Slaying the Amazon Dragon…and Jeopardizing the 2020 Election?
When it comes to walking off cliffs, progressive Democrats in New York could show lemmings a thing or two.
They are exulting over their “victory” in torpedoing Amazon’s plans to bring 25,000 to 40,000 high-paying jobs to New York City. The progressives have dealt a sharp blow to the city’s hopes to become a major tech center. They have also handed Republicans a club for pummeling Democrats as anti-business fanatics in the 2020 elections.
State Senator Michael Gianaris and City Councilman Jimmy Van Bramer spearheaded the campaign against Amazon, but Representative Alexandria Ocasio-Cortes helped to galvanize the opposition, too…even though the Amazon headquarters would not have been built in her district. All three displayed a reflexively anti-corporate mentality, which could come back to haunt Democrats.
Sen. Elizabeth Warren’s post-mortem comments could also serve as good ammunition for the Republicans. Donald Trump has already started to label Democrats as “socialists”. That’s absurd, of course, but these progressives’ actions and remarks could play into his hands.
The progressives were also arrogant, defying polls that showed that 57% of voters in New York City and 60% in Queens supported the project. Approval of the Amazon deal was particularly high among minority voters, who seemed more interested in getting jobs than tilting at windmills.
A Major Setback for New York
The defeat of the Amazon project is a huge setback for New York City’s economy, which still depends heavily—too heavily--on Wall Street firms. Mainstream, business-friendly Democrats, like Gov. Andrew Cuomo, realized how high the stakes were: by attracting Amazon’s second headquarters, they could help establish New York as a leading tech hub. They understood that tech, not finance, could be the key growth engine for the city and state. Even Mayor Bill de Blasio, a loudly self-proclaimed progressive, promoted the Amazon project as critical to the city’s economic future.
Banks and other finance firms will not be the source of much job growth; the world has changed since 2008. Banks remain very profitable, and they provide a lot of well-paid jobs in the city. But financial companies have focused relentlessly on cost-cutting as their margins have declined permanently, because of changes in market conditions and regulation.
They have shipped thousands of jobs out of NYC to cheaper locations. In the most recent example, asset management firm Alliance Bernstein is transferring most of its operations to Nashville.
Various commentators have pooh-poohed the impact of the Amazon debacle, pointing to Google and LinkedIn’s presence in Manhattan. However, Amazon’s 25,000 to 40,000 NYC employees would have dwarfed those companies’ teams. To put this number in context, Goldman Sachs employs about 36,000 people worldwide.
Amazon’s arrival would have been a game-changer for the city’s tech sector, which focuses heavily on banks and advertising. The move would have created critical mass and breadth for the tech industry in New York. Building a headquarters in Long Island City would have been a much-needed boost for that neighborhood.
Why Did Progressives Oppose the Deal?
State Sen. Gianaris and Councilmember Van Bramer originally supported New York’s bid to attract Amazon. However, they switched sides after the details were announced. Why would they want to turn down so many jobs?
These may have been the key forces at work:
Criticism of the $3 billion incentive package
Amazon’s anti-union stance
The company's somewhat arrogant attitude toward the opposition
Personal pique and grandstanding
Unfortunately, Amazon is fiercely anti-union, and company representatives reaffirmed that in a public hearing, which was not an astute public relations move. However, labor unions could not have harbored any illusions about organizing highly-paid, white-collar workers. How many Wall Street bankers and traders do you think belong to a union? The real targets were probably an Amazon warehouse on Staten Island and Whole Foods stores.
Several unions supported the deal, but the progressives may have felt pressure from the others. Van Bramer specifically attacked Amazon for its anti-labor stance. In any case, labor representatives seemed to have miscalculated and overplayed their hand.
Opponents also criticized Amazon for not reaching out enough to local politicians and residents. The company probably could have waged a more thorough campaign, but consider this: Sen. Gianaris and City Council Corey Johnson turned down multiple requests from Amazon for meetings to discuss the project. Instead of exploring possible compromises privately, Johnson would only hold public hearings, which became highly confrontational.
Gianaris and Van Bramer and others may also have been miffed that they were not included in the original negotiations with Amazon. However, Cuomo and de Blasio were competing with dozens of other cities. They could not hash out the terms of the offer with a broad group of politicians and take the risk of leaks.
Corporate Giveaways….or Smart Competition?
New York offered about $3 billion in incentives to Amazon. That was a generous package, but New York was competing with locations that were more obvious choices. Crystal City, Virginia, the other winner in the competition, is essentially a huge office park. It is close to Reagan National Airport, a major highway, and large swaths of suburban housing. Even with these advantages, Crystal City offered Amazon about $800 million in the form of tax abatements.
