States Can’t Win the Endless ‘Business Climate’ Game
For the past four decades, America's 50 states have allowed themselves to be trapped as players in a multi-state race to the bottom staged by Corporate America.
The inter-state (and increasingly global) competition to offer corporations the most perfect “business climate” costs states a huge share of their tax revenues. Greg LeRoy, author of the Great American Jobs Scam, estimates the cost of state-level inducements at a staggering $50 billion annually, and journalist David Cay Johnston pegs the figure at about $70 billion.
The “business climate” game—with corporate taxes slashed ever lower, accompanied by reductions in taxes for the investor class—inevitably shifts the tax burden to homeowners and small businesses lacking the size and resources to claim subsidies.
Now the backlash against the corporate tax cuts has arrived—and it is being channeled not against the “free market”-preaching CEOs whose firms have actually benefited richly, but against public employees whose pay is actually lower than similarly-educated private-sector counterparts.
In states like New York, Connecticut, Massachusetts and Illinois, Democratic governors have rhetorically accepted the right of public workers to be organized and to bargain collectively.
But like President Obama’s guarded comment on the Wisconsin labor rebellion, Democratic politicians' defense of union rights was very scrupulously not linked to protecting all working families from the broader corporate assault on middle-class living standards and stifling the voice of all working people.
By refusing to point out that the heavily-unionized public employees are merely the most recent target of rapacious corporate leaders, these Democrats thus saw themselves freed of any responsibility to defend public workers’ wages and benefits.
Now they have emptied “bargaining” of any meaning by demanding massive sacrifices to balance the state budgets or face extensive layoffs.
In New York, for example, Democratic Gov. Andrew Cuomo threatened 9,800 layoffs unless public unions agreed to three-year wage freezes and other concessions worth $450 million. The major unions see no alternative.
Meanwhile, Cuomo has refused to consider a surtax on New York’s enormous number of millionaires and billionaires, or to examine the tax abatements and other subsidies for giant corporate facilities in Manhattan.
For the past 30 years, New York City has been aggressively granting tax breaks and subsidies to office buildings for IBM, US Steel, General Electric, Metropolitan Life, Philip Morris and Getty Oil, to name but a few recipients of public generosity.
These tax breaks led New York City Comptroller Harrison J. Golden to quip, “Tax inducements for this highly desirable area of the city are as necessary as additional sand for the Sahara Desert.”
The notion of “shared sacrifice” has been amended to mean only public workers and the beneficiaries of their services among the working class and poor, while exempting corporations and the rich—flying high with record profits, a 23% increase in CEO pay in 2010, and record shares of income—have been exempted.
Only in Minnesota has a Democratic Governor, Mark Dayton fought to begin resolving the state’s deficit by imposing a tax on the 7,700 state residents earning over $1 million. As Talking Points Memo describes the battle:
Dayton's message focused on unity, saying "We are one Minnesota." He called out Republicans for refusing to accept increased taxes for the wealthy, saying "instead of taxing their friends, they would prefer very damaging cuts to healthcare, K-12 and higher education, state and local public safety, mass transit, and other essential services."
"I believe in putting the people of Minnesota first," Dayton said, looking exasperated at times. "I really believe I've done everything I possibly could."
Dayton allowed the state government to close down for two weeks to turn up the heat on the intransigent Republican-dominated Senate.
Ultimately, Tea Party Republicans blocked the tax on their millionaire and billionaire allies. But they were forced to drop demands for slashing 15 percent of the state’s public workforce, eliminate their package of right-wing policy proposals for the state budget and agree to raise $500 million through the sale of bonds.
WHERE WAS THE MOBILIZATION?
But Dayton’s bold step might have been doomed from the start because—judging from news accounts I have seen—he failed to mobilize working families to head to the Capitol and challenge the Tea Partiers over their efforts to keep intact the fortunes of Minnesota’s wealthiest.
As in New York and other states (including Wisconsin), in Minnesota both Democrats and the public unions have failed to use their resources to re-frame the debate on taxes and jobs. The Republicans successfully created a direct connection between corporate tax cuts and a good “business climate” for job creation, with most Democrats eventually buying this faulty notion.
Even when manufacturing corporations blatantly play a game of “take the money and run”—amassing state subsidies for years before heading to the South, Mexico, and China—Democrats have been afraid to react by suggesting subsidies be linked to actual job creation and that they be repaid if corporations relocate them.
For example, Wisconsin’s strategy of maintaining an excellent “business climate” has very obviously failed when the city of Milwaukee—once known as "The Machine Tool Capital of the World"—has lost 80 percent of its manufacturing jobs despite a highly-skilled workforce.
Despite this context, public employee unions in Wisconsin—for all their imagination and militancy—have not been systematically educating their own members and the public about the futility of directing billions in public funds toward foot-loose private corporations with no loyalty to Wisconsin.
Imagine a campaign where members and their families are given well-crafted DVDs outlining the realities of Wisconsin’s tax system and corporate relocations, and where the public sees TV ads explaining the waste of its tax dollars on corporate subsidies.
If public-sector unions were to undertake such an education campaign in Wisconsin and across the nation, it would be much harder for Republicans like Scott Walker and John Kasich to use public employees as perpetual whipping boys.
Andrew Cuomo and other Democrats would be forced to explain why they are handing out tax breaks to the globe's wealthiest corporations. New York's public unions would have a major pressure point.
And it would also mean that when a progressive Democrat like Mark Dayton tries to impose taxes on millionaires and billionaires, he would no longer stand alone. He would be surrounded by throngs of supporters demanding that corporations and the rich pay their fair share for public institutions and services.