Boeing Would Have Chosen Chicago Anyway, Study Asserts

Good Jobs First, a group that's interested in the economic effects of government's policies, is having a field day with some of Illinois' efforts to lure, or retain, companies. One of the companies that made its short list is The Boeing Company; and the chronicle of the decision to move to Chicago, seen from the standpoint of Illinois and Chicago taxpayer expense, makes the case that the state and city threw away tens of millions of dollars -- Boeing was so impressed with Chicago's intrinsic assets (location, infrastructure, talent pool) that it would have chosen the Windy City, regardless the taxpayer-funded giveaways.

The study cites numerous interviews with Boeing officials, noting, at most, the limited effect the estimated $56 million giveaway as a deciding factor. A GRID article (June, 2001) contains what seems the majority opinion: "In terms of economic incentives, they were certainly one of the things the company was looking at, and all three cities provided what we would characterize as appropriate packages. We weren't making our evaluation based on which package was the biggest."

While politicians are always happy to talk about the "protection" or "creation" of jobs, the fact is, "jobs" are not a product -- they are a result of demand for a product (or service). Giving away taxpayer money does not stimulate demand for a product; in fact, it reduces the taxpayers' ability to pay for one, as a result of the reduced size of the wad of bills in his pocket. Subsidizing big companies, although a flashy pastime for politicians, also concomitantly reduces competitive opportunity for small (and minority) businesses, sectors for which those same politicians most-often pronounce their support.

Illinois' Republican governor, George Ryan (who stepped down this week), said in his radio address of May 12, 2001 (the day after Boeing announced its Chicago choice), "In Boeing's case, the consulting firm Arthur Andersen says Boeing's new headquarters will mean $4.5 billion in economic impact for Illinois. For our modest investment of $2 million a year in state tax credits on new revenue, Boeing will have an impact of more than $220 million a year on the Chicagoland region. That is a return on our investment of 110 to one. That's not bad." [Of course, that's before AA's (accounting) schemes became a public disgrace, taking the consulting side of the company down with it --ed.] That particular Arthur Andersen Consulting report has not been made public.

Greg LeRoy, Executive Director of Good Jobs First, told ANN, "This is a useful tutorial for site-location basics: studies make it clear that state and local taxes mean so much less than the basics: location, talent, infrastructure, and so on. It's true, aside from a truly marginal case -- where every other factor is equal --  that there is little incentive to relocate, based on local tax breaks."

'Why not,' Boeing might have asked, 'take the free money?' Greg implied, when he told us, "The public officials just didn't pick up on the fact that the incentives were icing; they weren't decisive."

Jeff McCourt, Good Jobs Illinois Project Director, added, "From the perspective of public officials, it's important to note that, the only reason those three cities got chosen in the first place, was that they were already winners. The incentives are a very, very small part; but it's essentially all they (politicians) talk about." [It is all politicians can do -- rearrange other peoples' money --ed.]

For all the hoopla surrounding the move, it's useful to note that we (the public) were largely in on the proceedings. Mr LeRoy pointed out that this particular business location decision was unusual in two big ways: "Boeing is exceptional: Boeing is a fortune 100 company; and [the site decision] was public," he said; "but it's illustrative of the point we try to make: there are a lot more, and more-important factors in play here."

FMI: www.goodjobsfirst.org/gjf.htm; www.ctbaonline.org;
(explanation of so many esoteric tax programs): www.econdev.stlrcga.org/default.asp?p=24