It’s great news that Ford Motor Co. is investing $700 million and creating 500 full-time jobs to build a new Super Duty pickup at its Kentucky Truck Plant in Louisville, where the company has manufactured vehicles since 1969.
It’s also an indication that while Ford’s committed to growing its production capacity of electric vehicles — last year it announced a partnership with South Korea’s SK Innovation to invest $5.8 billion in vehicle battery plants in central Kentucky — it’s not planning to shut down production of its gas-powered vehicles, which greatly contributed to the company’s $18 billion in profits in 2021.
With such profits dwarfing Kentucky’s entire General Fund budget, why is Gov. Andy Beshear’s administration offering Ford $75 million worth of subsidies in addition to the $355 million taxpayers have granted the automaker since 2007?
It’s not like a giant manufacturer with $245 billion in assets needs a relatively paltry $75 million to upgrade its equipment, hire workers and pay them handsomely to build a profitable new product.
Such upgrades are a common occurrence among vehicle manufacturers, not because taxpayers fork over money, but because it’s been a necessity for automakers since the dawn of the production of new model years to shut down plants and upgrade lines for updated products.
Often, the decision is not about whether but when, with union workers angling to ensure shutdowns coincide with family vacations or deer-hunting season.
For the state to offer incentives to fund upgrades and create new jobs that were going to happen anyway is the “fundamental flaw” in states’ approach to economic development, said John Mozena, president of the Center for Economic Accountability, in a phone conversation.
And, as Mozena also notes, the larger a company is, the less its decision-making is impacted by such public subsidies.
“There’s no reason that the taxpayers of Kentucky should be funding Ford’s ability to do this,” he said. “All they’re doing is helping Ford’s bottom line in the profits for its shareholders.”
Profit is good, but taxpayers adding to an already-highly profitable company?
Not so much, especially considering that the $20-$25 million in taxpayer-backed incentives that Ford can take annually each of the next three years is enough to fund the combined cost of Kentucky’s November’s election and entire budget of the Secretary of States’ office which will help administer it.
Speaking of elections — perhaps they offer a primary clue about why taxpayer-backed incentives get offered to multibillion dollar companies, even if such handouts make little or no difference in a company’s decision to expand, update or relocate.
Could it be that such announcements are more about subsidizing governors’ reelection campaigns than about true economic development or convincing companies not to leave the state?
A sign at booths manned by Mozena at conferences where he speaks reads: “Economic development subsidies don’t exist to create jobs. They exist to make voters believe politicians are responsible for creating jobs.”
He cites studies claiming that states where incumbent governors are running for reelection are “more than twice as likely” to see a “sudden large increase in subsidy spending” and that “elected officials who make subsidy deals receive more in political donations and have larger margins of victory on Election Day as those who don’t.”
Will announcements like offering Ford these incentives be enough to help Beshear survive an election challenge next year?
But at the least, shouldn’t we get the math right on these subsidies?
An analysis by WDRB’s Chris Otts concluded that Kentucky taxpayers will shell out $150,000 for each of these positions created, even though the jobs will provide barely $60,000 in average in wages and benefits.
“We should be doing the math on these projects, not just what’s politically advantageous,” I told Otts.
Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read previous columns at www.bipps.org. He can be reached at email@example.com and @bipps on Twitter.
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