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John Morris

The really interesting thing is just how few people this huge mill will actually employ-- 2,700 and you have to figure that continuing steps towards automation will reduce that number.

The best explanation for the incentives is public choice theory. Its a huge upfront investment with a lot of construction jobs at the front end and a big ribbon cutting oportunity for politicians.

Jeremiah

2,700 jobs in that plant, plus jobs in the supporting industries to supply the plant, plus the jobs in service industries, housing, retail etc that will come to meet the needs of 2,700 new steel jobs.

But to answer the question; could we have competed if we hadn't spent nearly 2 billion dollars on other worthless crap? No, not a chance. Alabama is a right to work state Pennsylvania is not and the cost of doing business associated with that reality are going to discourage anyone who relies heavily on unskilled labor from giving the state a serious look.

John Morris

The other reason- Pittsburgh could never compete for stuff like this is that we are no longer well geographically positioned to supply steel to the American Auto industry, which is clearly moving to the south. We are positioned well to serve the Midwest auto plants and that's a fading thing.

John Morris

Sam, as much as I don't like this-- the cash subsidies are not 2 billion. The billions come from tax breaks-- letting the company keep it's earnings. Basically, the employees and other related workers in the region will be taxed. All corporate taxes are really taxes on workers, investors and customers.

The most interesting thing here is the major logistical bet ThyssenKrupp is making that the bulk of their customers will be located in the South. This is a self reinforcing thing-- easy access to steel may inspire more auto plants in the general region.

C. Briem

Honestly I think you are missing some of the trends in the global steel industry… or at least not realizing how much things have changed in the last decade. China is indeed the answer, but are you sure of the question? China’s demand for steel has pushed up the price of steel the world over. More telling: US Steel stock has gone up more than 10 fold in just the last 4 years. 10 fold!! There is plenty of steel investment going on and even Edgar Thompson had been hiring some. There is a reason ThyssenKrupp is investing and it is telling they are doing so in the US anywhere. Why not in the Ruhrgebeit? It’s probably not the incentives as you imply. The incentives were probably not the key to the decision to invest in the US.. but only important to where within the US. Big difference.

And to the commenter who that thinks modern steel production needs unskilled labor these days.. you need to look inside a modern steel plant.

But think how screwy these comments are. You can't have it both ways and blame Pennsylvania not being a right to work law state yet still decry the scale of incentives needed to bring the plant to Alabama. That and consider all the other right to work states that were not even considered for this project. Why is that? Many would have been more than willing to put up similar incentives I am sure. The site selection issues for big steel are not labor costs. Even if local workers had been willing to work for minimum wage steel would have left Pittsburgh as it did. It is revisionist, or self-serving, to portray otherwise.

But on Alabama’s incentives: If you think the return on this public investment is negative, then you have to ask yourself why they do it, and in particular why they keep doing it. Alabama is pretty happy with the projects it has been able to attract over the years with these. Most with equally extravagant incentive packages (Mercedes, Honda…). They have been doing this now for decades so they know both the short and long run costs. Are they just misinformed or confused? Have these incentives been bad for them in particular, or bad for us collectively. That is the question. Bashing Alabama’s decision to offer incentives in and of itself is not very helpful.

That is not an endorsement in any way of incentives (more: http://www.post-gazette.com/pg/06017/640137-28.stm), but you have to address this type of ad hoc tax competition at a higher level then why any individual state or municipality makes these offers. They have little choice but make these offers because everyone else is doing the same. If you want these incentives to go away you need to stop them at a higher level and redress the playing field that forces governments into this situation. Funny how it's not the same people decrying the incentives who are pushing for that kind of reform. Why is that?

condos and steel plants.... sigh... there is an analogy that make little sense in scale, motivations or costs.

Sam M

Chris,

I am not at all sure what you are so jacked up about here. Your entire first paragraph: What makes you think that I am unaware of these developments. I didn't state them directly. But I didn't state lots of things directly.

I mentioned China because so many people I know--many of them from my hometown, which remains heavily reliant on heavy industry--sing one single note when it comes to economic malaise: China. A few years ago it was Mexico. A few years before that, it was Japan. Clearly, a lot of jobs are going to such places. But not all of them.

And someone else mentioned in the comments about the American auto industry heading south. I think I mentioned that in the post, too.

As for Alabama's history of incentives for labor, I have posted on that before. Linking quite recently to an extensive article about it. I'll look around.

And as for this:

"condos and steel plants.... sigh... there is an analogy that make little sense in scale, motivations or costs."

Well, thanks for repeating EXACTLY what I said. If you read it closely, I ask whether our hudreds of millions could have been used for a similar project. Or even this same project. I know a lot of people who would answer "yes." And a lot of people who would love it to be so. I am not one of those people. And my answer, I believe, was "no." In fact, I think I said "obviously" no.

Maybe you think only a real jackass would take a look at how different regions spend their development dollars. Or mention that a one spends those dollars in one fashion, while another spends them in a completely different fashion. And perhaps you think that any attempt to look at them in the same space amounts to drawing a direct "analogy" between them. Or that it is completely ridiculous for someone living in "Steel City," a place still infatuated with the stuff, to note an ENORMOUS development within that industry.

Fair enough. I plead guilty.

C. Briem

ok.. but some important points in the first paragraph are just incorrect. Let's just take "And that Big Steel ain't coming back in America." If nothing else the Alabama project is proof enough that it isn't true. but it's not the only project. I can show you maps of new steel plants in the US over the last 30 years and there are plenty of them. (surprised?) I used to have some maps online showing them even, but I honestly can't find it at the moment. I will dig them up.

