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tv   Washington Journal Michael Farren  CSPAN  November 18, 2018 1:28am-1:56am EST

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for the trump presidency. an andrew johnson like president, someone who has impeachment swirling around them, and someone who is not able to heal a racial divide in the country. >> there is a real animosity between the president and congress as early as john adams. he is the person pushing toward the sedition act of 1798. what that does is try to prevent criticism of the government and the president. >> find c-span's the weekly on the free c-span radio app, or wherever you go for podcasts. welcomeuld like to michael ferrin for coming here today, were going to talk about
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what arlington, virginia, and new york city gave out to amazon. study of the large-scale bidding war that went on around the country for hq2 for amazon. guest: what i found is the average size of the bid was billion, at least the probably available bid. many were secret. if you look at the academic research, it finds they don't actually change the location decision. the vast majority of the time cities and states are wasting aliens of dollars every year. host: what is a company like amazon book for? what were they looking for and what it arlington and new york city have that they would have with or without the subsidies? guest: the number one thing firms look for, and the research
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is clear, is a skilled workforce. that is exactly what amazon said determined its final decision. said theyrent places were making the decision for virginia and new york city, in addition to nashville because of the local tech talent. host: you think arlington and new york city would have won if they offered nothing? guest: absolutely. if you look across the d.c. metro area to montgomery county and across the hudson river to newark, they both offered much larger subsidies in virginia and new york city eventually offered. if amazon was chasing subsidies rather than talent, they would have located in those places. host: join in on this conversation about virginia and new york making amazon or about virginia and new york and the amazon
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headquarters. call (202) 748-8000. if you were in the eastern or central time zone, call in at (202) 748-8001. if you're in the mountain or pacific time zone, call in at (202) 748-8002. again, you can always reach us on social media, twitter at @cspanwj and on facebook. heard the things we have from both the york in virginia is that what they call performance-based direct incentives. guest: cities and states have gotten a little bit better over time in structuring their incentives and how they are offered, even though they are generally a waste of money. performance-based incentives apply that rather than giving a large cash handout, they offer subsidies based upon each individual job created or dollar of investment offered.
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the problem is these jobs in investments most likely would have been created without it. some of the best research at the upjohn institute finds only between 2% and 25% of the time to subsidies actually sway where a firm decides to locate. three out of every four subsidies, at least three out of every four don't actually matter and are a waste of taxpayer dollars. host: the politicians in both new york and virginia have been talking about all of the jobs, gainhe money, they -- the gain in reputation their cities will get. this that make up for the incentives the state gives amazon for coming? guest: absolutely not. give your at the grocery store and are offered a free sample, it is just something you get is part of shopping at the grocery
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store. it is part of having a skilled labor force that draws these companies to you. if you were to pay five dollars for the free sample, it would be a waste of your money and your spouse would look at you like you were crazy and say we could've spent that on the family. why did you spend it on a free --ple you have gotten anyway you would have gotten anyway? host: amazon will build the exact same amount of jobs, 25,000 in each location but new york is paying twice with virginia did. betweenthe difference the negotiation in new york and virginia? guest: we will never know that because they are protected by nondisclosure agreements and all of these operations and these rooms, the deals in back rooms that are safe from public eyes. something that would help cities and states a lot in this process is to come together and refuse to sign nondisclosure agreements
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so that they can actually compete on the same playing field rather than have copies like amazon or tesla or bowling -- companies like amazon or tesla or boeing play them off against each other. host: good amazon know where they were going to put their headquarters? guest: i think they had a good idea. i think amazon is too effective and efficient. it is through a from a humble but ambitious online bookseller, and 20 years later it is one of the largest companies in the world. furthermore there is an industry behind location consulting. the decisions that go into that. i imagine amazon probably had a good idea of what they were going to be offering for locating from the beginning. -- or locating from the beginning. host: the cities of put out all these incentive packages, they never really had a chance of winning this headquarters? guest: given that subsidies most of the time don't affect the
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final decision of the company and given that cities have not changed that much over the course of this past year, it is not like their tech talent workforce has suddenly grown or suddenly become more appealing in other ways, the answer is yeah. a lot of the 238 cities ended up wasting public resources chasing amazon. host: bob from salt lake city, utah. good morning. caller: how are y'all doing? i had a question for you. i'm curious if any of the labor unions have anything to do with moving companies to certain --as and whether or not hello? host: go ahead. caller: are you still there? guest: -- host: the labor unions have
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anything with amazon decided to go to virginia or new york? guest: as far as i know labor unions did not have anything to do with amazon's decision. there was some research on this issue. sometimes corporate executives the idea that taxes are too high or the need incentives or some other problem to disguise a less politically correct reason to change where their firm is located. one of those reasons could be the presence of unions or moving to a right to work state. host: mike from rochester, michigan. caller: good morning. folksstion is, do you everything places like detroit ever really had a chance in this? it seems to me amazon really just wants to be your wall callersnd the political
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. my second point is are the losers in this deal really the winners? i will hang up and listen. thank you. guest: that is a great question. i'm so glad you asked it. that is the title of the paper we released earlier this week, that amazon hq2 is the only competition where the losers are the winners. with regarding your first question regarding detroit having a chance, with all apologies to detroit, i don't think they had a very good chance. you always have a possibility, i suppose, but from the beginning new york city and virginia have some of the highest number of tech talent in the entire u.s. washington, d.c. offers an advantage that no other city does. the access and closeness to political policymakers that
