Republicans Backed Subsidies For Foreign Car Manufacturers
By Justin Gardner | Related entries in Business, Cars, Economy
Southern Senators are crying foul at the auto rescue package, but they had no problem giving foreign automakers billions in subsidies to come set up shop in their states.
From the Washington Independent:
To hear Southern Republicans tell the story, the financial burdens facing Detroit’s automakers are self-made troubles to be settled by the laws of Adam-Smith capitalism. [...]Yet this argument — that the government has no business interfering in free markets — ignores an increasingly frequent tradition among Southern states, which have fronted billions in local taxpayer dollars in the past two decades to attract foreign auto plants. Those incentives, arriving in the form of tax breaks, training for new employees and even land, have enticed BMW to South Carolina, Mercedes to Alabama and Nissan to Tennessee. [...]
Not coincidentally, these Southern states are represented by the same coalition of GOP senators who led the fight against the recent Detroit bailout proposal. That legislation would have provided $14 billion in emergency bridge loans to General Motors and Chrysler, both of which say they lack the finances to survive the month. Rallying behind the animated opposition of GOP Sens. Bob Corker (Tenn.), Richard Shelby (Ala.), Mitch McConnell (Ky.) and South Carolina’s DeMint, Senate Republicans killed the legislation.
So how much did the foreign companies get?
Shelby’s Alabama, for example, secured construction of a Mercedes-Benz plant in 1993 by offering $253 million in state and local tax breaks, worker training and land improvement. For Honda, the state’s sweetener surrounding a 1999 deal to build a mini-van plant was $158 million in similar perks, adding $90 million in enticements when the company expanded the plant three years later. A 2001 deal with Toyota left the company with $29 million in taxpayer gifts.Alabama is hardly alone. Corker’s Tennessee recently lured Volkswagen to build a manufacturing plant in Chattanooga, offering the German automaker tax breaks, training and land preparation that could total $577 million. In 2005, the state inspired Nissan to relocate its headquarters from southern California by offering $197 million in incentives, including $20 million in utility savings.
In 1992, South Carolina snagged a BMW plant for $150 million in giveaways. In Mississippi in 2003, Nissan was lured with $363 million. In Georgia, a still-under-construction Kia plant received breaks estimated to be $415 million. The list goes on.
Basically, if these Senators really believed in the free market, they wouldn't give auto makers free money to come to their states. And yet they knew that these companies needed incentives to be competitive.
So this is just a little bit more perspective as we continue this discussion about the Big 3. Because these subsidies absolutely hurt the competitiveness of American auto manufacturers and that should be considered when you're making up your mind about whether or not they should go bankrupt.
This entry was posted on Wednesday, December 17th, 2008 and is filed under Business, Cars, Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
December 17th, 2008 at 10:10 am
First, what the state governments did is different from the positions that these individual Senators took in opposing the auto bailout.
Second, there’s a big difference between giving tax breaks to attract businesses, and jobs, to your state, and giving taxpayer money to three companies with a 30 year history of making horrible business decisions who have demonstrated no real will power to make the changes necessary to save themselves (witness — Chrysler’s owner which is sitting on billions of dollars in cash but wants the American taxpayer to bail out it’s bad investment in a failing auto company).
December 17th, 2008 at 10:28 am
Your post would make a lot more sense if the members of a given state’s legislature were actually the same people who are members of Congress. But they aren’t.
Members of a state legislature are supposed to do things that are perceived to be good for their state. OTOH. members of our nation’s congress are supposed to do things that are good both for their state and for their nation.
So here’s the question. Is the conundrum you point out really one that ought to be framed as an issue of partisan policy (blah, blah , blah, bad republican senators…)?
At the state level, there’s all sorts of variance in what a given state (and the state members of BOTH parties) will do when acting in its own perceived self- interest. And most assuredly it can become a race to the bottom. If we are troubled about this collectively, then the only comprehensive remedy is for the federal government to set policy that dictates things and constrains the actions of individual states. I’ll take no position on the merits of this, or the constitutionality, or the likelihood that could ever happen. I’ll just say that there are plenty of good reasons why it’s not so now, and why we’d seek to go down this road only with the greatest reluctance.
