On Oct. 9, Governor Andrew Cuomo announced the expansion of two firms — JMA Wireless and Bankers Healthcare — in the Syracuse area. The expansion, along with new and revitalized downtown facilities, has promised to bring new jobs.

Although this expansion has the potential to be quite beneficial to the local economy, it also comes with a cost — specifically, $11 million dollars in capital grant money and tax credits: the total sum which the state of New York has provided to both projects. While the promise of new jobs and a boost to the economy is certainly a tempting one, it cannot come at the expense of taxpayer money, which gives them an unfair advantage in the marketplace and is not worth the risks it poses.

The firms exist in industries which are currently on the rise. JMA Wireless is a high tech firm which, according to Syracuse geography professor Tod Rutherford, an expert on the labor market, is transferring jobs from places like Maryland and Texas. Bankers Healthcare is a high-end financial services firm.

These sectors of the economy have been growing quickly over the past ten to fifteen years. The amount of business done outside the local economy, and the degree to which local suppliers are hiring people locally must be accounted for when judging how beneficial these investments will be to the local economy, Rutherford said.

Both of these factors inform something called the “multiplier effect,” which Rutherford said “looks at the number of jobs that can be created given a certain amount of investment in the local economy.” If the multiplier effect is high, that means that a multitude of jobs were created from a comparatively small sum of money and that a lot of business was done outside the local economy.

This all bodes relatively well for these industries — JMA Wireless, specifically, has received tax credits before in Syracuse and has a relatively good track record, and both the financial services and high tech industries have been growing.

The problem is accountability, which cannot be guaranteed no matter how impressive the track record.

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“One of the big challenges is that firms may say they commit to 1,000 new jobs, but if there is a downturn in the economy, they can only create 200,” Rutherford said. “It is difficult to predict what the future will be.”

This is to be expected. Any investment represents a risk at some level and as far as investments go, this particular one represents a relatively low risk, with a relatively high potential for return on investment.

The problem lies in the principle that these investments establish. This is not a private firm using its own resources and capital to expand its firm and add new jobs to the area, something which would not pose any moral dilemma. Rather, this is a private firm using public resources to expand its business. While the impacts could ultimately be either harmful or beneficial to the community as a whole, it gives these companies unfair advantages over others in the area.

It is not the role of the government to play favorites with companies, even when such companies are in industries on the rise and have the potential to create new jobs. Taxpayer money should not be used to aid in their expansion, whether or not new jobs are created, as it is ultimately a form of corporate welfare that comes at the expense of welfare for impoverished individuals who actually need it.

When the government gives money to any company, no matter how big or how small, they are playing a very dangerous game. They are propping up companies with the money of those who did not specifically consent to fund these companies in the first place. While this makes sense in the case of infrastructure, transportation and other public goods that benefit a wider swath of residents, to allocate it to specific corporations and lift from them the burden of having to invest the money and create the jobs themselves uses public resources to play favorites with private entities, which is an intrinsically unfair principle to establish.

As Rutherford points out, this sort of thing happens all the time, especially with defense contracting, part of the military industrial complex, which is perhaps the most egregious example of such. But as beneficial as the impacts can be, it is the principle that is flawed.

Accountability for these companies is a requirement, to ensure that they ultimately do create the jobs they have been tasked with creating, but it is also somewhat irrelevant whether they do or not given the possibility that the investment could have ended poorly in the first place.

Taxpayer dollars should be used for public goods and resources, not to aid private entities because of the potential for good that such aid will have.

Nicholas Cassol is a freshman newspaper and online journalism major. His column appears bi-weekly. He can be reached at nrcassol@syr.edu. He can be followed on Twitter at @CassolNick. 

Published on October 30, 2019 at 12:39 am