The Morning Jolt

Economy & Business

Critics of the Amazon Deal Have Valid Reasons to Oppose it

A box from Amazon.com in Golden, Colo., July 23, 2008. (Rick Wilking/REUTERS)

Making the click-through worthwhile: As machine recounts are completed, it’s long past time for a trio of Democrats to concede; an update on construction of the wall — or 18-foot fencing — on the southern border; a long rebuttal to the claim that critics of the Amazon deal are “whiners”; and Mickey and I plan to bring you a podcast today.

Stacey Abrams, Bill Nelson, and Andrew Gillum . . . It’s Time to Concede Your Races

How you know when a race is over: when the losing candidate starts talking about a legal challenge to ask the Supreme Court to invalidate the results of the election and call for a new election. Apparently Stacey Abrams is incapable of conceding that she lost a hard-fought, close race:

The Democrat’s campaign is considering a long-shot legal challenge under a law that allows losing candidates to contest the election in the case of misconduct, fraud or “irregularities.” She would face a tremendous legal burden to prove her case.

Barring successful legal action, the secretary of state could certify the election as soon as 5 p.m. Friday and cement Kemp’s victory in the tightest race for Georgia governor since 1966.

The latest tally showed Abrams is roughly 55,000 votes behind Kemp — and in need of more than 17,000 votes to force a Dec. 4 runoff.

Kemp’s lead was virtually unchanged after elections officials in Gwinnett County late Thursday tallied hundreds of absentee ballots that were rejected solely because of a missing or incorrect date of birth. The ballots were counted after a federal judge’s ruling, but they did not significantly change the race.

Ohio senator Sherrod Brown, yesterday: “If Stacey Abrams doesn’t win in Georgia, they stole it. It’s clear. It’s clear. I say that publicly.” (Heads I win, tails you lose. I don’t to hear any more descriptions of Brown as a sensible moderate.)

Meanwhile, down in Florida, the machine recount changed nothing — Ron DeSantis is Florida’s next governor.

In the governor’s race, it was an anticlimactic finish to the dramatic machine recount — plagued with technical issues and an avalanche of lawsuits — with almost no change in the margin between DeSantis and his Democratic opponent, Andrew Gillum, since this weekend. Still, about 0.41 percentage points separate the two candidates, or just under 34,000 votes.

Two days ago, Andrew Gillum wrote on Twitter: “I believe that we win. #BringItHome”. As of this writing, there is no message of concession, only his retraction of his Election Night concession.

And in the Senate race, the machine recount actually expanded Rick Scott’s lead, but the Democrats will continue to keep fighting through the manual recount.

The race between Nelson and Scott remains extremely tight, and both campaigns continued to fight in court Thursday over ballots and deadlines that could swing how many votes are included in the manual recount and how long elections supervisors have to count them. Following the statewide machine recount over the past five days, new totals showed Scott leading Nelson by 12,603 votes, a tiny increase over his 0.15 percent lead Saturday.

Senator, you can ask for a recount to continue and acknowledge that you don’t expect the process to find an additional 12,604 votes in your favor. The largest vote swing in any recount going back to 2000 is 512 votes.

When a race is close and a Republican is ahead, the message from the national media is: “Take as much time as needed to count every vote. The values of democracy and elected government are at stake.” When a race is close and the Democrat is ahead, the message from the national media is that the Republican candidate is being a sore loser and dragging out a futile exercise and needs to concede and accept defeat gracefully.

Hey, Remember the Wall?

If you’ve wondered how construction of “the wall” — or more specifically, 18-foot-tall bollard fencing  — I have an update on NRO today. In the coming weeks, the House and Senate will try to get a lame-duck spending deal done and include at least some funding for “the wall.” You’re going to hear a lot of not-all-that-accurate claims that either “Nothing’s been done” on the wall or that the border is already secure. Neither is quite right, and I hope that today’s piece sheds some light and offers actual information on a topic that is often debated but rarely understood.

The Amazon-Deal Critics Aren’t ‘Whiners’

Rarely do I disagree so strongly with an article in The Weekly Standard as I did with Tony Mecia’s “Hey, New York and D.C., Stop Whining About Those Amazon Jobs.”

It’s a weird piece because it begins by conceding the point that locals have reasons to object to the Amazon deal’s impact on traffic, parking, the tax giveaways, and crony capitalism. But then Mecia writes that those concerns are “way overblown.”

Mecia says that the Amazon job additions are small compared to the overall rate of growth in the cities — a point that raises the question of why Amazon should get these giant financial concessions if their impact on the job-creation rate is so limited — and four paragraphs later he writes, “Will traffic worsen? Will schools become crowded? Will rents rise? Yes, definitely.” Once again, with concessions like that, those concerns don’t seem so overblown!

But the single statement in the piece that stands out for being both not right and not Right is the declaration that in the Amazon deal, “those communities come out ahead economically, because the incentives are tied to the actual creation of jobs and investment, which increases tax revenues above the amount of the incentives.”

