Amazon’s HQ2 Boondoggle Shows Trump’s Impact on the Right

There are strange political alignments on the $3 billion dollar deal that New York State and City just inked to win half the Amazon “HQ2” jackpot for Long Island City, Queens, just across the East River from Manhattan. (The other half is going to the Washington, D.C. suburb of Arlington, Virginia, where officials are only ponying up about one-fifth as much in subsidies). New York Governor Andrew Cuomo will be handing over between $1.5 billion and $1.7 billion to richest-man-on-earth, Jeff Bezos, and his trillion-dollar company on behalf of New York taxpayers. Another $1.3 billion comes courtesy of New York City Mayor Bill de Blasio. Cuomo says the only opposition to the giveaways comes from “extreme conservatives and socialists.”

That’s not exactly true. The New York Times, which is culturally far left but more conventionally liberal on economics, has joined with more fiscally “woke” progressives like openly socialist Representative-elect Alexandria Ocasio-Cortez in opposing the deal. As has the Wall Street Journal, which tacks right on economics but could hardly be mistaken for Roy Moore. The widespread opposition from the Right runs the gamut from Trumpian populists like Tucker Carlson to free marketeers such as the Mercatus Center. Meantime, the quasi-socialist de Blasio has deserted his old comrades at the barricades on this one.

Still, Cuomo’s rough shorthand, suggesting that the battle lines are largely drawn between the allied Left and Right on the one hand and the corporate liberal establishment on the other, is close enough for government work. I follow a strict rule of thumb that when the Left and the Right agree they’re wrong except when they’re right. This is one of those exceptions.

The deal is a classic example of corporate welfare and a New Age form of crony capitalism for the socially progressive titans of politically fashionable industries. Bezos, a big donor to liberal causes whose empire includes the left-leaning Washington Post and the trendy Whole Foods Market chain, will get some $2.5 billion in state and city tax credits and abatements (most of them “refundable”—jargon meaning that if, as is often the case, the deal is so sweet that your tax liability is reduced to less than zero after the government pays you) and $300 to $500 million in direct grants. In return, he will provide all of 2,500 jobs per year over 10 years, “a drop in the bucket” of the 700,000 jobs already added by the city’s expanding economy over the last decade, which at the $2.8 billion to $3 billion price tag will cost taxpayers between $112,000 to $120,000 per job. At an average salary of $150,000, these will not be jobs for struggling family breadwinners but for affluent young tech professionals, in a “hot” area that was once a decaying industrial zone but where the median income is now $138,000 and the average rent $3,458 a month.

In other words, the upper-status social liberals who run the city and state will take $3 billion from working-class and middle-income taxpayers and small businesspeople and give it to the wealthiest man in the world to fund 75 percent to 80 percent of the cost of six-figure salaries for other upscale social liberals. The galling result will be to drive up housing costs and commercial rents to unaffordable levels for many of the average taxpayers and businesspeople who are footing the bill—in effect, using their own money to displace them.

But what of the argument that these handouts are necessary to lure Amazon and other corporate giants, and more than pay for themselves through economic stimulus generating increased tax revenue? In fact, as both the Times and the New York Post argue, and as studies document, the subsidies are essentially a windfall: a negligible factor in corporate location decisions dwarfed by such considerations as general business climate and, especially in the case of fashionable industries like tech, the perceived cultural cachet of being in a place like New York. Google just announced plans to add 7,000 jobs in the Big Apple region without a cent in subsidies. And Amazon spokesman (and former Obama press secretary) Jay Carney acknowledged that subsidies weren’t a key factor in the company’s decision. Rather, it chose the New York and D.C. areas because they’re “attractive places to be for people when we want to recruit talent.”

As to paying for themselves, Mercatus Center economist Veronique de Rugy notes in a National Review article titled “Alexandria Ocasio-Cortez is Right about Amazon’s Corporate Welfare” that there is “a broad body of economic research that shows that targeted state subsidies to private business . . . have little to no net positive effects.” This is likely to be especially true in the case of subsidies from a fashionable locale like New York to a fashionable industry like tech which, as noted, wants to be there anyway. In the analogous case of the the state’s $420 million film tax credit boondoggle, a report prepared for Cuomo’s own tax reform commission decimated the Governor’s rosy analysis of the revenue it supposedly generated, noting that it turned on the absurd assumption that almost no film production would take place without it.

Weighed against the dubious benefits of corporate welfare like the Amazon deal are the equity and resource diversion costs summarized by de Rugy:

blatant cronyism is unfair to local companies who face heavier tax burdens than the favored companies. … New York, with the money that’s now going to Amazon, could have paid for three years of road maintenance or have reduced the corporate income tax rates by 5.42 percent.

“These tax breaks are wrong,” she concludes. “Dead wrong.”

De Rugy’s view is widespread among conservative pundits, even if it places them in uncomfortable alliance with an avowed socialist like Ocasio-Cortez. Of course, it’s not universal. Commentators on Fox Business, for example, sputtered in rage at opponents of the deal while rhapsodizing about how it would set in motion a “virtuous cycle” of state-funded economic growth leading to the “greatness” of more Starbucks outlets. Some of this silliness is just a reaction to the prominence of the silly Ocasio-Cortez on the other side. But it also reflects the historical tendency of many conservatives to let support for the market slip into unthinking support for big business.

What’s striking, though, and may represent a watershed moment, is that the Fox Business line clearly seems to be the minority view on the Right. I don’t think this would have been the case just three years ago, and I think it reflects how the rise of Donald Trump, who (regardless of how he’s actually governed) ran to the left of the Republican Party on economics, has made the party and the conservative movement more responsive to its working-class base. (Some NeverTrump fiscal conservatives may validly object that they have always taken a principled stand against corporate subsidies, but I think it would have been more difficult for them publicly to take on the world’s richest man in the Romney-Ryan era.)

The Trump movement was the culmination of two related trends that have made knee jerk conservative support for big business unsustainable.

First, the GOP, the political organ of conservatism, has become increasingly lower-middle and working-class, as working people have moved right and “educated” professionals have moved sharply to the left. At the same time, corporate America has become the most strident and powerful force for cultural radicalism and elitist contempt for traditional and conservative values. This has led to a bizarre result as the GOP has become probably the only political party in history that looks out for the financial interests of its enemies and opposes the financial interests of its own voters.

But eventually rank-and-file Republicans wake up and realize that it’s time to stop reflexively siding with liberal corporate billionaires who despise them and their voters. They realize that sometimes the right needs to ally with the populist left against the liberal corporate elite. And in opposing the Amazon boondoggle they’ve done so.

Photo Credit: Matt Winkelmeyer/Getty Images for WIRED25

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About Dennis Saffran

Dennis Saffran is a Queens, N.Y.-based appellate attorney and political and policy writer whose work has appeared in City Journal, The Federalist, the Wall Street Journal, and elsewhere. Follow him on twitter @dennisjsaffran.