Sometimes, in American politics, it can be very disconcerting to notice the jarring differences between the “spin” of public relations and the reality of public policy. One such example emerged just last week, in an economic tussle that recently broke out on the border between New York City and New Jersey.
JP Morgan Chase, one of the “too big to fail” banks that received a $25 billion TARP program bailout from the federal government during the 2008/09 global crisis, earned over $21 billion of net income last year on total assets of over $2.5 trillion. Such immense wealth didn’t deter bank officials, though, from threatening to move 2,000 jobs from New York City across the river to northern New Jersey unless Bill de Blasio, the mayor of the Big Apple, granted them hundreds of millions of dollars in tax breaks.
At the same time, the bank offered New Jersey Governor Chris Christie the identical deal: 2,000 jobs in exchange for a massive amount of tax breaks. And then the institution played one politician off against the other, and waited to see whether either one would accept the offer.
The result? One politician refused to offer the tax breaks to JP Morgan Chase, retorting that the bank’s request was “excessive” and a “non-starter.” But the other politician offered close to $200 million in tax breaks, and ultimately won the jobs.
So which politician adhered to a fiscally conservative position and turned down the bank? Was it Mayor de Blasio, a liberal progressive Democrat? Or was it Governor Chris Christie, who is currently running for President as a conservative Republican?
If you listen to political spin, you’d undoubtedly guess that the Democrat offered the tax breaks and the Republican refused to do so. But if you made that guess, you’d be wrong.
In truth, the Christie administration has offered government fiscal support to many private corporations during his time in office. And some of his decisions, such as those to support a failing Atlantic City casino and a giant insolvent shopping mall development, have not turned out well.
In all fairness, though, other states in the New York metropolitan region have made similar mistakes. In Connecticut, for instance, massive fiscal benefits to global firms like the Swiss banking giant UBS and the pharmaceutical firm Pfizer have similarly failed to pan out.
In other words, this is not a partisan issue. It’s a concern that cuts across both political parties. And what lesson can we learn from this common experience?
Namely, it is not always wise for politicians to offer massive government tax breaks in exchange for short term employment promises by private organizations. And, perhaps more importantly, voters should never assume that government officials of either political party will necessarily act in a fiscally conservative manner when such promises are dangled before them.