Wednesday, November 28, 2007

from KY to FORD: more subsidies for corporations and interest groups

From Jere Downs in today's C-J...

$60 million in tax breaks OK'd for Ford truck plant

Deal aims to keep 4,000 jobs in city

State officials yesterday approved $60 million in tax incentives for Ford Motor Co. to invest $200 million in the Kentucky Truck Plant on Chamberlain Lane. And the automaker expects to seek more state aid to upgrade the Louisville Assembly Plant on Fern Valley Road.

Great! Giving selective subsidies to certain corporations and to support certain workers in labor unions, taking taxpayer money from people all around Kentucky and bringing it here to Louisville. And apparently, they're just getting started!

The tax breaks were a key factor in Ford's recent decision to invest in Kentucky Truck, company spokeswoman Gabby Bruno said.

Of course, Gabby has to say that-- but there's no credibility in the statement. What else could Gabby say: "It made no difference in our decision; we just wanted your money"? The fact is that we never know whether such subsidies are effective-- even in the short-term.

The incentives require Ford to substantially maintain its current work force of about 4,000 at Kentucky Truck. "Hopefully it will be enough to maintain the jobs here," Aubrey L. Hayden, the authority's vice president, said before the board unanimously approved the package. "There are so few high-paying manufacturing jobs left."

Now, the jobs angle. One reason they're high-paying is that they're being artificially inflated through the taxpayer subsidy!

The average family of four in Kentucky is having $60 taken from them to finance this subsidy. And from what I can tell in the article, the job assurances in Louisville from Ford-- attached to the subsidies-- extend through 2012.

As an example, let's look at potential labor cost savings as an alternative way for Ford to save the same amount of money. $60 million with 4,000 workers over 5 years: given 2,000 hours of work per year, that works out to $3,000 per worker per year-- or a drop in average wages and other labor costs by $1.50 per hour.

The article does not report average hourly compensation for Ford workers. I thought it was in the $60/hour range. But the first article I found on Ford's recent labor agreement indicates that current workers are compensated at $82/hour. So, their compensation could be reduced to $80.50/hour...or we can just take it from taxpayers.

The state has lured new investment and secured jobs before with large aid packages. To encourage the $1 billion expansion of the UPS Worldport air-cargo sorting hub at Louisville International Airport, Kentucky granted about $52 million in tax incentives last year, said Mandy Lambert, a spokeswoman for the Cabinet for Economic Development.

Again, "lured" in the first sentence is too strong-- we don't know that. The next sentence is fine-- the subsidies are certainly an incentive to stay.


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