It’s hard to argue that a $50 million state subsidy for an automaker isn’t corporate welfare, but Rob Dixon doesn’t like the term.
Dixon, Missouri’s director of economic development, had to defend Gov. Mike Parson’s administration against conservatives’ slings and arrows during debate over one of the governor’s priorities, a bill that offers General Motors incentives to invest $1 billion in its Wentzville plant.
Republican critics said the bill made the state pick economic winners and losers, using a new “deal closing fund” that amounted to a slush fund. It’s no such thing, Dixon says: The fund provides flexibility in handing out some Missouri Works tax credits, but still requires clawbacks if a company fails to create jobs.
As for the corporate welfare label, the criticism applies to much of what Dixon’s department does, which is handing incentives to companies that invest in the state.
Missouri competes with other states, and Dixon doesn’t see unilateral disarmament as an option. “Every state uses incentive tools,” he said. “Whether you like it or not, they are indisputably a part of the economic development competition across the country.”
Indeed, Alabama dangled $700 million last year to win a joint Toyota-Mazda plant. Wisconsin offered Foxconn $4.8 billion to lure a giant electronics factory, although the company now seems likely to build something much smaller.
Missouri has never played in such a pricey league, and the new economic development bill doesn’t change that. In fact, Dixon says, it allocates no more money than the state was spending under existing programs.
“We think we’re being somewhat conservative and fiscally responsible with this program,” he said.
The bill extends a program created in 2010 to encourage a Ford expansion in Kansas City. The GM subsidies could start in 2023, after the old law’s funding ends, at up to $10 million a year.
GM hasn’t said whether it will add jobs in Wentzville, but Dixon argues that keeping the current 3,500 jobs is critical. “They have a major impact on our state economy and on the everyday lives of millions of Missourians,” he said.
GM contributes $2 billion a year to Missouri’s economy and supports 12,000 jobs at suppliers and other businesses, the state says.
It’s important to note that GM is shrinking its overall production capacity. “You fight for those kinds of jobs every chance you get,” says Steve Johnson, chief executive of the St. Louis Regional Economic Development Alliance. “Talk to the people in Lordstown and see if they think you can take these jobs for granted.”
He’s referring to Lordstown, Ohio, where GM ended auto production two months ago. The company also may close four other plants in North America.
Incentives, Johnson says, help make the case that GM should invest in Wentzville and not somewhere else. “The competition for capital within a company is fierce,” he said. “Sometimes communities assume that they’re not going to walk away, but expansion projects of this sort are every bit as competitive as a green-field project.”
The new economic development bill does invest in people as well as companies: It provides financial aid for adults, over age 25, who return to school for education or training in a high-demand field such as computer science, nursing or welding.
That part of the bill should improve the state’s long-term future, because most firms say a lack of suitable workers is their biggest barrier to growth.
Meanwhile, subsidizing GM should ensure that the region doesn’t lose some of its highest-paying manufacturing jobs. Unfortunately, fierce competition for such jobs has made corporate welfare a necessary evil.