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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

September 11, 2014 at 10:10 AM

Nevada’s impossible Tesla gamble

I have hesitated to comment on Nevada beating out several states to win a coveted battery factory for electric automaker Tesla. After all, with Washington giving Boeing nearly $9 billion in tax breaks for the 777X, it might seem like a “pot, meet kettle” situation.

But there are important differences. While distasteful and bowing to corporate blackmail, Washington was maintaining and enhancing one of the world’s most important aerospace clusters, with tens of thousands of well-paying jobs and a huge supply chain. Boeing is what keeps Washington and metro Seattle as one of America’s top exporters.

Nevada is getting a battery factory and an estimated 6,500 jobs in exchange for giving Tesla $1.3 billion. The only thing that makes economic sense is the state’s massive supply of lithium, a key ingredient of lithium-ion batteries.

While a study commissioned by the governor claims the plant, if completed, would eventually bring $100 billion in “economic activity” over two decades, this is questionable. There won’t be a sizable supply chain gathered nearby. But the lost tax revenue will starve government of the ability to maintain schools and infrastructure. Richard Florida takes apart the deal here, making the points that the factory might employ far fewer people and Nevadans would be paying almost $200,000 per job.

This is a desperate state, the worst hit by the housing collapse of the Great Recession. Unemployment was 7.7 percent in June, five years into the “recovery.” Even the gambling industry is suffering, especially in Reno, near the Tesla site. So it’s not surprising that Nevada would be easy pickings for the ongoing bloodsport where corporations pit state against state in a race to the bottom.

With deindustrialization, poorly executed trade deals, a hollowed middle class and immense corporate power, this costly game is unlikely to stop. Yet combined with tax dodging and policy bought in D.C. by major corporations, it is hurting American competitiveness and the national interest, gutting our future. It is also deeply unfair to the majority of companies that can’t buy tax breaks. This is crony capitalism at its worst.

The message for Washington is a reminder that other states want what we have and are willing to shred their commons to get it. But, wait. With underfunded schools, more cuts coming to state universities, inadequate transit and budget-cut vandalism to what was the crown jewel of the state ferry system, we should also know there’s no free lunch.

Eventually, a state degrades the foundations that made it world-class competitive in the first place — and they aren’t Mississippi-level investments and government services.

Would a law stop corporations from setting state against state? Or would it take a constitutional amendment. The oligarchy would fight it. But stopping this destructive binge to mostly benefit a slice of the 1 percent would be healthy and good for business.


Thursday Reading: The Congolese miners who suffer so you can have a cell phone | Vice


 

Today’s Econ Haiku:

Costs of endless war

It’s a racket, Smedley said

Just cut teacher pay


 

Comments | More in Economic development | Topics: Boeing, Nevada, Tesla Factory

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