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PAUL JAY: Welcome to The Real News Network, and welcome to the first edition of The Epstein
Report with Gerry Epstein.
Gerry is the codirector of the Political Economy Research Institute, known as PERI. He's also
a professor of economics in Amherst, Massachusetts. He's published widely on a variety of economic
policy issues and central banking issues, international finance and such. Thanks for
joining us, Gerry.
GERALD EPSTEIN: Thanks for having me, Paul.
JAY: So what caught your attention this week?
EPSTEIN: What's caught my attention is a terrific series in The New York Times by Louise Story
(started yesterday, on Sunday, and is going Monday and Tuesday) about tax competition,
the way states and localities are giving massive subsidies to corporations to move to them,
ostensibly to create jobs, and then the companies mostly just take the money and run. We've
known about this problem for a long time, but The New York Times actually has been investigating
this thoroughly for the last ten months and gotten a lot of terrific data on this.
JAY: So hang on. What does it mean, "take the money and run"? 'Cause don't they have
to sign contracts that require them, you know, to create so many jobs and stay there for
so many years and such and such?
EPSTEIN: Well, sometimes they do and often they don't. Even when they do, they're often
not enforced, and even when they do, they're meaningless. Like, the company will create
one or two jobs. And, for example, Amazon signed a contract or set up a warehouse in
Texas, and then within a couple of years closed it down and left 200,000 people without jobs.
So this is a very serious issue, and it's--The New York Times series makes it clear--and
there've been other studies--that the states simply are trading away millions of dollars
if not billions of dollars of subsidies and getting very little in return. In fact, the
number they come up with is that there are about $80 billion of subsidies given out by
states and locales to corporations every year.
JAY: So how do you stop this? I mean, that's--it's sort of the whole name of the game when a
big corporation is setting up a subsidiary somewhere--they create this competition where
states practically bid to get them in. But how would you stop that the way America is
organized?
EPSTEIN: Well, they do set up this bidding process, and it's a race to the bottom, and
it's become--as the New York Times series makes clear, it's become part of the normal
culture of doing business now.
How do you stop it? Well, one way you stop it is you take a proposal from a couple of
the economists and the president of the Federal Reserve Bank of Minneapolis about 15 years
ago, who said that there ought to be a federal law outlawing this kind of tax competition.
Everybody would be better off, and even the states realize that. It's like an arms race.
When you get into an arms race, you know that everybody's worse off. So you ought to have
a law against it.
There have been attempts by groups of states to cooperate and to have a treaty among themselves
that they wouldn't engage in this kind of arms race. There was one in New England about
ten or 15 years ago, but that broke down within months because the competition for jobs is
just so intense.
JAY: [crosstalk] Sorry. Go ahead.
EPSTEIN: The other way to stop this is to do what we here at PERI have been arguing
for a while--Bob Pollin and others--is if you have a full-employment economy, then people
aren't so vulnerable to this kind of blackmail by corporations, because they can get decent
jobs anywhere.
JAY: And it takes another form, too, not just the subsidies, but also what happens in terms
of labor legislation and wages. You have this competition between states that are either
what they call right-to-work states, where it's much more difficult to organize unions,
and you also have this competition now between which states are helping facilitate these
two-tier contracts where you have lower wages for starting workers. And I know in Wisconsin
what won those two-tier contracts at places like Harley Davidson was exactly the threat
they would go to a state where they could get away with this.
EPSTEIN: That's right. The threat effect is very powerful. And it's not just happening
here in the U.S. It's happening all over the world, international competition. I remember
when I was doing some research in China about ten years ago on foreign investment and I
interviewed somebody who was in charge of a free-trade zone in a northern city called
Dalian, and I asked him, well, who's your biggest competition for investment? Is it
South Korea? Is it Vietnam? He said no, it's the free-trade zone just down the street,
'cause they can out-bid us. The more you have this decentralization of this bidding process,
the more you hand over enormous power to the corporations.
JAY: Alright. Thanks very much for joining us, Gerry.
EPSTEIN: Thank you.
JAY: And thank you for joining us on The Real News Network.