Vice President Biden: stimulus funds ‘would not be granted’ to relocate Jobs
On Wednesday Congressman Michael Turner (R-Ohio-3) announced that he has received an official response from Vice President Joseph Biden addressing his concern that federal stimulus dollars may have been used to fund NCR Corporation's relocation to new facilities in Duluth, Ga. and Columbus, Ga.
In his response, Vice President Biden said "the use of federal recovery funds for the potential relocation of jobs from one State to another is not an approved use of Recovery funds." Biden's letter dated July 14 added, "If the City of Columbus applied for Recovery Act funds to purchase a facility to house NCR to facilitate the relocation of jobs from Ohio to Georgia, the request would not be granted."
Vice President Biden's letter was responding to Congressman Turner and House Republican Leader John Boehner's (R-Ohio-08) letter to President Obama in early June inquiring if this was an appropriate use of federal recovery act dollars.
"The Obama Administration has finally responded to the Dayton community concerns about NCR Corporation relocation," said Rep. Turner. "Vice President Biden says no stimulus funds will be used to fund the new NCR facility. However, previous media reports and even a NCR Corporation press release announced the use of federal stimulus dollars."
Turner calls for investigation into use of stimulus funds in NCR deal
Congressman Michael Turner (R - OH) questioned Office of Management and Budget (OMB) Deputy Director Rob Nabors on Georgia's appropriation of $5 million as part of a $60 million-plus incentive package to lure National Cash Register (NCR) away from Dayton during a House Oversight and Government Reform committee hearing last Wednesday.
Turner contended that the use of stimulus funds as part of Georgia's incentive package was "inappropriate" and represented a violation of the "spirit of the law."
According to Turner, Nabors gave the Congressman assurances that he would investigate the NCR case.
"Director Nabors committed to me that he would review this specific use of stimulus dollars," Turner said. "He assured me that, if they were found to be inappropriate, the Administration would see what avenues they had to affect the outcome and the use of these monies. What we gave to Nabors included NCR's own press release, where NCR touted that the aggregate of the package offered by Georgia included stimulus monies."
Turner also asked Gov. Ted Strickland to urge Vice President Joe Biden to investigate the NCR case. Biden was in Cincinnati last Thursday, examining the use of stimulus money in the city. According to Turner, Strickland has yet to respond to his request.
"The Vice President is the one who has been charged by the Administration to act as the point person to oversee the stimulus dollars and maintain accountability," Turner said. "Since he was in the state, I knew that the Governor would have the opportunity to talk to him about the use of stimulus monies. He was just down in Cincinnati and, 50-miles up the road, 2,100 jobs are leaving the state, in part with stimulus dollars. I thought it was appropriate for the Governor to raise the issue. I have not heard whether or not he did."
According to Ohio's Democratic Lt. Gov. Lee Fisher, neither he nor Gov. Ted Strickland were with Biden during his visit to Cincinnati. Yet, Fisher stated that their response to the revelation of Georgia's possible use of stimulus funds in the NCR transaction was frank and swift.
"Right after we learned that Georgia may have used federal stimulus dollars, we communicated our displeasure and disagreement with that approach with the White House and the Administration that same day," Fisher said. "I think it's fair to say that we were very quick and direct in our response and it remains to be seen what, if anything, the Administration will do."
NCR first revealed that stimulus money was being used for the centralization of its operations in Georgia in a June 2 press release. Since then, Turner has argued that President Barack Obama's stimulus bill is being used to subsidize corporate relocation and the displacement of already existing jobs instead of facilitating economic recovery.
Such condemnations are not restricted to those of the Republican persuasion, as is evidenced by the remarks of Fisher.
"I believe that using federal stimulus funds to lure a company from one state to another is absolutely wrong and thoroughly and completely inappropriate," Fisher said. "The Governor and I have consistently condemned that and I have communicated that directly to the White House and to the Secretary of Commerce Gary Locke."
However, Fisher contended that reports concerning Georgia's possible use of stimulus money in the procurement of NCR have yet to be verified.
"I think that the first thing that has to be done is to confirm whether the newspaper reports were, in fact, correct," Fisher said. "I haven't received, at least as of this moment, any confirmation that federal stimulus funds were used. But, if they were, then I believe that that needs to stop immediately and it provides sufficient reason to take a second look at the entire transaction between Georgia and NCR."
According to Fisher, such a "second look" might force Georgia to use money from its own coffer as a substitute for the $5 million in stimulus funds.
"If Georgia were not permitted to use federal stimulus funds as incentives, they would have to, at a minimum, replace those dollars with state dollars," Fisher said. "If Georgia is prepared to do that, then, unfortunately, Ohio may not be able to do anything. On the other hand, if Georgia is not prepared to do that, we would be ready to go to the table with NCR in a heartbeat to try to convince them to stay in Dayton and convince them that their initial decision to move to Georgia was wrong."
