Friday, November 21, 2008

Senator Shelby owes Michigan an apology

Senator Shelby from Alabama has been pretty outspoken in his opinion that the Big Three shouldn't get financial aid from Washington. He had this to say on Meet the Press recently:
This is a dead-end, it's a road to nowhere, and it's a big burden on the American taxpayer.
And this:
We don't need government--governmental subsidies for manufacturing in this country. It's the French model, it's the wrong road, we will pay for it. The average American taxpayer is going to pay dearly for this, if I'm not wrong.
Senator, we don't take kindly to southern hypocrisy in the north, as Wizardkitten was quick to point out:
Turns out that Senator Richard Shelby has some authority to speak on being a "big burden on the American taxpayer". As of 2005, his home state of Alabama is No. 7 on the list of beneficiary states of the federal taxpayer dollar...They take in more and more federal taxpayer dollars, but yet keep falling behind the rest of the country.
Alabama taxpayers receive more federal funding per dollar of federal taxes paid compared to the average state. Per dollar of federal tax collected in 2005, Alabama citizens received approximately $1.66 in the way of federal spending. This ranks the state 7th highest nationally and represents a rise from 1995 when Alabama received $1.33 per dollar of taxes in federal spending (ranked 9th nationally).
FYI Senator: Michigan is a donor state. We pay more in federal taxes than we receive back from the government.

The Senator probably doesn't care what some blogger thinks, but he should care that Peter Karmanos, Jr. (CEO of Compuware Corporation and owner of the Carolina Hurricanes, Plymouth Whalers, and Florida Everblades hockey franchises) thinks his comments were inaccurate, over-simplistic and hypocritical.
I trust it is safe to say that when you refer to “government subsidies,” you are referring to subsidies provided by both federal and state governments. And if this is in fact true, then I am sure you were adamantly against the State of Alabama offering lucrative incentives (in essence, subsidies) to Mercedes Benz in the early 1990s to lure the German automobile manufacturer to the State.

As it turned out, Alabama offered a stunning $253 million incentive package to Mercedes. Additionally, the State also offered to train the workers, clear and improve the site, upgrade utilities, and buy 2,500 Mercedes Benz vehicles. All told, it is estimated that the incentive package totaled anywhere from $153,000 to $220,000 per created job. On top of all this, the State gave the foreign automaker a large parcel of land worth between $250 and $300 million, which was coincidentally how much the company expected to invest in building the plant.

With all due respect, Senator, where was your outrage when all this was going on? … I certainly don’t recall you going in front of the nation (as you did this past Sunday) to discuss what a big mistake Alabama was making in providing subsidies to Mercedes Benz. If you had, however, you could have talked about how, applying free market principles, Alabama shouldn’t have had to resort to subsidies to land Mercedes Benz. Competitively speaking, if Alabama had been the strongest candidate under consideration (i.e. highest quality infrastructure, workforce, research and development facilities, business climate, etc.), then subsidies shouldn’t have been required.

The fact is that Alabama knew that, on a level playing field, it could not compete with the other states under consideration and, thus, to lure the German car builder to the State, it offered the aforementioned unprecedented subsidies. In effect, Alabama — your state — did exactly what you said government should not do: provide subsidies for manufacturing.
Karmanos ended his letter by saying, "It’s no great mystery why Alabama politicians went to such dramatic anti-free-market measures to secure Mercedes Benz — they did it for the betterment of their state through job creation and increased tax revenues. And who could blame them? Is that so different than what would occur by providing financial aid to help rescue the domestic auto industry? Such aid would save millions of jobs and millions of dollars in lost tax revenue."

Jobs and tax revenue that would probably finds its way back to Alabama.

3 comments:

K. said...

On this subject, the only thing more hypocritical than a southern conservative is western conservative. This is all about union busting.

abi said...

What we witnessed this past week in congress regarding the Detroit bailout was just a dog and pony show. Just some pols trying to have it both ways - they know they're going to have to help the auto industry, and they will.

Kathy said...

K, that's the way I see it too. Sadly, we (worker bees) all lose when unions lose.

Abi, I think they'll help them too, but I'm furious that they haven't held Wall Street to the same standards. They're being handed a gift - not a loan - and no one's asking where their plans are or how they travel around the country.

I'm in favor of business plans and accountability, but it should be applied to all industries across the board.