racial divide in american. person whoms is the is pushing for the act of 1798. what the act does, it tries to prevent criminals him -- prevent criticism of the government and president. announcer: find that under the podcast have of the free c-span -- podcast of the free c-span radio app. >> we would like to welcome michael ferris for coming here today. we will talk about all of the economic subsidies in virginia -- what new city york city gave out to amazon. you did a study of the large-scale bidding war that did -- went around the country for amazon. what did you find? >> i found the average size of

the bid for hq to was about $8.9 billion. at least the probably available bid. so many of the bids were secret. the funny thing is if you look , at the academic research, it finds they don't actually change a firm's location decision. that means the vast majority of , the time cities and states are wasting billions of dollars every year. company -- does a host:, what does a like amazon look for? what were they looking for and what it arlington and new york city have that they would have with or without the subsidies? guest: the number one thing firms look for, and the research is clear, is a skilled workforce. that is exactly what amazon said determined its final decision. four different places said they were making the decision for virginia and new york city, in addition to nashville because of the local tech talent. host: are you saying that you

think arlington and new york city would have won if they offered nothing? guest: absolutely. if you look across the d.c. metro area to montgomery county , maryland, and across the hudson river to newark, they both offered much larger subsidies in virginia and new york city eventually offered. if amazon was chasing subsidies rather than talent, they would have located in those places. host: we want you to join in on this conversation about virginia and new york and the amazon headquarters. we went to -- we want you to: at (202) 748-8000. if you were in the eastern or central time zone, call in at (202) 748-8001. if you're in the mountain or pacific time zone, call in at (202) 748-8002. once again, you can always reach us on social media, twitter at

@cspanwj and on facebook. facebook.com/cspan. one thing we have heard talked about a lot from new york and virginia is that what they call performance-based direct incentives. what are they and why does it matter? guest: cities and states have gotten a little bit better over time in structuring how their incentives are going to be offered even though they are generally a waste of money. performance-based incentives apply that rather than giving a large cash handout, they offer subsidies based upon each individual job created or dollar of investment offered. the problem is these jobs in investments most likely would have been created without it. some of the best research at the timothy barton at the upjohn institute finds only between 2% and 25% of the time to subsidies actually sway where a firm

decides to locate. three out of every four subsidies, at least three out of every four don't actually matter and are a waste of taxpayer dollars. host: the politicians in both new york and virginia have been talking about all of the jobs, all the money, the gain in reputation their cities will get because of this decision. does that not make up for the incentives the state gives amazon for coming? guest: absolutely not. if you are at the grocery store and you are offered a free sample, the free sample is just something you get is part of shopping at the grocery store. it is part of having a skilled labor force that draws these companies to you. if you were to pay five dollars for the free sample, it would be a waste of your money and your spouse would look at you like you were crazy and say we could've spent that on the family. why did you spend it on a free sample you would have gotten anyway?

host: new york offered a much an virginiaage the dead. amazon will build the exact same amount of jobs, 25,000 in each location but new york is paying twice with virginia did. what was the difference between the negotiation in new york and virginia? guest: we will never know that because they are protected by nondisclosure agreements and all of these operations and these rooms, the deals in back rooms that are safe from public eyes. something that would help cities and states a lot in this process is to come together and refuse to sign nondisclosure agreements so that they can actually compete on the same playing field rather than have copies like amazon or tesla or boeing play them off against each other. host: do you think amazon new when they opened up the bidding process last year where they were going to put their headquarters? guest: i think they had a good idea.

i think amazon is too effective and efficient. it has grown from a humble but ambitious online bookseller, and 20 years later, it is one of the largest companies in the world. furthermore there is an industry , behind location consulting. and the decisions that go into that. i imagine amazon probably had a good idea of what they were going to be offering for -- or locating from the beginning. host: the cities of put out all these incentive packages, they never really had a chance of winning this headquarters? guest: given that subsidies most of the time don't affect the final decision of the company and given that cities have not changed that much over the course of this past year, it is not like their tech talent workforce has suddenly grown or they have suddenly become more appealing in other ways, the answer is yeah. a lot of the 238 cities ended up

wasting public resources chasing amazon. host: let's go to bob from salt lake city, utah. bob good morning. , caller: how are y'all doing? i love your show. i had a question for you. i'm curious if any of the labor unions have anything to do with moving companies to certain --as and whether or not hello? host: go ahead. caller: are you still there? host: i think we got a question. did labor unions have anything with amazon decided to go to virginia or new york? guest: as far as i know labor unions did not have anything to do with amazon's decision. en said sometimes corporate executives will use the idea that taxes are too high

or that they need incentives or some other problem to disguise a less politically correct reason to change where their firm is located. one of those reasons could be the presence of unions or moving to a right to work state. host: let's go to mike from rochester, michigan. mike, good morning. caller: good morning. my question is, do you folks ever think places like detroit ever really had a chance in this? it seems to me amazon really just wants to be near wall street and the political callers. my second point is are the losers in this deal really the winners? i will hang up and listen. thank you. guest: that is a great question. i'm so glad you asked it. that is the title of the paper we released earlier this week,

