Exiting the World: Trump Gutting the State Department

“There is simply no denying the warning signs that point to mounting threats to our institution and to the global leadership that depends on us”, writes Ambassador Barbara Stephenson, a career diplomat with the U.S. State Department for over 30 years, in a letter to a foreign service publication:

“The talent being shown the door now is not only our top talent, but also talent that cannot be replicated overnight. The rapid loss of so many senior officers has a serious, immediate and tangible effect on the capacity of the United States to shape world events.”

When Rex Tillerson took the reins at the State Department, the first order of business was clearly the threats the world presents — nuclear missiles from North Korea, the growing belligerence of Russia and China, the perpetual turmoil of the Middle East. It was therefore bewildering that his priority instead seemed to be cutting costs and reorganizing the agency. He announced the intention to cut the 75,000 person department by 30%, a White House goal that undoubtedly originated with Steve Bannon’s goal of “administrative deconstruction”. That approach seemed to resonate with Tillerson, the corporate chieftain, as if the agency should be handled like the business he’d just run, ExxonMobil. He seems most enthusiastic talking about…

“organizational redesign…the organization chart itself, the boxes, and who reports to whom…The most important thing I can do is to enable this organization to be more effective, more efficient”.

The most important thing? Hardly. Certainly not now. But not entirely outlandish. In a New Yorker profile of Tillerson, a former State Department negotiator told author Dexter Filkins, “No one will tell you this, but there’s a lot of dead wood around here”. There are 75,000 people in Washington and in almost 300 embassies and consulates around the world, numbers that might need review, or at least some rebalancing. There are more consulates in France than in China, for example. Pressed upon the agency by Congress and the White House are some sixty-six special envoys and representatives that were created at various times. They are given ambassadorial rank which overlaps and can stir conflict with the actual ambassadors of the countries to which they are assigned. “No one, starting over, would design something like this,” says Bill Burns, a former Deputy Secretary of State.

But the department deals with a plethora of matters in addition to diplomacy. Proposed budget cuts of $6.6 million can only heavily undercut these missions, which range from humanitarian aid to the promotion of democracy, protection of the oceans to HIV/AIDS programs in Africa, disaster relief to refugee survival — work by the State Department that projects America’s benevolence to the world. Barack Obama, promoting the Trans-Pacific Partnership of 12 nations, often said that if we are not in the Pacific to set the rules of trade, China would set them instead. Filkins quotes a retired diplomat saying much the same, that if there’s no one to show up at meetings to represent the U.S., whether the subject is…

“…the oceans, the environment, science, human rights, broadband assignments, drugs and thugs, civil aviation — it’s a huge range of issues on which there are countless treaties and agreements that all require management. And, if we are not there, things will start to fall apart.”

exeunt omnes

One would expect that a deep cut — wise or not — would be of lesser staff well down the stack. Not so, as Ambassador Stephenson makes plain in an interview on the PBS News Hour. State Department regulars have ranks, she tells us:

We had five four-stars at the beginning of the year. So they are called career ambassadors. We now have two career ambassadors left at the four-star rank. And then we had 33 at the beginning of the year that were at the three-star rank. We call them career ministers. And they’re down to 20.

Few were fired. As civil servants, State Department personnel have strong protections against summary dismissal, but Tillerson’s scorched earth policy is causing those at the top — those with the most experience, those who have come to know deeply the countries that were their stations, who have learned to speak their languages, who know over a long term their leadership class — to become discouraged enough to leave the agency. Given President Trump’s America First pronouncements, many in the foreign policy ranks were averse to serving in a Trump administration. Some three hundred career diplomats departed during the transition. Scores more left after Tillerson was appointed. Some quit when their jobs were eliminated or they were removed from their posts without being reassigned.

Stephenson goes deeper: “Our two-star ranks were 431 on the day after Labor Day, which is when the promotions were added in for the year. And they had fallen to 369”, enforcing the point that the Tillerson policy is not to trim out the lower levels, but to watch idly as those with the most knowledge of the world go out the door.

