In February 2009, as the nation grappled with the worst financial and economic crisis since the Great Depression, Newsweek published an issue with these words in large type on the cover: “We Are All Socialists Now.”
Written by Jon Meacham, the cover story stated that “the U.S. government has already—under a conservative Republican administration—effectively nationalized the banking and mortgage industries.” And since “neither consumers nor business is likely to do it, the government will have to stimulate the economy.”
He was referring, of course, to the Emergency Economic Stabilization Act of 2008, the $700 billion bailout of the U.S. financial system enacted in October 2008 under former President George W. Bush, and the American Recovery and Reinvestment Act, the nearly $800 billion stimulus plan signed into law by President Barack Obama on Feb. 17, 2009.
While noting that “we remain a center-right nation in many ways,” Meacham wrote it was time “to acknowledge the reality of the growing role of government in the economy.”
As I recall, the Newsweek cover provoked a lot of reaction, much of it negative. But six years later, it’s hard to argue with its main thrust: Government—at all levels—is a big player in the economy. The biggest of all, some might say.
Among those who own and run businesses, this reality is a common complaint. Government, they say, is the biggest problem in the economy. If left alone, the private sector would create more jobs, higher wages and superior technology innovations.
Yet businesses are among the most avid recipients of government funding—from federal Small Business Innovation Research grants to state Regional Economic Development Council allocations and Excelsior Jobs Program tax credits to County of Monroe Industrial Development Agency incentives. If there’s public money to be had, it seems, the private sector is happy to take it. And we’re not talking nickels and dimes.
Three years ago, in a series called “United States of Subsidies,” the New York Times investigated the thousands of local incentives granted nationwide—the tax breaks granted by states, counties and cities, not Washington. The Times found that companies of every stripe—from energy conglomerates and high-tech ventures to banks and retail chains—each year receive breaks that total more than $80 billion. In fact, the newspaper reported, the cost is surely far higher, because many agencies do a poor job of tallying the value of the incentives they hand out.
Among the biggest recipients, many are big-name companies: General Motors, Ford, General Electric, Boeing, IBM, Microsoft, Google and Amazon are just a few of the 48 companies the Times said had received more than $100 million each in state grants since 2007. (To search the database the Times created for the series, go to http://goo.gl/wHQ8fR.)
At the time this series was published, New York ranked among the top five states in monetary value of corporate incentives. If anything, it has moved closer to the top since then. Under Gov. Andrew Cuomo, New York has ramped up economic development efforts, with Albany the driving force.
Over the last three years, New York has awarded more than $2 billion for job creation and community development through the REDC program. In 2015, more than $230 million will be distributed in direct assistance to businesses and other private-sector organizations. Meanwhile, the Start-Up NY program, which has created tax-free zones linked to college and university campuses, awarded $59 million in tax breaks last year and is forecast to boost that amount to $106 million in 2015.
Then there’s the Buffalo Billion and the Upstate Revitalization Initiative. The Buffalo Billion is Cuomo’s commitment to invest that dollar amount over 10 years in a bid to shake the Queen City from its decades-long economic doldrums. It’s a “shock and awe” approach that owes much to New York’s strategy in building a nanoscience industry in the Albany region. Three-quarters of the Buffalo Billion now is earmarked for a single project: the SolarCity Corp. manufacturing plant by the Buffalo River.
When grumbles were heard elsewhere in UpstateNew York about Buffalo and its billion dollars from Albany, the governor launched the URI, a competition that will award $500 million each to three of seven upstate regions.
At a SolarCity event a few weeks ago, Cuomo was asked if he could foresee a time when New York could exit the business of trading tax breaks and subsidies for promises of jobs. “No, because what’s happening now is every state is competing for every business,” he replied.
“If you’re not careful you will wind up losing a lot of businesses because the other states are going to be more competitive.”
This is the first in a series. Next: Who built Clinton’s Ditch?
8/28/15 (c) 2015 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email email@example.com.