It was a dramatic display of corporate power over political obeisance. The subject on the Phil Donahue Show recently was General Motor’s (GM) new Saturn plant, featuring GM Chairman, Roger Smith, and six Governors who have been furiously bidding to have the company locate the plant in their state.
Roger Smith came on first with what was supposed to be the Saturn car glistening nearby. Actually the Saturn has not been built and won’t be sold until 1989 at the earliest. Smith stayed for only 20 minutes to boost his car and answer Donahue’s questions. Smith parried Donahue’s questions about all the help the states were offering GM in order to get the plant. GM’s Saturn plant was going to be around a long time, said Smith, implying that such temporary goodies being offered to attract the plant to one state or another would not be decisive factors.
Smith was correct and misleading at the same time. Like other large companies, GM knows what it is looking for as far as a plant location is concerned — among them, the labor force, educational institutions, markets, proximity to other production and transportation facilities. So why then is GM dangling this Saturn plant before the states to tempt them into this frantic bidding battle? Because GM wants a big multimillion dollar subsidy package up front as a windfall, and by playing one state off against another, it can succeed in getting the chosen state to submit the same welfare package for the world’s second richest industrial corporation.
After Smith departed the Show, the Governors were brought to center stage. Each one tried to keep his dignity while vigorously making a pitch for his state as the preferred one to house the Saturn small car plant with its projected 6000 workers. The Governors of Iowa and Minnesota seemed oblivious to the populist traditions of their states which might have restrained their desire to have small taxpayers subsidize profits-glutted General Motors. The Governor of Texas, Mark White, seemed the most calm and confident as if he knew that GM had already decided to locate in Texas. Ross Perot, the billionaire member of GM’s Board of Directors, has been buying large acreage near Dallas and is determined to bring Saturn to Texas.
As the gubernatorial hawking became intense, the Governors began to say that bidding for corporate plants was routine and that is “what Governors do.” Why one Governor said he makes a hundred trips for that purpose. When Donahue, taking off from an audience question, asked why people paying their share of property tax should subsidize GM paying less than its share, one Governor patronizingly informed Donahue that property tax was a local not state matter.
What did not come forthrightly from the Governor’s articulate mouths was the specific content of these subsidy packages. They admitted that all the states would offer about the same package which included free or nominally priced land. What they did not mention was the size of property tax abatement, the free job retraining, the cheap loans, waivers and assorted infrastructure capital that used to be part of private capital investment. Pennsylvania Governor, Richard Thornburgh, tried to temper the special treatment of GM by saying that his state would offer the same package to a company with 15 employees. Oh, sure.
There is a serious question of inequity here. Without putting the proposal to a referendum, these Governors are busy making existing businesses, homeowners and workers subsidize a new plant in their community. The GM plant, for example, will be given police and fire protection by local officials, but will not be paying its fair share of taxes for these services. The people down the street and across the highway will be forced to do the paying.
This kind of state bidding for corporate business is unjust. It should also be unlawful to take tax money or its equivalent and give it to a private for profit corporation. Tax revenues to build roads, schools, dams and many other public facilities are for a public purpose. To my knowledge, GM has not agreed to share its profits with these coerced taxpayers.
The states need to be saved from themselves by a federal statute that puts the brake on the myriad public subsidies to private corporations. Many officials in these states would like to be rescued from this bidding game that no one but the likes of GM wins, because all the states offer about the same package.
So Ronald Reagan, why not help get GM and company off the backs of state governments. You, above all, should understand that corporate welfare tends to be contagious and subversive of the free enterprise system.