Most do not appear likely to be replaced. At the end of October, forty-eight ambassadorships were still vacant. Save for two filled slots, the entire level of twenty-three Assistant Secretary positions were empty. These are the most senior stations in the diplomatic service; Congress isn’t helping by failing to confirm however many have at least been appointed to fill them.

Finding replacements has not been easy for Tillerson for reasons already cited and for the additional problem of White House interference. Anyone who spoke out against Trump during the campaign is blackballed by the White House. That stopped Eliot Abrams, who Tillerson wanted as Deputy Secretary of State. Someone as competent as Susan Thornton, a career diplomat who speaks Chinese who Tillerson wanted as Assistant Secretary of State for East Asian and Pacific Affairs was nixed by Bannon for not having been tough enough on Chinese trade. That Bannon could overrule the most important member of the cabinet says much about this administration. The Oval Office is not at all upset by an eviscerated State Department. National security adviser, H.R. McMaster, thought those people who are leaving are those who won’t get on board with the Trump administration’s policy. As for Donald Trump himself, on Laura Ingraham’s radio program he defended the lag in hiring by saying “I’m the only one that matters”.

It brings to mind Iraq. Tillerson may not be aware that he is copying the blunder of the self-exonerating, ego-inflated J. Paul Bremer, who expelled from the Iraqi government several levels deep of Baathist party functionaries — the people who knew how to run the country, keep the lights on, pump the oil — bringing about the chaos of years of insurrection.

the singularity

At Exxon, Tillerson was not the sort to take lunch in the company cafeteria. His management style became increasingly withdrawn, operating along with a chosen few executives from a cloistered area at headquarters that earned the name “the God pod”. He has brought that culture to State, an organization whose ethos is the opposite, whose reason for being is outreach, of extending itself the world over, a reflex made apparent when nine hundred State Department employees signed a petition protesting the White House ban on travelers from seven Muslim countries.

In contrast, Tillerson has met with few legislators and has generally been accessible to few foreign emissaries. The foreign minister of a top European ally canceled a visit to the U.S. when Tillerson, having failed for weeks to respond to requests for a meeting, offered only 20 minutes. As head of Exxon, he has traveled the world negotiating deals, and the media makes that seem to be his current practice, yet he has so far traveled less than half as much as John Kerry or Hillary Clinton the same number of months into their service. It was “Where’s Waldo” during the early days of his tenure, guided by the Exxon credo that any day you wake up and are not in the media is a good day. That’s no longer possible, but Tillerson is bewildered by news reports that morale has hit bottom at his agency. “I walk the halls, people smile,” he says in a recent interview. “If it’s as bad as it seems to be described, I’m not seeing it, I’m not getting it.”

Some say Tillerson is overwhelmed by the number of decisions he is called upon to make. His budget cuts would heavily reduce the number of American diplomats working abroad, pushing still more deciding to the top. He doesn’t seem to be getting that.

losing it

Stephenson explained what few of us know: The Foreign Service is like the military. You move up through the ranks to official designations such as FS2 and FS1 (Foreign Service 2 and 1) but which are spoken of internally as military ranks, lieutenant colonel and colonel in this example. It’s an up-or-out system. There are big cuts along the way to “getting that very first star to be a counselor of the Foreign Service”, ambassador Stephenson explains.

“And only 35, 40 percent make that cut of the officers. And then it’s cut further. That’s how we actually grow senior Foreign Service officers, by bringing them in at the beginning and actually training them on how to be diplomats. We’re not alone in this. The military does it this way. So does essentially every diplomatic service of every major Western country.”

And yet Tillerson scuttled the hiring of new Foreign Service officers, effectively telling those who had been granted fellowships to go home, although he has since allowed two classes to move forward.

