Corporate Hostage Taking

http://www.openleft.com/diary/15493/stopping-the-great-american-jobs-scam

Stopping The Great American Jobs Scam
by: David Sirota
Thu Oct 15, 2009 at 11:15

For the last month on my morning drive-time radio show on AM760, we have been discussing the Frontier Airline situation, and how it serves as an important microcosm of all the debates about jobs, the economy, public policy, and corporate welfare inherent in Greg LeRoy's terrific book called The Great American Jobs Scam - a scam that afflicts almost every community across the country.

The basics of the story are this: Frontier declared bankruptcy on April 10, 2008, ultimately got bought by Republic Airways in August of 2009, and has been reporting operating profit for 10 straight months (probably a big reason that Republic bought it, and Southwest tried to).

In recent weeks, however, Republic Airways has been threatening to slash Frontier jobs in Denver (the airline's hometown) unless Denver and Colorado governments hand the company a series of special tax breaks. This is exactly what the Great American Jobs Scam is: a corporation using a threat to extract special giveaways.

This particularly ugly threat comes, of course, just as the city and state's massive budget deficits are causing huge cuts to the most basic social services for the most vulnerable populations (the homeless, the indigent, the mentally ill, etc.). The question we've been discussing on the radio is whether Denver and Colorado should give in or not?

Clearly, Republic is effectively trying to get in on the Great American Jobs scam by holding a gun to our elected officials' heads: Either hand over the taxpayer cash, the airline is saying to the pols, or we'll slash jobs in a high-profile way, hurt your economy, and embarrass you. The standard reaction from politicians in this situation is to do what Denver and Colorado officials initially did by seeming to promise capitulation. What usually happens is that after a period of "deliberation," these officials do exactly as they are told, selling the capitulation to the taxpayers as a way to supposedly preserve tax revenue (if we keep the jobs, we keep the income, which is taxed, which preserves our tax base...).

Of course, it rarely works out that way - what most often ends up happening is that the capitulation destroys tax revenue (see this latest example here in Colorado) and - worst of all - the jobs that the tax breaks were chasing end up leaving anyway.

This is how corporate welfare works in America - and it speaks to why we need federal tax/regulatory reforms to prevent this kind of situation whereby a corporation effectively plays different states off against each other with a game of economic Russian roulette.

Short of that federal reform, though, communities can themselves try to change the paradigm - which is exactly what Denver seems to be trying to do.

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The real question on issues of corporate welfare is simple: Don't taxpayers have a right to be treated like a business party in a normal contract negotiation? I mean, in what business transaction other than one with city/state government is one party allowed to simply renege on a deal and still get all the benefits of that deal? There are none and that's why the Great American Jobs Scam has been so devastating.

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