No, communities don’t always come out ahead economically when they shell out generous incentives to get a company to relocate. And while it’s probably a safe bet that the revenue paid to Arlington and the Commonwealth of Virginia will eventually surpass the payment to Amazon, it’s likely to take quite a few years to catch up.

Let’s do some back-of-the-envelope math. “Virginia’s state and local governments agreed to shell out as much as $796 million in tax incentives and infrastructure improvements over the next 15 years in exchange for 25,000 well-paying tech jobs. That works out to just under $32,000 per job.”

Assume one of these new Amazon employees is making $150,000 and rents an apartment in Crystal City near work and is single. The average state income-tax payment for a Virginia state resident with that income level is $8,142. If the taxpayer is married with a spouse who doesn’t work, the payment is $7,916. If both spouses are making $150,000 each, they’ll pay $16,541.

Some of those new employees will rent, some will buy homes; the average homeowner in Arlington pays $8,742.

So even if the new workers don’t buy homes and pay property taxes, over four or five years, the state recoups what it paid Amazon, right? Wait, not quite. New residents and workers give states and localities money through taxes and fees, but they also take away money by using state and local government services. More residents in the area because of Amazon means more kids in public schools, more people calling 911, more fires to put out, more emergency-room visits, more public-transit use, more people using parks and libraries, more court cases for the circuit court, more sanitation needs, more leaf collection, and so on. More use of the roads will require more street repairs more frequently.

It’s impossible to calculate the precise balance for each new worker, but the gist is that parents, crime victims, and Medicaid patients cost a state or locality more than non-parents, those lucky enough to not be victimized by crime, and those who are not dependent upon the government to pay for medical costs. Amazon’s new employees probably won’t be on Medicaid and hopefully won’t be calling the cops regularly, but at least some are going to be parents. The public schools in Arlington prides themselves on being among the best in the country and spending a lot of money per student.

The Washington Area Boards of Education, which annually analyzes the budgets of local school districts to provide as close to an apples-to-apples comparison as possible, puts Arlington’s per-student spending at $19,340 for the 2017-18 school year, up 2 percent from a year before and above the all-time record of $19,040 recorded in 2014-15.

If a couple moves to Arlington and each makes $150,000 from Amazon . . . they’ll pay roughly $16,500 in state taxes per year. Good news, that’s almost a quarter of the $64,000 the state paid Amazon for their jobs! But they also bring with them two kids in public school, adding about $38,000 in new costs, or the school lets its per-student spending drop. Suddenly it won’t take four or five years to make the Amazon deal pay off. It will take more years of the couple working and having no kids in the public schools for Virginia and Arlington to make the money back.

One other key variable for these calculations: Some of these new Amazon workers might live in Alexandria, Fairfax County, or across the river in the District of Columbia or Maryland, which alters whether they’re paying property taxes or bringing new children into the public schools. The equation is not, as Mecia suggests, “new taxes paid to the state, minus payment to Amazon.” The equation is “new taxes paid to the state, minus payment to Amazon, then minus cost to state of new worker moving to the jurisdiction.” If those new workers stay for many years, then yes, Virginia and Arlington will eventually get more in new tax payments than they lost in the giveaway to Amazon.

But this is just the financial bottom line, not an examination of the quality of life — traffic, longer commutes from a lack of affordable housing, more crowded and less quality schools, overcrowded hospitals, and so on.

One of the best pieces on the deal came from Josh Barro, who focused on Amazon’s deal up in New York City: “[Michael] Bloomberg, and his successor Bill de Blasio, and Governor Andrew Cuomo all want an East Coast rival to Silicon Valley . . .  a borough where Amazon serves as the commercial leader — unlike Chelsea, where Google basically blends in — does more to raise the profile of tech in New York.”

Barro asked, “Is that an important goal? Does New York need to be the leader in everything, even if that drives up rents for people who don’t work in the tech industry?” He concludes that the answer is no.

New York City doesn’t need to be a national or world leader in the tech sector. It’s already among the world leaders in financial markets, banking, mass media and publishing, advertising, real estate, health care, higher education, garments, chemicals, specialty foods, transportation and shipping, and entertainment, and I’ve probably forgotten a bunch of other industries.

Washington is a government town, and that business is never going to relocate. With that industry comes defense contractors, civilian contractors, nonprofits, media, lobbying firms, trade groups, higher education, health care, embassies, and international organization. And of course, both Washington and New York are among the country’s biggest tourist destinations.

That’s what’s really bonkers about the Amazon choice. The company had dozens of cities begging them to relocate and bring 50,000 tech jobs, and where the relocation would be hailed as an economic blessing. But somehow the company managed to pick the two cities that needed them the least, where the existing residents wanted them the least, and the two places where the local idiot lawmakers didn’t need to give away the store — and those idiot lawmakers went ahead and did it anyway.

ADDENDUM: Mickey and I plan to tape a podcast today.

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