Nick Burns, a former Under-Secretary of State, told The New Yorker‘s Filkins, “The Foreign Service is a jewel of the United States. There is no other institution in our government with such deep knowledge of the history, culture, language, and politics of the rest of the world.”

And no other institution is so connected to that world, a world that still looks to the United States for leadership, that still wants to talk to us, but is finding no one to talk to.

“These cuts will decimate the Foreign Service,” says Burns. Adds David Rank, the Deputy Ambassador to China, who decided to resign, “Maintaining our network for foreign relations is hard. It requires constant attention, a lot of people, a lot of work…But rebuilding it? Not a chance.” Once lost, we will never rework our way back into our former position of influence.

The Rich Make Off with the Middle Class Tax Plan

For fiscal 2017 the nation’s deficit reached $666 billion, the sixth highest on record. The Congressional Budget Office projects that, if no countering action is
taken, the deficit 10 years out will reach almost $1.5 trillion. That’s for the single year 2027. And it doesn’t count the added $1.5 trillion leeway the House and Senate have awarded themselves in a budget resolution to give their tax reform plan running room.

“These numbers should serve as a smoke alarm for Washington, a reminder that we need to grow our economy again and get our fiscal house in order”.

That was White House budget director Milk Mulvaney’s reaction to the 2017 deficit announcement. His remedy? Cut taxes! Cut revenue by sharply reducing individual and corporate tax rates. That doesn’t make matters worse, you see, because tax cuts will spur growth — so much growth in paychecks that the added taxes thereon will plug the hole caused by the cuts. That’s the conservatives’ theory that refuses to die despite there never having been any direct correlation in the wake of past tax cuts.

company picnic

The biggest cut would be the drop in the corporate rate from the world’s highest at 35% to 20%. There’s bipartisan consensus that this should be done — Obama proposed it in 2012 — in order to compete with other countries that have been slashing their own rate to attract corporations to their shores. But the quid pro quo for the steep drop in the tax rate was to be the elimination of scores of loopholes that corporations use to reduce their effective tax rate well below the posted 35% to an actual 18.1%. Getting rid of the myriad of loopholes that lobbying has inserted into the tax code was to be a big part of “simplification”. What’s happened to that? Instead, under the proposed plan, corporations would apparently still have loopholes to reduce their taxes below even the new 20%.

A number of other provisions make the plan a bonanza for business. Multinationals will be enticed to repatriate their accumulated $2.6 trillion in foreign profits at a 12% tax charge. Their future foreign profits would face a maximum tax of only 10%, less whatever the foreign country charges. To spur capital spending for plant and equipment in the U.S., those costs can be expensed against profits immediately, reducing the tax bill. The Senate plan agrees but delays the changes for a year

These major changes are bound to find their way into paychecks in support of Mulvaney’s claim. The question is how much (and how soon). The notion is that with so much extra cash sloshing about, businesses large and small will share it with employees. Wages will rise leading to higher tax revenue to fill the deficit hole.

That would have greater credibility had we seen this phenomenon during the last few years when large corporations in the U.S. were piling up cash without any need for the proposed changes. Instead, corporations have preferred dividends and stock buybacks, boosting the stock price, witness market indexes posting records almost daily. Stockholders have been the prime beneficiaries, not employees. Wages have largely been kept flat.

But a 20% tax would certainly be a boon for small businesses, helping them to hire more workers or raise pay, while, not incidentally, undercutting their fight against poverty-level minimum wages.

blowing smoke

“The Democrats will say our tax bill is for the rich, but they know it’s not and what they will do…they immediately say it’s for the rich, it’s for the rich, because it’s the right thing to say for them, but [that] doesn’t work, and they know that.”