that amazon hq2 is the only competition where the losers are the winners. regarding your first question, regarding to detroit ever have a chance. with all apologies to detroit, i don't think they had a very good chance. you always have a possibility, i suppose, but from the beginning new york city and virginia have some of the highest number of tech talent in the entire u.s. furthermore, washington, d.c. offers an advantage that no other city does. the access and closeness to political policymakers that could ensure amazon is actually regulated away from growing in the future or amazon could ensure that its influence is used defensively because it is expanding into a lot of other industries, and those industries may try to keep amazon out to

keep themselves protected from the additional competition. it is slightly possible that amazon's influence in d.c. can lead to additional economic growth if the user to ensure the competition is kept accessible rather than closing the door behind themselves. host: let's go to andrew from white plains, new york. andrew good morning. , caller: good morning. thank you for having me. and thank you for c-span and , your guest. it has been a great program this morning. my question for your guest is what can be done to encourage companies to start rebuilding into the center of our country? i think back to a c-span program on infrastructure where a lady from cleveland complained saying all the money for developers is going to the east coast and west coast. she says we need some for cleveland. great point i would think. your comments? thank you. guest: we are working on

research that you can broadly look at as innovation in public spaces. we need to allow companies and communities greater ability to find the best way to coordinate to work forward. the questions over say uber a do years ago and whether or not they would be able to operate parallel the questions regarding scooters now and airbnb and housing regulations and the probability that you will have higher housing costs because of regulations in each city, and innovation and education as well. the extent that the cities at the center of the country are able to transform themselves by allowing more innovation in the things we normally take for granted like transportation or education. they will make themselves more appealing to tech companies and the growing industry going forward.

host: according to your report, the incentives all the states offered did not do any good. what is the better way for the se cities and states going forward to attract these huge companies? better education systems? better transportation? what are we talking about? what can a cleveland or st. louis do to get the companies to come there? guest: what i would say is that they need to encourage entrepreneurs to do what entrepreneurs do, which is reinvent and re-create the economy in the spaces we live -- and the spaces we live in. to build further off of your question, another thing we can look at is right now cities and states waste about $90 billion a year on economic development subsidies. that is not even counting the federal amount of waste that goes from the federal government to the local governments for

this. $90 billion a year could do a lot to stimulate local economies in more beneficial ways. we need to craft an agreement between cities and states to agree not to compete for companies relocating because it does not work. it wastes public resources and redirects them away from genuine public need like transportation or policing or education. it could actually reduce corporate income taxes. what we found was for the average states hq2 bid, you could reduce corporate income taxes for all companies across the state by 29% rather than giving one large subsidy to amazon. at the end of the day, we need to find a way to get out of this back competition, this dirty game that is wasting money. host: let's go to gina from

alexandria, virginia. gina good morning. , caller: hi. i understand jeff bezos has sevennces, like six or around the headquarters so that is a good reason for him to be located there. also, jeff bezos and the president have an ongoing dislike for each other. why would he put his headquarters in one of the red states? that makes no sense. host: what do politics have to do with this? guest: politics has a lot to do with the d.c. decision. personally, my own conjecture, amazon is looking to set up in d.c.'s backyard and become a hometown company to have regulators and politicians and policymakers look at amazon and say, oh, that is just amazon.

we don't want to overly regulate them. they are not a danger. they want to normalize amazon and policymakers' minds. -- in policymakers' minds. there is an enormous amount of tech talent in the area, but i think that is a major application or side benefit that d.c. offers that no other city could offer. and the fact that jeff bezos has homes in both new york city and washington, d.c., that is what people were saying at the beginning that this could motivate the decision. i think a corporate executive finds himself flying to a given city very often. rather than staying in a hotel constantly, he says why not go ahead and build a home in the city and have a second home? it is a signal of the company getting ready to expand into the city.

host: if you are a politician, a mayor or governor, and the state next to you is offering all of these incentives that you know you shouldn't. how do you explain it to your constituents? this is why we are not going to give to amazon or others. what is the excavation they can give? they are politicians. they need to get votes. how would you say they should explain it to their voters that this is why we are not trying to draw this company here by offering them incentives? guest: in a book, they find that is the reason why politicians offer these subsidies. if they don't work, why would you do it? politicians can't claim credit for the jobs created without offering subsidies because they -- the jobs would be created anyway. there are a lot of politicians and economic development officials around the country

that are not happy with what they were doing. one official in kansas city said i know it sounds like i'm talking myself out of a job, but there ought to be a law against what i'm doing. so how can we do this? , one idea we propose is an interstate compact. this is an agreement between the states, part of the u.s. constitution. there are over 200 interstate compacts in existence already. it gives the states away to contractually agree to do or not do something. the states can enter into this topact and say we will agree not offer economic subsidies and we will get out of this crony ward we have found ourselves in and struggling to get out of. host: let's go to kathleen from dayton, ohio. kathleen good morning. , caller: good morning. i want to encourage your viewers to go to the washington journal

segment and post this on their facebook page and elsewhere. this is an important issue. as i was out counting on doors -- as i was out knocking on doors for the dems, i purposely selected old manufacturing areas in dayton, ohio, where the housing, the access to stores, people without cars is huge. these are people -- i will use this as an example. mary frances, who retired from gm in 1997, making $17.50 an hour. i want to repeat that. she retired from gm in 1997 making $17.50 an hour. i know bezos -- we're celebrated he raised the wage to 15, but it sounds like you are describing taxpayers are basically subsidizing again a multibillionaire like they did with walmart.

