Welfare For The Rich
“This is a free-market economy. Welcome to the era after communism.” So said Mayor Rudolph Giuliani in explaining his foiled plans to sell 112 community gardens to private developers — destroying urban green space that helps build community.
But while Mayor Giuliani may be tough on gardeners and poor people who receive welfare, his free-market credentials are sorely lacking. Under his tenure, New York has practiced an unrestrained form of corporate socialism. Mayors Koch and Dinkins also embarked on the giveaway path, but Mayor Giuliani is blazing new trails, offering subsidies at about twice the rate as Mayor Dinkins.
Take the $900 million package for the New York Stock Exchange, a naked subsidy to the high temple of free markets ostensibly designed to keep it from moving to New Jersey. This deal, which provides for about $200,000 in subsidies for each “retained” job, isn’t the only corporate-welfare arrangement the Mayor has struck with a financial exchange. He has bestowed similar gifts on the American Exchange, the Mercantile Exchange and the Coffee, Sugar and Cocoa Exchange.
Mayor Giuliani has also provided deals — including sales-tax exemptions, property-tax abatements and discounted electricity prices — for media corporations. The beneficiaries include ABC, NBC, Ziff-Davis, McGraw-Hill, Reuters, Condé Nast, Time Warner (expected soon) and Rupert Murdoch’s News America. (The New York Times received tax breaks, for a printing plant in Queens, during the Dinkins administration.) The Mayor gave CBS $10 million in tax breaks and subsidies even though it had already committed to stay in the city through 2008.
For his closest corporate friends, one set of tax breaks is not enough. Some large companies that had already received welfare packages were extended new tax breaks and other subsidies. Among the double dippers: Reuters, Condé Nast, Smith Barney and Bear, Stearns.
This corporate socialism is for the rich only. Small and medium-size businesses don’t qualify. These subsidies create competitive advantages for large corporations, which use the same city services as smaller businesses but don’t pay a proportionate share of the taxes that finance them.
Underlying New York’s subsidies is the threat, stated or implied, that companies will move elsewhere without this welfare. City and state officials, in New York and elsewhere, can work to forestall such corporate blackmail by entering into compacts with their neighbors not to start bidding contests. That would deprive the New York Stock Exchange, for example, of its ability to bluff New York City with an unlikely Jersey City.
There is also an important Federal role in addressing this problem. Congressional hearings, like those scheduled to be held on June 30 by John Kasich, chairman of the House Budget Committee, can shine a light on the bidding-for-business issue and act as a deterrent to corporate bullying.
Federal legislation to encourage city and state compacts is also needed. And the Government should levy a surtax on companies receiving state and local tax escapes, at the very least treating the value of the tax breaks as income on which Federal taxes should be paid. Representative David Minge of Minnesota has introduced legislation toward this end.
Addressing the problem of corporate bluff and blackmail requires the commitment of both city and state officials. Companies choose a location first on factors such as proximity to customers, suppliers and labor. Governments that deliver high-quality public services can stand up to corporate shakedowns and still preserve jobs.
If the Mayor had shown even a little of the toughness he displayed to the city’s small gardeners, many giveaways could have been avoided. A respect for the free-market principles he claims to embrace should lead him to withdraw his support for taxpayer subsidies to large corporations.
Originally published as an op-ed in The New York Times, May 15, 1999.