Wednesday, September 27, 2006
On this day:

Incentive or giveaway?

From the Mobile Press-Register:
Local and state agencies approved incentives agreements Tuesday with Northrop Grumman Corp. and EADS North America meant to help finance an assembly center in Mobile that would produce military refueling tanker aircraft, if the Northrop team can win an Air Force competition against Boeing Co.

The dollar value of the incentives known to the Press-Register Tuesday exceeds $110 million. ...

The agreements pledge a cash payment of $82 million to the companies over five years, intended to pay for the construction of plants at the Brookley Field Industrial Complex, according to officials with the city of Mobile and the Mobile Airport Authority. EADS would get $52 million, and Northrop would get $30 million, according to a summary of the contracts released by the city.

The companies have said they plan to create at least 1,150 direct jobs and as many as 3,000. But they only have to create 300 apiece, or a total of 600, and maintain that total for five years to fulfill their contracts with local and state agencies, the city summary said.

Officials said Northrop and EADS wouldn't get any of the money or tax breaks if the team does not win the Air Force competition. ...

The structure of the Northrop/EADS incentives appear to differ from some of those offered by the state in the past.

In deals with big automakers, state and local governments have spent large amounts of cash to buy and prepare industrial sites.

In this case, though, the Mobile Airport Authority already owns the land, and only about $10 million is set aside for site preparation, roadwork and port improvements.

Northrop and EADS are not obliged to use the $82 million in cash incentives to pay for their plants, although [Airport Authority Executive Director Bay] Haas and [Mobile city attorney Larry] Wettermark said they are expected to. Haas and Wettermark said the cash payments could help the team deliver a better price to the Air Force in the bid competition.

This amounts to an awful lot of government involvement in what is essentially a private venture. Using taxpayer money to pay for infrastructure improvements is one thing, but using it to contribute directly to a corporation's bottom-line, as appears to be the case here, borders on obscene.

Handing out state revenues to large corporations so that they can build assembly plants, train workers, and pay their executives is simply not a proper function of government. Due to their arbitrary, "government-picks-the-winners" nature, incentive packages like this one are even more unjust than the income redistribution programs that conservatives have so often rightly condemned. This level of government meddling is an affront economic liberty and, more importantly, to the principles of limited government. Not too long ago, there would have been plenty of politicians - including many conservative Southern Democrats - railing against this kind of "incentive" package as a giveaway to big business. Today, the only reactions our elected officials seem to offer are either support or silence.