Ernest Dumas muses this week on the latest huge gift of corporate welfare in Arkansas — $100 million or more in local and state giveaways to lure a Chinese company to build a pulp mill near Arkadelphia.
“What will President Trump, our leading Sinophobe, say?”
If you like this deal, there’s a constitutional amendment on the ballot in November that will let Arkansas leaders give still more tax money away in the name of creating jobs that might or might not pay a decent return. It will also allow private chambers of commerce that lobby against the working people in so many ways to also cadge a share of local tax revenues for their (higher) salaries.
This week’s Dumas column follows:
By Ernest Dumas
You can be sure that President Richard M. Nixon would be proud of the Arkansas segment of his legacy, a huge subsidy from Arkansas taxpayers for a company in communist China that will build a wood-pulp factory in south Arkansas. But what will President Trump, our leading Sinophobe, say?
We may never know, but he would be apt to say from personal experience that whenever the government gives a leg up to a corporate titan, even a wily Chinese communist, it has to be a good thing. The bio of Li Hongzin, the president and founder of Shandong Sun Paper, boasts that he is a member of the Communist Party and the 993rd richest person in the world.
One hundred million dollars from Arkansas’s taxpaying sons and daughters of toil ought to raise Li in the wealth rankings at least a few notches. A good result from a toughly negotiated business deal, Trump might say, though he would also say he would have struck a far better deal with the commies than Gov. Hutchinson and Clark County did.
But what do the taxpayers who are footing the bill say? They had no role, unless you count the Clark County voters who approved a half-penny sales tax in 2007 to build a fund to supply cash subsidies to companies that will open a plant there, or the elected lawmakers and governors who offered up the package of state cash incentives and $50 million of collateralized loans to the paper company. The mill will hire up to 250 people, building it will employ others, and big landowners in the area will reap wealth from the sale of their standing pine saw wood.
The Shandong deal, like others that depend upon huge subsidies and tax forgiveness from government treasuries, is built solely upon the trust that the subsidies will produce lucrative jobs for hungry Arkansas laborers. The pulp deal will cost taxpayers about $400,000 for each of the 250 jobs, based on the few details gleaned from the announcement, but some day the salaries paid those workers and the taxes they pay are supposed to offset the investment. Shandong will get a 65 percent discount on property taxes on the plant and equipment for 20 years but they can argue that the county wouldn’t have collected those taxes anyway.
Jobs became the magic talisman for economic development a couple of decades ago. You sell or oppose any idea, like tax cuts or healthcare, for what you claim it will do to or for jobs.
I have mentioned communists way too often, because the ideology of the principal beneficiary of the pulp deal should have no bearing on its wisdom or value. But it helps divert our attention for a change to the other side of the equation: the case for the corporate beneficiary and not just for the new workforce.
In the case of the two biggest beneficiaries of Arkansas’s corporate welfare—Big River Steel and Lockheed Martin—their side got little mention in the hurrah over the jobs that the taxpayer subsidies would bring to Arkansas.
In a moribund steel market, Arkansas welfare and tax write-offs give Big River a competitive advantage over Nucor Steel, a taxpaying Arkansas corporate citizen a few miles away. One or both now may not survive in a tightening steel market dominated by China.
A year ago, the legislature approved an $87.1 million bond issue and other subsidies for Lockheed Martin if it won a government contract to build a light military vehicle at its Camden missile plant. What the state did was assure Lockheed Martin somewhat better profits if it had to submit a really competitive bid. Alas, a competitor still got the contract. Was fattening a company’s profits a proper role for the state government? No one would argue seriously that it was, except for the jobs.
Thanks to Nixon, we no longer dwell much on the fact we are helping communists. Nixon liked to call his dramatic 1972 visit to China and the brutal Mao Tse-tung “the week that changed the world.” Indeed it was, for Mao helped him keep his campaign promise to exit Vietnam without admitting defeat, it awakened the Soviets to the need to salve relations with the United States and it began a dynamic economic relationship with China that thrives today.
Mike Beebe was governor nearly five years ago when the Chinese first said they were interested in striking a deal to build a plant in Arkansas’s piney woods to convert cellulose from timber to pulp, which workers back in China would convert to soft paper products—perhaps for export back to the U.S. someday to compete for the Koch brothers’ big market share.
Americans for Prosperity, the Kochs’ big front, was the only strenuous critic of the deal. Almost like health and food assistance for the poor, you see, corporate welfare is unholy.