110 or 15 years ago they were paying their workers or giving them under 40 hours a week so they can go get medicaid. , absolutely absurd to me, that taxpayers are paying for these subsidies. is there a way they can release these nondisclosure agreements? i want to encourage manufacturing to come to dayton, ohio, and tell trump and ivanka to close the factories in china and give these people a living wage. guest: absolutely. so what can cities and states do? i mentioned the interstate compact. a lot of states already have something on their books called constitutional gift clauses. this was research by a couple of my colleagues that will be coming out soon. most states already went through something similar like this in

the early 1800s. [cough] excuse me. there were about eight states and one territory that defaulted on their debt in the early 1800s because they have given up massive subsidies to railroads to canal building companies and ended up going into default. the state legislatures passed constitutional gift clauses that say public funds cannot be used for private purposes. but, over the intervening years, what has happened is we just kind of drift away from this in the legal interpretation of what a public use of money is. it has become more watered down to the point we are able to use anything as a public purpose. the foxconn company condemned agricultural land to say it was blighted so they can use eminent domain to move people out of

their homes to build a new foxconn plant. that is kind of an egregious example but it is the worst example of how public use has gotten watered down for private enterprise. host: what is the worst thing people can expect in virginia and new york because of amazon moving their hq2 headquarters? higher rents? worse traffic? more taxes? what are taxpayers looking at? guest: probably all of those things. higher rent, worst traffic. that comes from a city growing over time. higher taxes than otherwise would be possible certainly. even for the smaller subsidies, smaller than average subsidies that virginia offered to amazon, we calculate corporate income taxes could be dropped by about 7% instead of offering that

subsidy to one particular company. meaning that companies all throughout virginia would actually see the benefit of this and contribute to local economic development in their own areas rather than economic development in the d.c. area, which is already the richest part of virginia. host: what is the best thing taxpayers can expect now that their states have given all these incentives amazon? guest: the best thing they can expect is not from the subsidies. the subsidies likely did not change the location decision. the best thing they can expect from amazon being there is continued economic growth. i having too much economic growh growth is a good problem to have, especially compared to not having enough economic growth, as many parts of the country realize all too well.

the best thing is a continued surging economy. d.c. should take it to heart stories like detroit and other , industrial hubs around the u.s., that companies 100 years ago, 50 years ago they were booming. then the manufacturing that -- the manufacturing moved from those areas. the same thing could happen to d.c. and silicon valley. how do we keep allowing companies to innovate rather than try to hold everything down and say this is our industry and we will just rely on this industry? host: let's go to paul from fort edward, new york. paul, good morning. caller: good morning, everyone. my question involves your take on the data collection that amazon just received for free. for example the education, the , city's future expansion, tax policies, etc.

with amazon taking over many brick and mortar stores, in a way they are getting free data that other cities were not have access to. with them moving into different businesses isn't this a form of monopoly? shouldn't they be broken up? guest: i wondered if we would get the monopoly and antitrust question this morning. for the first question regarding the data, there is already a location consulting industry for businesses that would have a lot of locations that amazon already got. one of the jokes that i did make is with the special information to the extent that was not available to the general industry, amazon might be able to open its own location consulting firm with that information. but, the issue really is that amazon has got every city and state to show them their cards and is now able to command

higher subsidies as result. alabama paid about $50 million in subsidies for a distribution center in birmingham. the thing is, amazon needs distribution centers in order to service its customers. there is no real reason to subsidize something they need to do anyway. furthermore, oklahoma had just given about $2.5 million for a similar distribution center. you could argue alabama overpaid by about 20 fold as a result. regarding the antitrust question, i think it is really important. it is understandable that people look at a company getting really big and start worrying it will have too much economic or political power. being big does not by itself make a monopoly. economics has contestable markets. the economic research shows even in a case where you only have

two or three major companies servicing a particular market, that is enough for competition to ensure those companies are not able to act like monopolies. the problem with monopoly is not the size. the problem with monopoly is that the large company acting like monopolists to the extent that company is worried about competitors coming in. even if amazon had all of the online space and was completely the only online retailer, as long as it did not act like a , it would be ok. host: we would like to thank michael farren from the mercatus center at george mason university. thank you so much. guest: thank you for having me. washingtonc-span's journal is live every day with news and policy issues impacting you.

coming up sunday morning, former members of congress discuss the political climate after the midterm elections and what it means for the new congress. and one from the booking institute talks about suspicions that north korea is continuing its ballistics program. during the discussion -- join the discussion. announcer: the white house to not release a weekly address from the president this week. the virginia congressman deliver the democratic weekly address and he talked about the midterm elections and the democratic agenda. jerry from virginia. this week, i helped welcome many of the new members of congress including three incredible woman -- women from virginia.