That was President Trump in a meeting with industry representatives just before the tax plan was presented. Far to the contrary, the plan contains huge gifts for the rich, Trump among them as we outlined in “A Bespoke Tax Plan for the Trump Family“. We cited:

 the doubling yet again the value that can be transferred out of an estate tax-free to $10 million per person, and the intention to eliminate what Republicans call the “death tax” altogether after six years;
 the elimination of the alternative minimum tax, a second computation that rolls back heavy use of deductions (as in 2005, when Trump would have paid just $5 million instead of $38 million had there been no AMT);
 the switch to a maximum tax rate of 25% for businesses that are set up to pass income through to personal tax returns instead of that income being subject to as much as the 39.6% maximum tax rate for individuals (Trump has over 500 businesses structured as “pass-throughs”);
 the giant corporate tax cut that will save corporations some $2 trillion over the next decade, profits that will accrue to the wealthy; the richest 10% hold 40% of all equities.

And what about “carried interest”? Trump campaigned against this special privilege loophole (“hedge fund guys are getting away with murder”) that lets hedge fund and private equity chieftains call their paychecks capital gains, taxed at 24% rather than a likely 39.6%, even though none of their own money is at risk. That fix is nowhere to be found in the tax plan.

So when House Republicans claim that their plan does not tilt heavily to the benefit of corporations and the rich, and for Donald Trump to say “it’s not good for me, believe me”, no, only a fool would believe you or them.

don’t look there, look here

Their tactic is to trumpet steep tax cuts for individuals and families to distract from the benefits showered on corporations and the wealthy. “This plan is for the middle-class families in this country who deserve a break,” says House Speaker Paul Ryan. “It is for the families who are out there living paycheck to paycheck, who just keep getting squeezed”.

Few in the public can be expected to navigate the effect of the welter of proposed changes: The tax plans double the standard deduction to $24,000 but take away the $4,050 exemption for each member of the family, replacing it with a $300 credit for adults, but only for five years. It increases the child credit from $1,000 to $1,600. State and local taxes can no longer be deducted except for property taxes up to $10,000. But the Senate takes away that as well. Mortgage interest continues to be deductible, but would now be limited to $500,000 houses in place of $1,000,000 houses in the House plan. The Senate bill makes no mortgage interest changes. Interest on student loans would no longer be deductible. Charitable contributions still are. But the deduction of medical costs, including health insurance, already applicable only to costs beyond 10% of adjusted gross income, is taken away altogether. That will be a major tax increase for those with steep medical bills or chronic conditions and is easily the most obscene place to find money to fund tax cuts for others.

What sort of thinking says that money given to others out of charity is commendable — no argument there — but money spent on one’s own health and survival is not? Or that interest expense, a subsidy to the housing industry that economists regularly view as distortative for favoring owners over renters, is a worthy deductible, but huge medical bills in a system allowed to charge crippling costs are not? How is it defensible to subsidize the housing industry while penalizing those trying to get an education — the student loan interest takeaway — and in that system, another with runaway costs?

middle class mendacity

But we are told that it all adds up to tax cuts across the board. On the day the Senate plan was released, Ryan at a House press conference said “all the analysis, whether it’s TPC [Tax Policy Center], JCT [Joint Committee on Taxation] or Tax Foundation, they all tell you that the average families in all income groups see a tax cut”.

This claim comes apart when data is laid against the actual tax brackets. Kevin Brady, the House bill’s chief architect, said on the day his plan was announced that the plan would deliver a tax break of $1,182 a year to a typical family of four earning $59,000 a year. Paul Ryan repeated that claim in his press conference. When we set up a prototypical family of four earning that gross income of $59,000, reduced by the standard deduction, exemptions and child tax credits as they are for this year versus the House plan were it installed next year, here’s what we got:

The tax bill based on the new rules is higher by over $300 than the previous year. The $1,182 tax savings doesn’t exist. If fact, we show that taxes are higher under the House plan for all households earning $75,000 or less. That should have been obvious to the plan’s promoters if only because the plan raises the minimum tax rate — from 10% to 12%. (The Senate keeps all seven levels including 10%).

