A proposed major semiconductor complex for upstate New York is raising hopes of a revived American manufacturing sector. But the deal is built on massive taxpayer subsidies, reminding us of America’s pattern of government giveaways to businesses with no net economic benefits, especially for low-income people and communities. Which will we get this time?
First, the deal. Chip manufacturer Micron Technologies announced a 20-year investment of up to $100 billion—yes, “billion” with a capital “B”—in chip manufacturing to be located outside Syracuse, New York.
Billions (yes, billions again) in subsidies from the federal and New York State governments are part of the deal. The federal money is tied to the new CHIPS Act, which has strong (but as yet untested) language for spending accountability and equity. But New York’s comes from virtually unrestricted funds in its recent budget, passed with no public debate or rules for effective oversight (along with a multimillion dollar boondoggle providing a new stadium for the NFL’s Buffalo Bills.)
Supporters of the deal call it “transformational,” a “historic investment” they claim will create around 9000 manufacturing and related jobs, and almost 50,000 total jobs in the state, along with increased tax revenues. The state share is estimated at $5.5 billion (it could go higher), a historically large spend in a field littered with expensive state subsidies, from Wisconsin to Texas to Florida.
And New York has been one of the nation’s most extravagant subsidy spenders. Subsidy watchdog Good Jobs First finds New York has spent almost $43 billion (that “B” word again) in state and local awards to businesses since 1980, and there are very likely more that are harder to identify. (Business subsidies are plagued by a lack of transparency and disclosure.)
Will the spending produce the promised benefits? Or will it just be another failure in a long, long line of wasted taxpayer money, shoveled by governments to companies promising huge benefits that don’t materialize? Critically, will the feds (through the CHIPS Act) lean on New York to be more accountable and equitable?
Upstate New York, like other parts of the country, has a poor track record when it comes to positive results from subsidies. Under Governor Andrew Cuomo, the state’s “Buffalo Billion” program spent over $2 billion in western New York, promising creation of 8000 jobs and stimulus to the region’s economy.
But it didn’t work. In 2020, the state comptroller reported major “deficiencies” in New York’s “management and oversight” of the spending, including “a lack of consistent and rigorous performance and evaluation standards,” lacking “cost-benefit analyses to assess the overall benefits of the projects.” An Investigative Post story found “employment in the technology sector actually fell in Western New York between 2011 and 2017, despite the infusion of Buffalo Billion money.”
And there was flat-out corruption as well. Cuomo’s appointee to head the project, praised by the then-governor as “New York’s secret weapon,” was convicted by federal prosecutors of bid-rigging and kickbacks on project contracts.
But corruption isn’t the main story on subsidy failure. It’s simply that businesses get large tax breaks for promising to locate in particular paces and create jobs and economic benefits. And then they don’t deliver. The vast majority of those deals don’t pan out, draining public funds in the process.
Public-spirited analysts like Good Jobs First or Boondoggle from the American Economic Liberties Project provide excellent (and often depressing and infuriating) reporting on wasteful subsidies. Economists on both the right and the left criticize subsidies for wasting scare tax dollars that could be better spent—for the right, in overall tax reductions, and for the left, in more meaningful public investments in education, targeted business assistance, and infrastructure.
One common characteristic of subsidy deals is overpromising benefits to create political support and to avoid hard oversight questions. Reinvent Albany, a first-rate analytic watchdog organization focused on New York State has raised several important questions about the Micron deal that should be examined more closely.
9000 jobs in the Micron plant? Reinvent notes New York’s currently largest plant “employs roughly 2700 people,” and the new Micron plant “will be even more automated.” 40,000 supply chain and construction jobs? Chip fabrication plants are highly capital intensive, and very expensive chip fabricating machines mostly come from the Netherlands, so a lot of the capital expenditure will go out of the country. The project will be “green?” Chips take a lot of water, and some estimates say the plant on its own could use 25% as much water as the total used by the nearby city of Syracuse.
But the biggest worry is simply that low-income workers, communities, and the economy won’t get the promised benefits, and taxpayers will be left holding the bag. Consider Foxconn’s subsidy-driven promised electronics plant in Wisconsin, hailed by then-President Trump as “the eighth wonder of the world” that would produce 13,000 jobs along with spinoff benefits and help revive U.S. manufacturing. The plant never materialized, leaving Wisconsin taxpayers holding the bag.
Foxconn is just one of many, many failed economic development subsidies . This bleak record is challenging for public policy advocates (like me) who support the U.S. adopting a more intentional and equitable industrial policy, especially in manufacturing. What such a policy would look like is a subject for another blog, although it must have workers and their interests at the core, and active federal oversight to counter state governments’ lack of it.
At a minimum, we need stronger guarantees from companies, more transparent details on government financial subsidies, clear numerical and equity targets for jobs and economic benefits, and ongoing community and government oversight. So far, we don’t have any of that for the Micron deal. Advocates of industrial strategies need to press for them as essential when awarding any public support.