Agreeing On Corporate Welfare

Wouldn’t it be reasonable to assume that New Jersey’s Republican Governor Chris Christie and Connecticut’s Democratic Governor Dan Malloy would find nothing in common to agree on? After all, they occupy diametrically opposite positions on the nation’s “conservative vs. liberal” political spectrum.

Recently, indeed, the men have publicly (and vociferously) argued with each other. Six months ago, Governor Malloy wrote a guest editorial for New Jersey’s largest newspaper about Governor Christie’s veto of a proposed gun control law. He declared that: “Gov. Christie … showed a callous lack of respect to the families (who supported the law). Those families deserve better. The people of New Jersey deserve better as well.”

Four months later, while visiting Connecticut to campaign for Governor Malloy’s Republican opponent in the 2014 gubernatorial election campaign, Governor Christie exclaimed that: “The four years of Dan Malloy have been brutal for the people of this state.”

Wow! Callous? Brutal? That is certainly rough language, isn’t it? And yet Governors Christie and Malloy apparently do agree on one government policy. Namely, they both support the distribution of corporate welfare benefits to firms that threaten to leave (or that promise to enter) their states.

Two weeks ago, for instance, New Jersey agreed to give the automobile maker Subaru $118 million to move its corporate headquarters four miles up the road to Camden. Why? It did so because Subaru considered a potential move to Pennsylvania.

Subaru did commit to hire 100 new employees over a ten year period. But was it worth $118 million in corporate welfare benefits for New Jersey to generate 100 new jobs? Interestingly, that deal was actually less costly for taxpayers than an earlier agreement with the NBA’s Philadelphia 76ers. The basketball team received $82 million to move its front office and practice facilities to Camden, and to hire 50 new employees.

Those corporate welfare costs work out to $1.18 million for the new Subaru jobs and $1.64 million for the new 76ers jobs. Why did New Jersey offer the 76ers an additional $460,000 per new job? Perhaps it did so because Subaru’s headquarters is currently located in New Jersey, whereas the 76ers’ headquarters is currently based in Pennsylvania. Apparently, crossing a state border yields additional welfare benefits for relocating corporations, even when the geographic distances of their moves are miniscule!

Meanwhile, United Technologies obtained a $400 million benefit package earlier this year from the state of Connecticut without promising to hire any new employees at all. The firm simply agreed to make certain investments that would “have an impact” on 75,000 existing jobs. And two years ago, a global investment firm named Bridgewater Associates was promised $115 million to move approximately fifteen miles (and six local commuter train stops) down the Connecticut coast line from Westport to Stamford.

Bridgewater declined the offer earlier this year, but only after the state spent $16 million to demolish a boatyard on Stamford Harbor to clear space for the firm. News organizations and community leaders now refer to the empty construction site as “a pile of dirt” and “a money pit.”

Eventually, it may be possible to justify these government expenditures as investments in economic development activities. Who knows? Perhaps Subaru, United Technologies, and Bridgewater would have left New Jersey or Connecticut without these incentive payments. And perhaps the 76ers would have never moved to New Jersey without them.

Nevertheless, it is indeed noteworthy that such strikingly different politicians as Governors Christie and Malloy appear to agree that corporate welfare is a beneficial development strategy. With New Jersey and Connecticut continuing to place in the lowest quintile as the worst states in America for business, though, it may be time for both Governors to reconsider this strategy.