by Thomas Valentine
After a contentious midterm election season, conservatives and leftists have finally found one thing they can agree on: Amazon’s HQ2 deal to open two new 25,000-person headquarters in New York and outside Washington, D.C. is a bad idea.
To recap, Amazon launched its “HQ2” search in October 2017. Declaring that this new headquarters would be a full equal to their original Seattle campus, Amazon opened bids for a single 50,000-person headquarters to places 1) with a population over 1 million, 2) within 30 miles of a city or major population center, 3) within 45 minutes of an international airport, 4) within 1-3 miles of a major highway, 5) with access to mass transit, and 6) with up to 8 million square feet available. Well over 200 cities made formal proposals, including cities in 42 states and 8 Canadian provinces — places as varied as Birmingham, Ala., and Salt Lake City, Utah.
The announcement generated instant buzz around the country, with many hoping that the 50,000 new high-paying jobs — plus the hundreds of thousands of related new jobs in construction and service — would revitalize or reinvent a Midwestern town like Detroit; Gary, Ind.; or Toledo, Ohio. Amazon could even choose the crumbling city of Baltimore and revitalize that place while being within a quick train ride to Washington or New York. One small community outside Atlanta called Stonecrest wanted Amazon’s attention so badly that it offered to formally rename itself “Amazon, Georgia.”
In January, Amazon released a list of twenty finalists. While nine of them were in the already-prosperous I-95 corridor between Miami and Boston, the finalists still included a diverse array of cities like Indianapolis and Nashville. But rumors and speculation began focusing on the D.C. area and New York City, with Dallas remaining in the mix. Then, last week, Amazon announced what should come as no surprise: they had decided to split HQ2 between Crystal City in Arlington, Va., just across the river from D.C., and New York City’s Long Island borough. In other words, Amazon would be moving to two fantastically wealthy areas with low unemployment and close proximity to power.
Making matters worse was the enormous sums of money New York and Virginia were granting to Amazon in the form of tax incentives — paying one of the world’s wealthiest companies (worth roughly $1 trillion depending on stock prices) to relocate there. Amazon will receive over $2.2 billion in taxpayer subsidies from New York and Virginia. (Nashville will get a consolation prize of a 5,000-job operations center in exchange for a $102 million subsidy package.)
The backlash was quick and wide: Voices ranging from socialist phenom and new Congresswoman Alexandria-Ocasio Cortez (D-N.Y.) to Fox News’s conservative host Tucker Carlson condemned the deal as crony capitalism and corporate welfare.
States and cities spend billions of dollars per year offering tax subsidies to relocate on the basis that new jobs and economic production will make up the costs. However, they often don’t. For example: Wisconsin offered a $4 billion package to Asian electronics manufacturer Foxconn to open a screen manufacturing facility near Milwaukee, promising 13,000 jobs and a $10 billion investment from Foxconn. With the deal in place, Foxconn has now admitted that they will build a smaller plant largely staffed by robots, though they do promise to meet their $10 billion investment promise. The deal may have cost Gov. Scott Walker his re-election bid, which he lost by one point. Or consider that, in the Kansas City area, which straddles Missouri and Kansas, both states have spent years wooing companies back and forth across state lines, distances as little as a mile or two, in what’s being called an economic border war. The effect for each state has been a net job increase of near zero — but at the cost of billions of dollars in tax subsidies.
More criticism came from the angle that Amazon never really intended to choose a Midwestern city. The song-and-dance that smaller industrial cities and communities went through to attract them was little more than a PR stunt for Amazon to make it look like they were taking “flyover” country seriously, when in reality they had always wanted to be in a wealthy area. At a time when big tech companies are coming under larger scrutiny from Congress, it certainly helps to have a huge physical presence within minutes of Capitol. The New York and D.C. metropolitan areas are already among the richest in the country, and they will now get even richer.
Not that New York and Northern Virginia are necessarily happy about it, however. Amazon’s huge presence in Seattle has turned that city into a nightmarish hub of skyrocketing rent, homelessness, and traffic. It will raise property values, for sure, but can D.C.’s breakdown-plagued Metro system handle hundreds of thousands of new riders? How much worse will the choking traffic in both cities get? And will middle-income working families be able to afford housing, or will they be pushed to the exurbs or out of the cities entirely?
Conservatives normally applaud any form of job creation. But Amazon’s HQ2 debacle has shone a bright light on the absurdity of states bribing companies with tax dollars. Some have proposed that Congress should stop it, though there are constitutional questions about whether it would fall under its interstate commerce authority. And Amazon’s relentless growth continues to raise monopoly and antitrust questions.
It is still an open question whether anything will be learned or anything will be done. But, at least, there is agreement on both sides that both should happen.
Photo credit: Robert Scoble via Flickr, CC BY 2.0