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New York’s rejection of Amazon could be a turning point for corporate welfare

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Amazon’s HQ2 debacle is the latest sign that the public has gotten wise to corporate subsidies

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When Amazon announced the long-awaited “winners” of its search for a second headquarters last November, the swift and visceral backlash from residents and local officials of New York City seemed destined to fizzle with time, just like similar outrage every time a city gives out half a billion dollars to build a stadium or lure a manufacturing plant.

But this time was different. Amazon endured three months of negative publicity in New York before giving up the $2.8 billion in subsidies the state and city offered the company in return for a new campus in Long Island City, a neighborhood in the midst of a development boom that’s already the priciest in the borough of Queens.

While a similar fate has not met Amazon’s other HQ2 location in Crystal City, Virginia, and a smaller operations center in Nashville, Tennessee—at least not yet—New York’s victory over a company as wealthy and powerful as Amazon will no doubt embolden residents of other cities to rise up the next time an elected officials tries to give a sweetheart deal to a corporate entity.

And it was no small victory. At the time of the announcement in November, Amazon’s deal with New York stood to become the fifth-largest corporate welfare subsidy in American history, according to a Curbed analysis of data from Good Jobs First. It would have made Amazon the fifth-highest recipient of corporate welfare behind only Boeing, General Motors, Intel, and Alcoa.

New York’s rejection of Amazon comes at a time of renewed scrutiny of corporate subsidies that likely helped contribute to the outcome.

In July 2017, former Wisconsin governor Scott Walker gave Taiwanese manufacturer Foxconn $4.7 billion in public subsidies to build a factory in Mount Pleasant, Wisconsin, for LCD panel production, with the promise of 13,000 well-paying jobs for the state’s long-suffering blue collar workers. The project was used by both Walker and President Donald Trump as evidence they were reviving manufacturing in the Midwest.

According to Bloomberg, the factory currently employs 178 people. In November, the Wall Street Journal reported Foxconn was considering bringing workers from China instead of hiring locals. In January, a Foxconn executive said that the company was rethinking its plans for the factory.

Now, instead of manufacturing, it might be used for research and development because it’s cheaper to manufacture in China and Mexico.

If Amazon’s defeat in New York is to become a turning point for how the country responds to corporate welfare, elected officials will need to make the connection that not only is corporate welfare unpopular with constituents, it’s just bad policy.

Of the respondents of the Menino Survey of Mayors, an annual poll of 110 U.S. mayors, 58 percent of mayors said public subsidies for corporations were bad politics, but 44 percent believed they were both bad politics and good for the city. Only 14 percent said they were both bad politics and bad for the city.

Last summer, a coalition of dozens of city officials, urban policy experts, and economists headed by author Richard Florida signed a petition denouncing these types of giveaways and incentives as “wasteful and counterproductive.” Some argued they should be made illegal.

“Such incentives do not alter business location decisions as much as is often claimed, and are less important than more fundamental location factors,” reads the petition. “Worse, they divert funds that could be put to better use underwriting public services such as schools, housing programs, job training, and transportation, which are more effective ways to spur economic development.”

What’s interesting about Amazon pulling out of New York is that while some local officials groused about the deal over the last three months, it appears that Amazon made the decision to pull out on its own, while the deal’s chief political architects—Mayor Bill de Blasio and Governor Andrew Cuomo—remained supportive, suggesting the company was more responsive to public opinion than the elected officials were.

Yet despite Amazon’s statement thanking him for support, de Blasio blasted Amazon after the announcement today, after spending the better part of three months advocating for the alleged benefits of the company’s presence in New York.

“Instead of working with the community, Amazon threw away that opportunity,” de Blasio’s statement said. “If Amazon can’t recognize what that’s worth, its competitors will.” But based on what’s transpired with HQ2, a deal to cut one of Amazon’s competitors a similar break seems highly unlikely.