Turner's calls for an investigation into the use of stimulus funds are being made concurrently with a growing debate over proposals for the introduction of a second fiscal stimulus. In a July 7 Bloomberg article by Shamim Adam, economic advisor Laura Tyson stated that the first stimulus bill was "a bit too small" and argued that another one should be drafted with an emphasis on infrastructure projects. In a July 9 ABC News piece by Alice Gomstyn and Bianna Golodryga, prominent investor Warren Buffet advocated a second stimulus, likening President Barack Obama's American Recovery and Reinvestment Act (ARRA) to "half a tablet of Viagra." Of course, such proposals constitute an anathema to most Republicans.
"I voted against the first one and I would vote against the second one," Turner said. "The problem with the first one is that it was not well-defined about how some of the money could be used and it was so large that it would create spiraling deficits. I think we are seeing that more in its uses. We're not seeing job production. Government doesn't create jobs. We can help support an economy that produces jobs, but anyone who thinks that the government is going to just cut checks resulting in our prosperity is going to be disappointed."
Turner is not alone is this contention. Senator Jon Husted (R-Kettering) also echoes Turner's sentiments.
Husted said, "I think that that (a second stimulus package) would be like digging yourself a hole and then deciding to keep digging. The amount of debt that we are accumulating is burdening current and future generations of Americans. We're digging ourselves into a hole that we might not be able to get out of. I don't think any upside of any future stimulus plan is greater than the downside of what it will mean for the near and the long-term future of our country."
While several voices are promoting a second stimulus package, questionable cases of stimulus fund allocations from the first plan could stymie efforts to pass a second one. Not the least of these questionable cases is the NCR relocation.
2,100 jobs and a considerable amount of tax revenue will be leaving with the 125-year-old company. In hopes of changing the company's mind, Strickland offered NCR a $31.7 million incentive package. Yet, NCR spurned Strickland's overtures. According to Fisher, NCR did not refuse Strickland's incentive package because it was inadequate, but because the company simply did not openly express its needs to the community.
"That incentive package that we offered was not based on any information from NCR because they refused to provide us with any information," Fisher said. "If NCR were to come back to us and provide us with the information about what they need in order to remain in Ohio, that figure ($31.7 million) might actually be different. It might conceivably be more. But, we cannot engage in conjecture at this point because we have no indication that NCR is willing to revisit the issue. If they are, the first thing that we would do is sit down with NCR senior executives, ask them specifically what it is they intend to do in Ohio and what they would need, and then we would be able to put together a much more customized and targeted financial incentive package that would be even more attractive than the one we initially offered."
This month, NCR began moving its worldwide headquarters to Duluth, Ga. Simultaneously, the company is transplanting its manufacturing operation in Columbus, Ga., which is planning to use federal stimulus funds to purchase a former Panasonic building to accommodate NCR's facility needs. Turner stated that, heretofore, Georgia is still using $5 million for these purposes.
"We have not heard any intention from the city (Columbus) to forgo stimulus dollars," Turner said. "In fact, at this point, I believe they are still proceeding. It's still on NCR's website."
Presently, 48 states are facing shortfalls in their budgets. Simultaneously, several of these states are seeking to curry favor with companies so that they can bring jobs and tax revenue to their respective regions. Yet, because of their deficits, they can't offer incentive packages like Georgia. Given this distinct disadvantage, both Turner and Husted fear that some states will be tempted to use stimulus money to bid for already existing jobs, citing the NCR case as a legal justification.
"Right now, there's nothing in the stimulus plan that prohibits them from doing that," Husted said. "As much as people may say it's a bad thing, there's nothing that prohibits them from doing that. There's nothing in the law to prevent states from using their stimulus power to cherry-pick jobs from another state."
"I think that Georgia illustrates the temptation to do that," Turner said. "States that have gotten in the habit of trying to buy jobs from other states will look to stimulus dollars to continue to fuel those economic development activities. This Administration should stop that because that does not create jobs. It, in fact, creates pockets of unemployment and will result in only wealthy states being the winners."
Outrage over the possible role of stimulus funds in NCR's relocation has added to mounting concerns about increasing government intervention in the economy.
"I'm very concerned that this is leading to a path of so much government intervention in the private sector that it certainly puts the freedom of our markets at risk," Turner said.