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could ensure amazon is actually regulated away from growing in the future or amazon could ensure its influence is used defensively because it is expanding into a lot of other industries. those industries may try to keep amazon out to keep themselves protected from the additional competition. it is slightly possible that d.c. caninfluence and lead to additional economic d.c. can lead to additional economic growth the competition is kept accessible rather than closing the door behind themselves. host: andrew from white plains, new york. good morning. caller: good morning. thank you for c-span and your guest. it has been a great program this morning. my question is what can be done to encourage companies to start rebuilding into the center of
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our country? i think back to a c-span program on infrastructure where a lady from cleveland complaint, saying all the money for developers is going to the east coast and west coast. she says we need some for cleveland. break point i would think. -- great point i would think. guest: we are working on research that you can broadly look at as innovation in public spaces. we need to allow companies and communities greater ability to find the best way to coordinate to work forward. uber astions over say few years ago and if they would be able to operate parallel the questions regarding scooters now and airbnb and housing regulations and the probability of higher housing costs because of regulations. and education as well,
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innovation in education. the cities at the center of the country transforming themselves by allowing more innovation in the things we normally take for granted like transportation or education. they will make themselves more appealing to tech companies and the growing industry going forward. report,cording to your all these incentives offered did not do any good. what is the better way for the cities and states going forward to attract these huge companies? better education systems? better transportation? what are we talking about? what can a cleveland or st. louis do to get the companies to come there? guest: they need to encourage entrepreneurs to do what entrepreneurs do, which is reinvent and re-create the economy in the spaces we live
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in. to build further off of your question, another think we can look at is right now cities and states waste about $90 billion a year on economic development subsidies. that is not even counting the federal amount of waste that goes from the federal government to the local governments for this. $90 billion a year to do a lot -- could do a lot to stimulate local economies in more beneficial ways. when you to craft an agreement between cities and states to agree not to compete for companies relocating because it does not work. it wastes public resources and redirects them away from genuine public need like transportation or policing or education. they could actually reduce corporate income taxes. what we found was for the average state hq2 bid, you could
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reduce corporate income taxes for all companies across the state by 29% rather than giving one large subsidy to amazon. at the end of the day for need to find a way to get out of this back competition, this dirty game that is wasting money. host: gina from alexandria, virginia. good morning. caller: hi. i understand jeff bezos has -- that's a good reason for him to want to have -- to be located there. and theff bezos president have an ongoing dislike for each other. why would he put his headquarters in one of the red states? that makes no sense. host: what do politics have to do with this? guest: politics has a lot to do
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with the d.c. decision. conjecture, --n my own conjecture, amazon is looking to set up in d.c.'s backyard and become a hometown company, to have regulators and politicians and policymakers look at amazon and say, oh, that is just amazon. we don't to overly regulate them. they are not a danger. they want to normalize amazon and policymakers' minds. there is an enormous amount of tech talent in the area but i think that is a major application or side benefit that d.c. offers that no other city could offer. and the fact that jeff bezos has homes in both new york city and d.c., that ish what people were saying at the beginning about motivating the
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decision. i think a corporate executive finds himself line to a given city very often. rather than staying in a hotel constantly, he says why not go ahead and build a home in the city and have a second home? it is a signal of the company getting ready to expand into the city. host: if you are a politician, a mayor or governor, and the state next eu is offering all of these incentives that you know you should, how do you explain it to your constituents? what is the excavation they can give? they are politicians. they need to get votes. how would you say they should explain it to their voters that this is why we are not trying to drop his company hereby offering them incentives? -- draw this company here by offering them incentives? they find thatk,
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is the reason why politicians offer these subsidies. if they don't work, why would you do them? politicians can't claim credit for the jobs created without offering subsidies because they would be created anyway. there are a lot of politicians and economic development officials around the country that are not happy of what they were doing. one official in kansas city said i know it sounds like i'm talking myself out of a job, but there ought to be a law against what i'm doing. how can we do this? one idea we propose is an interstate compact. an agreement between the states, part of the u.s. competition -- constitution. there are over 200 interstate compacts and exist -- in existence already. they can congratulate -- they agreentractually
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to do or not the something. we will get out of this crony ward we have found ourselves in and struggling to get out of. host: kathleen from dayton, ohio. good morning. caller: good morning. i went to encourage your viewers to go to the washington journal segment and post this on their facebook page and elsewhere. this is an important issue. as i was out counting on doors were knocking on doors for the dems, i purposely selected old manufacturing areas in dayton, ohio, where the housing, the access to stores, people without cars is huge. i will use this as an example. mary frances, who retired from gm in 1997, making $17.50 an hour. in 1997red from gm
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making $17.50 an hour. -- we're celebrated $15,aced the waste of but taxpayers are basically subsidizing again a multibillion ire like they did with walmart. they were paying their workers under 40 hours a week so they can go get medicaid. absurd -- absolutely this is absolutely absurd taxpayers are paying for these subsidies. is there a way they can release these nondisclosure agreements? i want to encourage manufacturing to candidate in, dayton, ohio, and tell to close thenka
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factories in china and give these people a living wage. guest: what can cities and states do? i mentioned the interstate compact. a lot of states already have something on their books called constitutional gift clauses. this was research by a couple of my colleagues. most states already went through something similar like this in the early 1800s. there were about eight states and one territory that defaulted on their debt in the early 1800s because they have given up massive subsidies to railroads and the canal building companies and ended up going into default. the state legislatures passed constitutional gift clauses that say public funds cannot be used for private purposes. whatthe intervening years has happened is we just kind of drifted away from this in the legal interpretation of what a public use of money is.