Above $75,000, taxpayers begin to pay less income tax in the House plan, ranging from breakeven at that level to a million dollar earner enjoying a 12% cut of $39,400. It is the “middle class” group earning from about $500,000 to $1 million that benefits the most because the 39.6% would not kick in until $1 million whereas it currently begins at $464,851.

the pitch unravels

Ryan says, “This is about fulfilling our promises to the American people”. Our question: When was it that the American people extracted that promise? Was there a general outcry that taxes are too steep? Or is this simply Republicans chasing their perennial goal of minimal taxes that will “starve the beast” of Big Government. George W. Bush and Congress already cut taxes 18%, a deep cut that led to steep deficits in parallel with those of the war costs. How can we keep doing this without the country falling apart?

Only intention to eliminate what Republicans call the “death tax” altogether after six years;
 the elimination of the alternative minimum tax, a second computation that rolls back heavy use of deductions (as in 2005, when Trump would have paid just $5 million instead of $38 million had there been no AMT);
 the switch to a maximum tax rate of 25% for businesses that are set up to pass income through to personal tax returns instead of that income being subject to as much as the 39.6% maximum tax rate for individuals (Trump has over 500 businesses structured as “pass-throughs”);
 the giant corporate tax cut that will save corporations some $2 trillion over the next decade, profits that will accrue to the wealthy; the richest 10% hold 40% of all equities.

Only half of Americans polled think the tax plan is a good idea and support has been dropping now that there is greater understanding of who will benefit the most and the write-offs that will be taken away. The fact is that Americans have plenty of ways to minimize taxes. The standard deduction, per person exemptions, and child tax credits exempt the first $30,800 of income for that standard family of four. In the 2012 campaign the “discovery” was made that some 47% of American pay no income tax. These hefty deductions are the reason why. For those with costs beyond the standard deduction there are state and local taxes, property taxes, charitable contributions, health costs, student loan interest — readily accessible data in any household to simply enter on a form or into software, but now called complications in need of simplification. Actually, it is now the deductions that are the tax “loopholes”. That’s what Ryan called them. The intent would seem to be to disguise the fact that nothing is being done about the actual loopholes such as “carried interest”.

So, yes, it’s burlesque, a prank to fool the working class into thinking the cuts are for them. At the White House, economic adviser Gary Cohn gives it away: “The most excited group out there are big CEO’s”, he said in an interview. Asked what happens if Republicans are unable to pass the tax reform package, Sen. Lindsey Graham (R-SC) answered in part, “Financial contributions will stop”. New York Republican Congressman Chris Collins told The Hill, “My donors are basically saying, ‘Get it done or don’t ever call me again'”. From the other side Bernie Sanders said, “You have members of Congress saying that if we don’t pass this, our billionaire friends are not going to contribute to our campaigns. That is what this whole tax bill is about.”

How Corporate Welfare Fleeces American Cities

It’s nothing new. This Time
cover dates from November, 1998
Wasn’t there a time when a business moved to a new town — chosen for proximity to rail or highways, for its educated workforce, for a reliable energy supply, etc. — built a factory and set to work as a valued addition to a community, content to support it by paying its taxes?

That time is long gone. Corporations now make colossal demands of any locale under consideration, imposing costs that the chosen state and town may never recoup, leaving the burden to taxpayers well into the future.

hq2

The latest example is, of course, Amazon looking for where to build the company’s second headquarters now that its growth has come to overwhelm its hometown, Seattle. Its call for bids has drawn 238 applicants from all but seven states. Even remote Alaska and Puerto Rico made attempts.

The company says it will build in phases, making capital investments of $5 billion over the next 15 to 17 years leading eventually to 53,000 jobs. In its first phase Amazon says it will spend $300 to $600 million to build between 500,000 and a million square feet by 2019. To be considered a candidate must have at least a million in population, universities nearby, an international airport a reasonable commute away, fiber optic Internet and cellular connections and those are just a few items on a long list. The biggest item is that Amazon urges candidates to think “big and creatively” with the arch suggestion that new laws may be needed to handle the deal.