Such fears are nothing new. Similar concerns were raised when President Franklin D. Roosevelt introduced the New Deal in 1933 to mitigate the effects of the Great Depression. Not surprisingly, comparisons between the Obama Administration and the FDR Administration abound. The cover of the Nov. 24, 2008 edition of Time Magazine featured Obama wearing FDR's characteristic fedora and clenching FDR's familiar cigarette holder in his teeth. The cover dubbed Obama's economic recovery plan "The New New Deal."
Such comparisons have prompted considerable concern among fiscal conservatives, who contend that FDR's New Deal gave rise to an American form of monopoly statism. In support of this contention, fiscal conservatives cite the cartelization of the farm sector under the Agricultural Adjustment Act and the formation of technocratic boards to arbitrate production, distribution, prices, wages, and all other employment conditions.
Historically, such a marriage between Big Government and Big Business has been called corporatism, which Benito Mussolini believed to be embodied by fascism. According to Chronicles' foreign-affairs editor Srda Trifkovic, the policy professionals that surrounded FDR were preoccupied with the variety of corporatism that was implemented by Mussolini in Italy. At the time, however, fascism was not considered a pejorative term.
Of course, that was then and this is now.
Today, corporatism is viewed far less benignly. Much to the chagrin of the present Administration, many political commentators contend that a corporatist thread runs throughout Obama's ARRA. For instance, Real Clear Markets writer Steven Malanga has characterized Obama's recovery plan as a return to corporatism, citing the President's appointment of "industrial overseers" to guide General Motors' future moves as a case in point.
Turner stated that, with the government being so deeply entrenched in private industry, there's a danger of all decisions regarding the marketplace becoming politicized. The Congressman cites the situation with GM as a case in point.
"Now we're in a situation where we (the government) own General Motors, but we don't own Ford," Turner said. "If General Motors and Ford bid on a government contract, I can't imagine how Ford would believe that the government wouldn't have bias toward dealing with itself. If General Motors is bidding, it is, in fact, the government bidding. So, you're going to have a situation where the government is making conflict of interest decisions that will affect the market."
Such corporatist arrangements particularly disturb Turner, who is currently promoting a constitutional amendment to prohibit government ownership of corporate stocks. According to Turner, if the government own stock in private corporations, then it might be tempted to provide certain businesses with state-sanctioned monopolies.
Presently, Montana, Arkansas, Nebraska, Colorado, Utah, Oregon, West Virginia, and Washington also have constitutional prohibitions against government ownership of corporate stocks. Turner stated that such prohibitions are designed to dislodge private businesses from the government and return them to a certain degree of autonomy.
"There are currently eight states that have this in their constitutions because states have done what we're doing now, which is buying into private entities in hopes of bolstering their economies," Turner said. "They got burned. Government isn't even a very good customer, let alone a good owner. We don't make good decisions as investors do and the marketplace should decide what businesses attract capital and what businesses grow. This amendment would require the federal government to act in the same way. It would permit us to make loans and grants, but it would not permit the federal government to own n enterprise because what we're seeing now is that, even in decisions of what dealerships should be open or where a plant should be located, political decisions are being made instead of good business decisions. That's not good for our country or our economy. "
Heretofore, only 10 percent of the first stimulus package has been spent. That leaves a massive amount of money that is waiting to enter circulation. The prolific borrowing and fiat money creation that is necessary to support the Administration's ambitious public-works projects has prompted some fears of inflation. Husted voiced such fears.
"There is no question that there will be inflationary pressure due to the mounting debt that we have in this country," Husted said. "That will result either in inflation or very, very high interest rates that will occur as a result of trying to eliminate the threat of inflation. There are consequences to this. This just isn't free money. We're going to get high interest rates or inflation or, even for a short period of time, both. Eventually, we're going to have to pay the piper for all of the spending. We just can't afford more of these kinds of things."
As for Turner, the Congressman contends that the stimulus package is facilitating the deviation of capital from other fiscally fruitful enterprises.
"When I took economics in college, they told us that there's limited capital in the market and, when the government borrows, it's going to the same capital markets that business and industry go to," Turner said. "So, the government is the giant sucking sound of capital. It's not a capital creator. I am certain that the excessive borrowing that is happening for the stimulus is attracting dollars that could be and should be invested in other economic job-producing endeavors. In the Keynesian model, what people miss is that there needs to be times of surplus, not just spiraling deficit. "
The skepticism over Obama's stimulus package notwithstanding, Fisher contended that the plan must be allowed to run its course before its effectiveness can be properly assessed and future packages can be implemented.
"I think that it's fair to say that we need to first see how the first stimulus package works over the coming months before we can decide whether a second stimulus package would be appropriate," Fisher said. "My experience with stimulus packages is that it takes a number of months for the positive effect to be seen in job numbers and in general consumer confidence. I think we'll have a much better sense by the end of this year whether a second federal stimulus bill would be appropriate."
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