The New York project was visionary and the logistics were more complicated. Amazon planned to spend $3.6 billion to build its headquarters in a dingy part of the Long Island City waterfront. In addition, New York’s combined city and state tax rates are among the highest in the nation.
The plan’s opponents attacked New York’s package as an expensive “give-away”, but that’s misleading. Most of the incentives--$2.5 billion—consisted of a reduction in Amazon’s tax rate, not cash payments. The plan also included a $500 million cash contribution to defray part of the project’s cost. Basically, Amazon would pay a 10% lower rate for several years, but it would still pay taxes. Furthermore, the lower rate was conditional on Amazon’s fulfilling its pledge to hire at least 25,000 workers, with an extension if that number increased to 40,000.
As Gov. Cuomo put it, “The government would effectively reduce their [Amazon’s] $1 billion payment by about $100 million for a net to New York of about $900 million. New York doesn’t give Amazon $100 million. Amazon gives New York $900 million.”
Cuomo noted that Amazon was committing to an annual payroll of $3.75 billion in New York. The governor estimated that Amazon would pay the city and state about $27 billion in taxes over 25 years, for a 9 times return on the $3 billion "investment". Even if we haircut that by 50%, the return on investment would be about 5 times. That’s not a bad deal for taxpayers.
Ocasio-Cortez and Warren Muddy the Waters
You would not know that from comments made by some high-profile Democrats. Their comments indicated that they did not understand the deal.
When Amazon abandoned the project, Alexandria Ocasio-Cortez crowed that the opposition had “defeated Amazon’s corporate greed, its worker exploitation and the power of the richest man in the world”. She didn’t seem to care much about the lost jobs.
Later, in another one of her gifts to Republicans, AOC wrote:
“If we were willing to give away $3 billion for this deal, we could invest $3 billion in our district ourselves if we want to. We could hire more teachers, we can fix our subways, we can put a lot of people to work for that money if we wanted to.”
AOC apparently did not grasp that most of the $3 billion was not cash. You cannot “invest” uncollected taxes to fund subway improvements. Well, after all, AOC worked as a bartender, not as a financial analyst, before entering politics.
Sen. Elizabeth Warren also rejoiced over the deal’s collapse, tweeting:
“@Amazon one of the wealthiest companies on the planet – just walked away from billions in taxpayer bribes, all because some elected officials in New York aren't sucking up to them enough. How long will we allow giant corporations to hold our democracy hostage?” Like Trump, Warren has a talent for issuing eye-catching but inaccurate tweets. “Bribes” are hidden, illegal payments or gifts for individuals or companies—not highly publicized, duly authorized tax incentives.
After the deal cratered, Mayor de Blasio switched sides and attacked Amazon in a New York Times Op-Ed column, demonstrating his gift for burning bridges. De Blasio presumably is trying to demonstrate his progressive bona fides. The mayor has not discouraged speculation he might run for President, though it’s hard to see any groundswell for that building in his hometown. In any case, his fierce criticism of Amazon reinforces the picture of an anti-business Democratic party.
A Lost Opportunity for Queens
Critics also castigated the project because it would put pressure on the subway network, which is stressed, and it would increase rents in Long Island City. However, the government could have spent some of that $27 billion in taxes to improve the subway and provide rental subsidies for low-income tenants.
The alternative to development is stagnation. New York is constantly tearing itself down and rebuilding, and Long Island City should not be an exception—particularly because the area needs a shot in the arm. The progressives’ whining about gentrification is misguided. This is not some quaint, undiscovered corner of the city; the status quo here is not worth preserving.
Parts of the neighborhood have improved over the last few years, but most of LIC is still scruffy. There is a thin sliver by the East River that is filled with shiny apartment towers and a graceful promenade. The views of Manhattan are phenomenal.
Apartment Towers in Long Island City
But this is a small slice of Long Island City. If you walk two blocks away from the river, you find yourself in a drab, gritty neighborhood.
The proposed site is an inspired location. The property faces the river and is just a block above the spiffy new residential towers. But the area is a dump. The site is occupied by a dilapidated, abandoned pier and parking lots for two City agencies and a business. People, not trucks, should enjoy these views.
The area close to the site is scruffy, too. A block behind it, several local businesses are shuttered, including a forlorn “Gentlemen’s Club”. There is not much street life away from the waterfront. Amazon’s headquarters would have increased property values, but that’s seems a fair price to pay for economic development.
Unless, of course, a politician doesn’t care about job growth. That is not a winning message for Democrats in 2020.
The Wall Street Democrat