That’s the tipoff taken to mean any town that wants to win had better come up with breathtaking dollar incentives and concessions for taxpayers to pay. Yes, the benefits will be considerable: the construction jobs and satellite local jobs that the winning town’s new behemoth will spawn. UPS, for example, has its distribution center in Louisville and makes the claim that 156 companies have clustered around its hub generating 12,000 jobs and $348 million in annual payroll. But having outstripped 238 bidders, the Amazon winner is apt to be quite a loser. It’s a calculation and a gamble full of unknowns that will trigger much debate once the victor and the final terms of its offer are announced.

The Economist says the playing field is not equal, that few places stand much of a chance for lack of money, infrastructure, suitable workers, and enough appeal to attract talent to move there.

“The shortest odds are on cities already dripping with rich, highly skilled workers, which least need an injection of economic life.”

Someday soon we will see a gaggle of politicians somewhere bleeding their town white to be on the stage with Jeff Bezos to announce the Amazon trophy.

outfoxed

That’s what we saw when the Foxconn deal was announced. Wisconsin Governor Scott Walker and House Speaker Paul Ryan stood alongside President Donald Trump and Foxconn Chairman Terry Gou at the White House to celebrate the planned $10 billion factory and the 13,000 jobs the Taiwan company will reportedly bring to — well how about that! — Ryan’s own district in the southwest corner of Wisconsin. Foxconn’s 1.3 million employees around the world assemble iPhones for Apple, Kindles of Amazon, PlayStations for Sony. In Wisconsin, they will produce flat panel LCD displays for television.

The deal comes to nearly $3 billion in tax breaks — $1.5 billion in state tax credits tied to new jobs, $1.35 billion in state income tax breaks for capital investment, and up to $150 million in sales tax exemptions. Foxconn additionally enjoys special privileges such as suspension of environmental review of its site selection as well as its possible effect on wetlands, waivers which native Wisconsin businesses are not offered. It seems clear that, if you want to form a company in Wisconsin, be sure that you are not from Wisconsin.

For each of the 13,000 jobs, the cost of the Foxconn deal comes to from $15,000 to $19,000 — annually. The state’s bureau that analyzes the cost of all impending laws concluded that Wisconsin’s taxpayers would not recoup their investment until at least 2043. No matter. The deal sailed through the legislature.

That is what is pernicious about the competition for corporate relocation. As states compete with each other, it is a race to the bottom as one takes from another, with companies draining money from localities left either to raise taxes or curtail public services. Politicians are concerned mostly to make themselves look heroic by bringing jobs to their turf, earning the approval of a public that seldom knows at what cost to themselves. In fairness, politicians are somewhat trapped. They will be pilloried for letting a big fish get away, but to land it must throw in the whole bait bucket.

getting out of hand

The tax incentives of so called “economic development” deals have more than tripled over the last 25 years with companies pocketing 30% of the taxes they otherwise would have paid had they not been treated preferentially (and with local businesses given short shrift). A study of 47 cities in 32 states found that their deals were costing the states $45 billion a year. One healthy development is that the Governmental Accounting Standards Board has issued a new rule requiring state and local governments to reveal the dollar cost of their tax abatement handouts. Perhaps the public will learn what is happening to them.

Municipalities have learned some lessons, but all too easily the rush for the jobs headline has caused politicians to sign deals without recourse, only to find that the job promise has come up short. And there are cases of a town paying for building some new facility to lure a company, only to have it pull up and leave for a better deal elsewhere. That’s what happened after 2011 when North Carolina put up $20 million to entice Chiquita Brands from Cincinnati to Charlotte; money paid, the new owners then decided a couple of years later to close the new headquarters and leave.

Cities may be learning that any relocation deal should be pay-as-you-go, with money changing hands only as jobs are created, and with clawback provisions for when the later-occurring quid quo pro in exchange for up-front money goes unfulfilled. Attention needs to be paid to whether, once tax credits are used up, taxpayers will begin to recover the subsidies given to companies. What guarantees that by then employees haven’t become non-taxable robots? Wisconsin take notice: Last year, Foxconn replaced 60,000 workers with robots in a single factory.

