GM, Amazon, and Crony Capitalism: Will We Ever Learn?

Last week, General Motors announced it was closing plants and laying off a significant number of both white and blue collar workers.  GM said it is taking these actions from a “position of strength” and to prepare for the future.  Less than 10 years ago, the US government effectively bailed General Motors out, costing tax payers over $11 billion.

In mid-November, Amazon announced it was building its “HQ2” in New York and Northern Virginia.  It also is building a major operation Nashville.  The estimated total tax breaks (subsidies) Amazon will receive are $2.2 billion.  In New York, the subsidy amounts to approximately $48,000 per job.  In case anyone misunderstands, that $48,000 is being taken from New York’s tax payers and being given to Amazon.  Andrew Cuomo, the Democratic governor of New York, said, “This is the largest economic infusion the state has ever seen…These are great jobs.”  I find it funny that the same political party that ridicules supply side economics supports tax breaks for Amazon.  Politics certainly makes strange bedfellows.

When politicians decide what is and what is not a “great job,” I get concerned.  Aren’t all (legal) jobs important?  We continue down a path where the government gets to pick winners and losers despite evidence that this strategy does not work.  Crony capitalism is a losing strategy for tax payers.  For capitalism to work optimally, the playing field should be level for all participants.

Articles cited/Further reading

https://www.thebalance.com/auto-industry-bailout-gm-ford-chrysler-3305670

https://www.askheritage.org/the-auto-bailout-who-was-actually-bailed-out/

https://www.nbcnews.com/business/autos/oops-gm-bailout-cost-taxpayers-almost-1b-more-estimated-n93816

https://www.cnbc.com/2018/11/13/amazon-tax-incentives-in-new-york-city-virginia-and-nashville.html

https://nypost.com/2018/11/15/cuomo-calls-amazon-deal-a-home-run-while-defending-massive-tax-breaks/

Comments are closed.