Interesting. A NJ think tank — New Jersey Policy Perspective — has a report out the shows that while subsidies to NJ businesses have surged under Governor Christie’s administration (subsidies that are billed as economy boosting), NJ’s economy has remained pretty sluggish. According to this report, $4bn worth of subsidies had been awarded to businesses in the past four and a half years by state authorities under Christie – more than three times the $1.2bn in subsidies that were given out in the prior 10 years. Got that? That’s $4 billion dollars worth of corporate subsides for this result:
A comprehensive review of economic data last month by the Newark Star-Ledger found that “during Christie’s governorship, only New Mexico has generated private-sector jobs at a slower pace than New Jersey”. The state is facing a budget shortfall of $2.7bn over the next year and has had its credit rating downgraded five times since Christie entered office.
Some of this activity seems specifically designed to help friends of Christie, with some calls to make these subsidy schemes subject to pay to play laws:
Christie signed a bill, which passed with bipartisan support, overhauling the state subsidy schemes last September. It contained language that specifically enabled the passage last December of the $106m subsidy for the property venture involving his friend, Jon Hanson, which the Guardian disclosed this month.
Some critics have called for the subsidy deals to be subject to New Jersey’s law against “pay to play”, which bars state authorities from contracting goods or services from firms that have made political contributions.
But look at what this investment gets New Jersey residents:
Yet New Jersey has badly trailed the rest of the US in recovering from the 2008 recession. The state has regained only half the jobs lost during the recession compared with 83% that were recovered nationally, a Rutgers University study found at the end of last year.
Look at how much they pay per job created — remembering that the more you subsidize a position, the longer it takes for it to pay for itself and at some point you won’t recoup the taxpayer’s investment:
They also found that the cost of each job due to be created or retained in the state by some corporate subsidies had more than doubled under Christie’s governorship. The “per-job cost” of jobs-related state subsidy schemes since Christie came to office is $33,853, compared to $16,591 in the last decade, the study found.
One of the things I really wish would happen with these corporate subsidies is the keeping of some standardized data — reported to taxpayers yearly — on the results of subsidy spending. Subsidizing Walmart and others to create low-paying jobs that the state still has to subsidize isn’t a good use of taxpayer money. if this is supposed to be so good for the local economy, then we should be able to see some serious data to back that up.
Then there’s the idea that tax cuts not only pay for themselves, but they bring greater economic prosperity. Kansas put this into action and predictably, those tax cuts got them an economy that isn’t recovering well AND a structural deficit — meaning that they always have a budget the promises more than they can pay for. Why? Because they decreased their revenues and hoped that no one would notice that they couldn’t pay for their budget.
Pennsylvania has a similar problem — they cut taxes largely paid by wealthier people, reducing their revenues by approx. $600M per year and the state is now swimming in red ink. And given the fact that Corbett has slashed education funding as a way to patch the holes in his budget, he is looking like he’s done for this re-election year. Still — we have one more data point showing that tax cuts neither pay for themselves or generate any prosperity.
It is good to see that someone has tried to quantify how much corporate subsidies are costing taxpayers as well as quantify how that spending supports (or not) economic development. And it is good to see that basic math doesn’t get thrown away to support discredited ideology.