The company has a very sketchy sense of obligation. In 2015, Foxconn pledged to invest $5 billion in the Indian state of Maharashtra over five years and create 50,000 jobs, with a dozen more factories to follow. Nothing came of it. A plan to invest $10 billion in Indonesia to produce electronics got pared down to $1 billion, and then no plant was built. A Brazil project was to yield 100,000 jobs; six years on, only 3,000 had materialized. Nothing came of a $30 million plant in Pennsylvania that was to hire 500 workers.

money for nuthin’

Less apparent in the Amazon list of particulars was the question of whether the candidate city’s offer of tax credits will include cash refunds. Tax credits are used to absolve companies from paying the taxes they accrue in the course of doing business. But especially with companies doing business nationwide or worldwide, taxes owed locally might not amount to much. So relocating companies began lobbying years ago for the right to sell unused tax credits to other in-state companies.

But such sales only make sense to buyers if they are at a discount. So in the latest trend relocating companies want to be able to sell their unused credits back to the state or taxing jurisdiction for 100% in cash. This is a liability of a dangerous sort for a city or municipality, a potentially huge cash obligation to be paid for by taxpayers well beyond the cost of taxes sacrificed by tax credits. Deep in the Foxconn deal one finds the guarantee that Wisconsin pay as much as $2.85 billion of refunds in cash.

hollywood handouts

The movie industry might have invented the cash back scheme. Having Hollywood stars and film crews set up in one’s state became a prestige item a few decades ago. States like North Carolina granted tax credits equal to 25% of a film’s production budget. Thirty-five states have tax credit programs; it’s a line in the budget for every major studio film.

Trouble was, the crews — spending on hotels, restaurants and supplies — didn’t run up a tax bill anywhere close to credits equal to 25% or so of a movie’s production cost. So the studios began to demand that unused credits be “refundable” — turned back to the state for cash. But states have begun finding out that film deals are the worst. In the North Carolina example, a state fiscal agency review found that $30 million in credits led to just 55 to 70 jobs. That’s $545,000 and $429,000 per job. The industry is seeing doors slam when they come expecting the usual deal.

Amazon and Foxconn have made the headlines but the shakedown of cities by industry is everywhere with some states having an annual budget to lure businesses away from other states. Kentucky has bid extravagantly to lure auto assembly plants. So has South Carolina. In April it announced that it will chip in $120 million toward the $500 million cost of an assembly plant for Volvo — now a Chinese-owned company. It could lead to as many as 4,000 jobs at $30,000 per. For Florida it has been the pharmaceutical industry, with grants of more than $1 billion. In recent years North Carolina ponied up $320 million to Apple and $250 million to Google for server farms. A study by Pew Research found that “no state regularly and rigorously tests whether those investments are working”.

Companies looking to move hold winning hands at both ends. For big corporations, bids pour in from other cities. And the home town enters the bidding to stop the move. Consider Boeing. The company announced that it was thinking of building its 777X jetliner somewhere other than Everett, Washington. That set off a bidding frenzy. But bids by other states were deemed not enough and and Boeing decided to stay in Washington after all. The price? An $8.7 billion package that included tax breaks on airplane production, a sales-and-use tax exemption for new buildings, even taxpayer-funded training for employees. All for just staying put. It’s a ruse that any number of other companies can follow. Make a threat to leave town every so often to pocket a new freshet of subsidies from one end or another.

three strikes

The masters of threatening to leave are sports teams, and best at that must be the Atlanta Braves. A Bloomberg analysis found that over 15 years the club…

“extracted nearly half a billion dollars in public funds for four new homes, each bigger and more expensive than the last.”

First came three stadiums for its farm system, most of them owned by the Brave organization &#0151%