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it has become more watered down to the point we are able to use anything as a public purpose for purpose. -- for the public purpose. company condemned agricultural land to say it was blighted so they can use eminent domain to move people out of their homes to build a new foxconn plant. that is an egregious example but it is the worst example of how public use has gotten water down -- watered down for private enterprise. host: what is the worst thing people can expect in virginia and new york because of amazon moving their hq2 headquarters? i your rents? -- higher rents? what are taxpayers looking at? guest: probably all of those things. higher rent, worst traffic.
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that comes in the city growing over time. higher taxes than otherwise would be possible certainly. even for smaller subsidies, smaller than average subsidies virginia offered to amazon, we calculate corporate income taxes could be dropped by about 7% instead of offering that subsidy to one particular company. companies all throughout virginia would actually see the benefit of this and contribute to local economic development in their own areas rather than economic development in the d.c. area, which is already the richest part of virginia. host: what is the best thing taxpayers can expect now that the states are given all these incentives amazon? guest: the best thing they can expect is not from the subsidies. the subsidies likely did not change the location decision. the best thing they can expect
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from amazon being there is continued economic growth. growthtoo much economic is inuoye a good problem to have, especially compared to not having enough economic growth, as many parts of the country realize all too well. continu -- ag is continued surging economy. d.c. should take to heart stories like detroit and other industrial hubs. 100 years ago, 50 years ago they were booming. in the manufacturing left those areas -- then the manufacturing that those areas. the same thing could happen to d.c. and silicon valley. how do we keep allowing companies to innovate rather than try to hold everything down and say this is our industry and we will just rely on this industry? host: paul from fort edward, new
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york. caller: good morning. my question revolve to take on the data collection that amazon just received for free. city's future the expansion, tax policies, etc. with amazon taking over brick and mortar stores, in a way they are getting free data that other cities were not have access to. within moving into different businesses isn't this a form of monopoly? guest: i wondered if we were going to get the monopoly antitrust questions this morning. for the first question regarding the data, there is already a location consulting industry for businesses that would have a lot of locations that amazon already got. one of the jokes and eight is
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with the special information to the extent that was not available to the general industry, amazon might be able to open its own location consulting firm of the information. the issue really is that amazon has got every city and state to show them their cards and is now able to command higher subsidies as result. alabama paid about $50 million in subsidies for a distribution center in birmingham. amazon needs distribution centers in order to service its customers. there is no real reason to subsidize something they need to do anyway. furthermore, oklahoma had just given about $2.5 million for a similar distribution center. you could argue alabama overpaid by about 20 fold as a result. regarding the antitrust question, it is understandable
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that people look at a company getting really big and start worrying it will have too much economic or political power. being big does not by itself make a monopoly. economics has contestable markets. the economic research shows even in a case for you only shows tht even in a case where you only have two or three major companies servicing a particular market, that is enough for competition to ensure that those companies are not able to act like monopolies. problem with monopolies is not the size. problem is the large company actually acting like a monopoly. and to the extent that that company is worried about competitors coming in. even as amazon has all of the online space and was completely the only online retailer, as long as it did not act like an ugly in order to not encourage other companies to enter and compete with it, it still would be ok.
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host: we would like to thank michael farren from the data at georgecenter mason announcer: c-span's washington journal, like every day with news and policy issues impacting you. coming up sunday morning, former members of congress discuss the political climate after the midterm elections and what it means for the new congress. a member of the brookings institution talks about suspicions that north korea is continuing its ballistics program. sure to watch eastern journal -- washington journal. join the discussion. announcer: the white house did not release a weekly address from the president this week. virginia congressman gerald connolly delivered the democratic weekly address and he talked about the midterm ec


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