Originally published February 20, 2019
Last week, after increased pressures and demands from leftwing activists, Amazon decided to pull out of building their second headquarters in Long Island City. This deal would have led to approximately 25,000 new, high paying jobs and $27 billion in tax revenue, at the cost of $3 billion in tax breaks. When Amazon pulled out of the deal, scores of leftwing politicians and pundits claimed victory: that working class New Yorkers were able to reject the largest company in the world. There are lessons to be learned from these events, but if the statements until now are any indication, New York will not learn them.
When this deal was first formed, it received immediate backlash from both the left and the right. Both sides of the political aisle disliked the tax subsidies New York was offering to Amazon, but for different reasons. The conservative right argued that New York should not practice crony capitalism by picking winners and losers. Rather, to attract business to New York, provide an equal playing field to any company wishing to relocate by lowering corporate taxes and regulations across the board. That is how other states, like Texas, stay competitive. The left, which is in favor of government picking winners and losers in the private sector, would rather see those tax subsidies go to minority and women-owned businesses, not a vast company like Amazon.
Since the conclusion is the same, the thought process that led to it loses relevancy when Amazon builds its headquarters. However, since Amazon left, the stark difference between these two rationalities against tax subsidies for Amazon is revealed. The conservative right did not cheer at the loss of jobs and tax revenue; rather, they lamented that New York cannot attract other companies to move to the City. The right knows that the only true path to economic competitiveness is to make it easier across the board for corporations to grow and thrive in a free market. While it may not be as immediate, jobs and tax revenue always come when a city fosters a business-friendly environment.
The left, however, did cheer at the pullout. Some of the statements by the elected representatives of New York were simply outrageous. Alexandria Ocasio-Cortez, who represents the 14th District, where the headquarters would have been built, believed that New York paid Amazon $3 billion, and now the city can use the money elsewhere. That thought process was not hers alone, shared by many leftwing publications that claimed that New York City could now use that money to fix the subway system. When confronted with the fact that the subsidy was not money that New York had, rather a reduction of what New York would have gotten if Amazon moved in, Ocasio-Cortez doubled down, claiming that the City can create the 25,000 lost jobs with the $3 billion (again, this is money the city does not have). Whatever her thought process was, this is the wrong lesson to learn from Amazon leaving New York. This perpetuates the notion that government’s primary responsibility is to create jobs, which it’s not. The government’s responsibility regarding jobs is to create an environment friendly enough for private companies to come in, grow, and hire. Outside of that, government is a massive hindrance.
Ocasio-Cortez was not the only New York politician to learn the wrong lesson from this. Mayor Bill de Blasio, one of the architects of the deal, wrote in an Op-Ed for The New York Times, “…I had counseled a senior Amazon executive about how they could win over some of their critics. Meet with organized labor. Start hiring public housing residents. Invest in infrastructure and other community needs. Show you care about fairness and creating opportunity for the working people of Long Island City.” When Amazon balked at these suggestions, New York liberals viewed it as Amazon’s intransigence on display. However, Amazon should have never been asked to do these things. Their primary responsibility is to their shareholders and their employees by staying in business and making as much profit as possible. That is how they expand, hire more employees, and provide better and cheaper goods and services to their customers. They should only build infrastructure, unionize, and make hires based on their bottom line profit margins. That cannot be dictated by the city they are setting up shop in. Amazon has had a longstanding policy against unionization of its employees, much to the pro-union left’s chagrin. This policy, though, allowed for the growth that led to the employment of over 600,000 people. Amazon has also, without government force, instituted a $15 minimum wage. This was accomplished without mass unionization.
The leftists in New York see the effects of Amazon on Seattle and recoil. Increased housing prices, gentrification, and crowded public transportation is all they can focus on. The left claims that Amazon would hurt minorities by increasing the income inequality by only providing high paying jobs. Minorities, when polled, tell a much different story. According to a Siena College Research Institute poll, 70% of black voters approved the deal (25% against), and 81% of Latinos approved (17% against). Compare that to the white voters, with 51% approving and 40% against. The left is incredibly out of touch with the very people they claim to be championing.
The idea that Amazon’s high-paying jobs would not be a broad economic boom for Long Island City is ignoring the reality of large corporate headquarters such as Amazon’s. For, besides the tens of thousands of jobs, billions in wages, billions in investment, and tax revenue by Amazon itself, there are fringe benefits. Businesses such as coffee shops, restaurants, bookstores, and clothing stores grow around these campuses. These small businesses attract corporate employees during their lunch breaks, and of course hire employees to run their stores. Not only was this growth rejected by Amazon’s opponents, the left celebrated.
The lesson that should be learned from the Amazon debacle is that the government should have never made crony capitalistic deals with corporations in the first place. Choosing winners and losers is a gamble, best left to professionals. The government should not gamble with taxpayer money, which corporate entity will come in and save your city. Rather, they should foster all business growth by lowering taxes and cutting regulation across the board. The lesson that New York politicians and pundits have learned, though, is that companies must march to their political tune to get tax breaks and preferential treatment. If you are willing to play ball by unionizing, building infrastructure, and hiring who the city tells you to hire, then you can pay less in taxes. No business in its right mind would take that offer, because no business could be profitable under those conditions. Until New York learns the right lessons, companies will find other places to go.