine After Elections Prompts Restarting of Peace Negotiations
TRIPS: The Story of How Intellectual Property Became Linked to Trade (1/7)
Why is the State of Maryland Defending Racist Practices of the Pocomoke police?
Elites Outraged At Trump's Refusal to Accept Election Result
Two More Land Rights Activists Assassinated in Honduras
Final Presidential Debate Accentuates Candidates' Divide on Abortion Rights
Clinton Reaffirms Commitment to No-Fly Zone in Syria
A Bloodier Battle for Mosul Might Begin After the Ouster of ISIS
Covering the Epidemic of Violence in Baltimore - TRNN Grand Opening
Justice Department Sues Pocomoke For Violating Rights of Fired Black Police Chief
Officers Withdrawn from North Dakota Following Arrest of Madison Elected Official
Fair Elections Under Attack, Just Not in the Way Donald Trump Wants You to Believe
TiSA Agreement Leaks Show Corporations Pushing Privatization of Public Services
Exxon Fighting to Shut Down Investigations Into Company's Foreknowledge of Climate Change
Opposition Calls for a General Strike As Congolese President Wins Election Delay
The Path to Actual Police Reform Starts with Real Civilian Oversight,, The Real News Network, Real News Network, The Real News, Real News, Real News For Real People, IWT are trademarks and service marks of Independent World Television inc. "The Real News" is the flagship show of IWT and The Real News Network.

All original content on this site is copyright of The Real News Network. Click here for more

Problems with this site? Please let us know

Linux VPS Hosting by Star Dot Hosting