December 17th, 2008 at 10:38 am
Repeat after me…A tax break is not a subsidy. Wealth generated by private enterprise does not automatically belong to the state. It is a very hard concept for leftists to understand, I know.
Justin, If you don’t see a difference, and you favor bailing out the auto industry with billions of dollars of taxpayer money, then why not simply advocate an across-the-board corporate tax cut or capital gains cut for all corporations that are struggling? Think of it as a give away of equal value.
December 17th, 2008 at 11:54 am
No Jimmy — you are have to crawl into the head of a statist liberal like Justin and only then will you realize that everything belows to the government — money, property, rights — it then the job of government to disperse those things to the people — money, property, rights. Government is the alpha/omega of all that we have and it to government that should worship. Paying taxes is merely the secularist means of tithing.
December 17th, 2008 at 12:18 pm
It would take a truly incurious person to not question the fact that the chief opponents of the *bailout*, including the architect of a problematic alternative (e.g. it’s been shown that Corker’s injunction that UAW wages be brought in line with Nissan’s [how convenient, what state do they headquarter in again?] is smoke and mirrors as the adjusted wages are not signficantly different), all happen to have foreign manufacturers as economic tentpoles in their respective states. Fortunately, the usual suspects show up right on cue. It is amusing to watch you folks take Justin to task for his ideological prejudices as if your own weren’t prominently on display in your responses. Priceless. It’s one thing to demand alternatives to the proposed bailout as was, and quite another to do so while ignoring the obvious and, at minimum, questionable circumstances of opposition. One can certainly embrace the Corker plan while also raising an eyebrow at the makeup of the team.
December 17th, 2008 at 2:57 pm
A tax break is a gift, a freebee and cannot be compared to the loans requested by GM and Chrysler. The free money given to the foreign automakers had to be paid for by someone. Who’s taxes do you think went up because of the gift given to foreign companies? Every american pays more because of the bribes given to entice the foreign companies to come to america. The state tax payer pays more and since the state looses money the congress members for these states ask for support from the fed, all taxpayers, to help them in their states. I sure am glad that the reTHUGlicans think that giving my tax dollars to foreign companies is a better use of my money than to borrow it to american companies….ya right…and we should complete that bridge in Alaska as well.
December 17th, 2008 at 3:56 pm
“One can certainly embrace the Corker plan while also raising an eyebrow at the makeup of the team.”
Not if you are a completely brainwashed reactionary right winger like the above.
December 18th, 2008 at 7:05 am
Understand that tax breaks are given to a wide variety of interests, domestic and foreign, in a broad variety of industries. Don’t think that tax breaks for foreign automakers are somehow a special and unique tool that required Herculean legislative effort to push through. States throw around tax breaks like candy on Halloween.
I think this argument would be much more effective if the government was considering requiring the automakers to pay zero taxes for five or ten years. Not necessarily a bad idea, but then the NeoProgs would have to admit that reducing corporate taxes spurs economic growth across the whole country.
As it stands, it’s an apples-to-oranges stretch.
December 18th, 2008 at 9:19 am
Tax breaks are generally an interesting scenario, and are certainly one of the best tools a state has to lure a given company or an industry’s heavy hitters to set up shop. My wife spent most of the the year in Shreveport working in a film industry that’s basically fueled by a tax break. The benefits are obvious in that you can’t tax a company that doesn’t do business in your state (I think of it less as a tax break than a tailored rate) and it’s a great source of skilled jobs and an economic stimulus to local businesses. Naturally, once something starts to work other states want in, and MI is the latest to throw their hat in the ring, proposing an even lower tax rate. Competition, rational tax policy offset by job creation and consumption. What’s not to like?
December 18th, 2008 at 1:50 pm
This is on the State level not the federal. The foreign automakers do more good for the people of the States invlved than American automakers in other States do. Did the Southern States get help from the Federal government to bailout the textile industy when it could no longer be competitive. No they didn’t and neither should Northern automakers. If they want subsidies, by all means let them ask the governments of the States where they are located, or maybe move to new facilities in the South where the cost of living is less and without the burden of organized labor unions.