Now I have reread your post and I still think it tries to say that China is the reason for steel going away. I infer (because as you say, you don't go into it) that that this is an argument based on the supply of steel from China... sort of analogous to story that it was Japanese steel which killed off the steel industry in the 80's.. a story which is only partially true anyway. The argument is backwards when it comes to steel. It has been the demand for steel from China that has been reshaping the industry globally. Again, I refer to the unbelieveable increase in value in old steel firms even including US steel. (stock from $9 to $111 in just the last 4 years per my quick check.. apologies for not checking for any splits). But the Chinese impact is not the same as the impact of Japan... or mexico or wherever. The story you hear from people in other industries losing their jobs to Chinese competition is probably the case for their industries, but you can't skip and say that just applies to steel because it sounds good. American textiles did mostly go away because of Chinese supply... but for steel the impact has been the opposite. Why has US steel stock become so valuable... why is there new investment.. why has the price of steel gone up so much? The reason so many lost their jobs in other industries to the 'china price' is because they were making stuff so much cheaper than we could, yet in steel the commodity price has been shooting UP. You just can't mix and match industries like that. It makes no sense.

and I do not think I said the same things you said about incentives. at all. The people who oppose incentives invidvidually as you do are typically on the opposite side when it comes to actually dealing with the problem comprehensively. I would be curious where you stand on the issue brought up in the case of Cuno v. DaimlerChrysler? I don't want to put words in your mouth, but I take Libertarians to mostly have been opposed to the idea that such incentives were unconstitutional and should have been left standing... the view the court took de facto (for the lawyers out there, I know they actually took issue with taxpayer standing). If the court had ruled in a different way, the Alabama incentives would not have happened because they would have been deemed illegal. It's an odd juxtaposition of views.

Sam M

Regarding "Big Steel ain't coming back in America."

I prefaced that part with "What you hear is that..."

And i do hear that. All the time. And the arguments all involve cheap Chinese labor. Or slave labor. Or meddling Communists. Etc. Which I think you can see spun out in steel tariffs and all the rest, despite the fact, which you point out, that USX is doing quite well. And that mills are going up in the US. Maybe I wasn't clear enough. But I was not trying to say that Big Steel's woes, such as they are, are China's "fault."

"But the Chinese impact is not the same as the impact of Japan... or mexico or wherever. The story you hear from people in other industries losing their jobs to Chinese competition is probably the case for their industries, but you can't skip and say that just applies to steel because it sounds good."

Yes. I know that. But that does not make one bit of difference to the barstool banter. In that realm, it is all the same. Some crazy "oriental" willing to work for six cents an hour. Or work 23 hours a day.

I agree. That's wrong. And I think this new plant in Alabama proves that. Maybe $50,000-$65,000 per year is less than the USW would want, but it's a hell of a lot more than six cents an hour. Which means that the "cheap labor" charge against China, writ large, cannot completely explain the loss of manufacturing jobs. They explain a lot. But not everything. And still, the plant is going up. Same is true of the Honda, Toyota and other plants you mention.

As for Cuno, is it done yet? I thought it got tossed back to Ohio on standing grounds or some such.

But yes, these sorts of cases pose a real conundrum. Libertarians are living in a non-libertarian world, and changing thigs for the better usually entail giving something up. I think the party line (Not Libertarian Party, but the generally classical liberal line) is a desire to eliminate the destructive and wasteful "everyone does it" status quo. But in doing so through cases like Cuno, you end up opening every line of state and local tax codes to litigation from taxpayers in other states. Which would obviously be unworkable. As usual, that people at Cato have tried to figure out the playbook here:

http://www.cato.org/pubs/scr/2006/denning.pdf

CB

I dont undertand.. if you know the common wisdom is not right, why use it as a premise for your argument?

and I know CATO's stance. I would not be surprised if they filed an amicus brief and I am too lazy to look up whether they did ot not. They clearly liked the Cuno outcome (which as I said was tossed ostensibly on taxpayer standing issues...) which puts them on the side of enabling the incentives you decry.. in particular the large state incentives which deserve the most ire. It's pretty symbolic I think. Incentives bad they will agree, but don't even think of trying to prohibit them. It's just odd. Like they want governments to just spontaneously start acting irrationally and stop offering incentives while everyone else does. Kind of a public good problem in reverse.

Sam M

"I dont undertand.. if you know the common wisdom is not right, why use it as a premise for your argument?"

I don;t think I did use it as the premise of my argument. I established it as the CW. Which seems a fairly standard rhetorical device.

"On Issue X, I hear lots of people say this one thing. Only Development Y seems to indicate something else."

Or, "I hear a lot of people saying Big Steel is going to China. So perhaps this $3.6 billion steel mill being built in Alabama is worth considering. What does it mean? How is it different? Could it have happened here?"

I don't know. It doesn't seem like that mich of a stretch to me.

As for Cato and Cuno, like I said, it is not the only issue that puts libertarians in a bind. The very issue of tax incentive financing, for instance. Libertarians are for lower taxes, right? Well, telling select businesses that they do not have to pay certain taxes amounts to lower taxes. But... eh. Not so much.

And that's nothing compared to the battles going on over intellectual property rights.

And in the Cuno case, from what little I understand, I don't think the Cato types are "in favor" of incentives. I think they are more opposed to the whatever alternative Cuno could have put in place.

But I do think that many of the people in the libertarian camp agree with your assessment.

Sam M

Chris,

Here's more libertarian handwringing about economic development. Different issue but similarly problematic, in this case involving the whole "states rights" sort of thing:

http://www.reason.com/blog/show/120281.html

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