Secret Corporate Subsidy Deals, Under Fire
PLUS: A new report on how to stop surveillance pricing.
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Back in 2018, Amazon concluded its “HQ2” search, announcing that its supposed second headquarters would be split between Virginia and New York, a choice its executives made after having a coterie of mayors, governors, and state legislators embarrassingly offer to throw billions of public dollars at one of the most powerful and profitable corporations in the world.
Rather famously, though, New York residents and a cohort of lawmakers successfully pressured Amazon to abandon the Empire State portion of its plan — which was the right call, it turned out.
Why am I bringing this up all these years later? Well, in the aftermath of the HQ2 fiasco, there was a brief moment of interest in reining in some of the tactics Amazon and many other corporations use to extract public subsidies from pliant lawmakers, which total billions of dollars annually.
On the list of potential reforms was abolishing the use of nondisclosure agreements in corporate subsidy deals — an idea that is suddenly back in the spotlight in Michigan, one of the most corporate subsidy-happy states in the country, for reasons I’ll explain below.
First, some background. It’s common practice across the U.S. for governors, mayors, state legislators, city councilors and employees of public economic development agencies and departments to sign nondisclosure deals with specific corporations when they are negotiating subsidy deals.
These NDAs prevent public officials from disclosing anything about the deal, often including the literal recipient, until it’s finished. This has the practical effect of cutting many key stakeholders — most importantly the taxpaying public — out of the process. (For those interested in even more background and examples of this practice, you can read a full-length report I co-wrote here.)
Post-HQ2, legislators in several states proposed banning public officials from signing NDAs related to economic development negotiations. A bill even passed the New York State Senate twice, unanimously. But that was as far as it got.
This week, though, the idea came roaring back, as the Michigan House approved a bipartisan set of bills to prevent public officials in that state from signing NDAs when exercising their official duties. The bills are led by a bipartisan pair of lawmakers — one a conservative member of the state’s Freedom Caucus, and the other a self-identified democratic socialist. The votes in favor of the bills were not close: One passed by an 80-28 vote, and the other was 91-17.
“Over the last several years, we have seen the increasing use of NDAs around projects that give millions of public tax dollars to multimillion and multibillion dollar corporations. It is important for us to remember that these are public dollars and that we are public officials, and that the public has a right to know how their money is being spent,” said Democratic State Rep. Dylan Wegela.
“The current practice is that in order to learn about the full scope of a project, legislators need to sign an NDA, and then doing so traps legislators in a cone of silence around said project. These nondisclosure agreements stop us representatives from fully and transparently communicating with our constituents and this practice has to end,” he added.
Wegela is one of the country’s most outspoken opponents of corporate subsidies and has done great work to advance these bills, as did his co-sponsor, Rep. Steve Carra. But part of the momentum is clearly that NDA use in Michigan is absolutely out of control and residents have noticed.
How out of control? Well, according to excellent reporting by a bunch of Michigan reporters, one in five Michigan legislators is bound by an NDA, as is Gov. Gretchen Whitmer. The Michigan Economic Development Corporation, the state’s public economic development agency, requires lawmakers to sign NDAs if they want to access details about potential business re-locations to their district, which then prevents those lawmakers from discussing the deals publicly.
As Michael LaFaive, director of the Morey Fiscal Initiative at the Michigan-based Makinac Center for Public Policy testified, the practical effect of all this secrecy is that “Residents of quaint communities such as Big Rapids or Marshall townships were effectively ambushed by the state and corporations a few years ago when they were simply told they’d be living in or near a new factory town.”
Legislators who sign NDAs are bound by them for several years, long after the political salience or potential impact of them speaking out publicly has waned. "I didn't gain anything from having signed one except learning how broken the process is,” said Michigan State Sen. Mallory McMorrow.
It’s unclear at this moment whether the House-passed bills will pass the State Senate or whether Whitmer would sign them if they did. Whitmer is one of the most prolific boosters of corporate subsidies in the country, making me skeptical she would allow these measures into law.
In fact, her administration approved $335 million in subsidies in 2023 alone per one estimate, and totals many billions of dollars across her time in the governor’s office — despite reams of evidence that this money has provided little in terms of lasting benefits to Michigan residents.
Still, it’s important to highlight positive steps toward economic development reforms when they occur. So kudos to the members of the Michigan House who advanced these important bills, and if you happen to be a Michigan resident, it’s worth your time to tell your state senator to support them as well, and perhaps prepare to push the governor’s office to do the same.
SHAMELESS SELF-PROMOTION: I wrote for the Economic Populist — our new American Economic Liberties Project newsletter — about why it’s such a big deal that New York Gov. Kathy Hochul came out in support of two key measures to reduce corporate power in housing markets. Read it and subscribe here.
SURVEILLANCE PRICING REPORT: My colleagues and I joined folks from a bunch of great organizations to publish a report last week on how to address surveillance prices and wages — i.e., the practice of setting personalized prices or worker pay based on personal characteristics gleaned from online data surveillance. You can read the report here.
Lawmakers in three states — California, Colorado, and Illinois — have introduced bills to ban the use of surveillance data to set prices or wages. You can read more about that here.
SIMPLY STATED: Here are links to a few stories that caught my eye this week.
Washington, D.C., is looking to join Illinois in regulating swipe fees, which are charges businesses pay to banks that issue credit cards.
The Virginia legislature approved a ban on junk fees, but it’s unclear whether Gov. Glenn Youngkin will sign or veto it.
My colleague Mark Ellis wrote an excellent op-ed explaining how monopoly utilities get away with constantly hiking prices.
Denver adopted a new ordinance to limit the number of new gas stations.
Legislators in several states are working to regulate cryptocurrency ATMs.
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— Pat Garofalo