 Welcome back to the FeeCast your weekly dose of economic thinking from your friends at the foundation for economic education My name is Richard Lawrence, and I'm here today with our panel. We are back from a week-long hiatus We've got Anna Jane Perrell Dan Sanchez and Mary Ann March. Welcome everybody fully fleshed out panel It feels like it's been a long time since we've all been in the same room together again. You guys look beautiful Well, thank you But most importantly Dan's beard looks beautiful beard watch 2018 continues I'm reporting live from the scene, and he looks fantastic, and now we're in no shape November. Oh, yeah So are there any plans at all to? Dispense with the beard once November is finished or maybe later probably the no when it gets warm again Okay. Well, it looks great. Yeah, it's mostly for insulation Here in Atlanta, you know depends on the season whether we actually need that or not But it seems like it might be a little bit of a cold winter. Yeah, I think so Speaking of winter of course now. We are past Halloween. I just took my Halloween decorations down yesterday Oh boy, it's been a little while Well, we had the lights up front that were not specifically Halloween, but they were close enough So the orange kind of gave it away a little bit But anyway, we are now fully halfway into November the holidays are approaching very very quickly. I am Gonna have in-laws here in Atlanta, which is gonna be awesome And it also means the beginning of the holiday shopping season is upon us temptations are everywhere They are coming at us fast and quick from you know every direction on the line It seems like yeah, Mary and I were just talking about right before we started filming We're just talking about hair curling irons like I just buy a new one. Yeah season for buying Yes, it is and it seems like Black Friday has been around with us for a couple of weeks now at least I keep getting emails about Black Friday, and I thought that was only one date Right after Thanksgiving, but I suppose it isn't anymore. They're trying. I've heard reports though that This holiday shopping season is not going to be what it was in the past. Really? Why is that? I Think a mixture of things. I think people are just used to buying online. We don't have these special Occasions that we go to the malls for for anymore. So yeah Amazon was kind of punished by investors But because it anticipated that the holiday season will be a little bit soft Baked into the stock price a softer holiday. Well, they did not have a very soft holiday at all in China The biggest retailer there Ali Baba for singles day recently had quite a nice haul. Yeah, they there's a Holiday called or at least it's a marketing holiday called singles day where Single people are supposed to console themselves by shopping online Fully I'd known and it was huge. It was in the tens of billions in a single day and All the Bob is actually bigger than Amazon. It's the biggest online retailer in the world Yeah, I've heard a couple people use it, but I you don't use it, right? No, I don't I've never used it I want to now after Dan told me that story. I was looking and there is cheap beauty products Oh, really fake eyelashes for $2. So the real question is do they also have an English language website? Yeah, it was an English I went on it. So Google or somebody worked that out for me Google knows Well for most of us for the rest of us who you know might not be as adventurous to go to Ali Baba's website We do have our favorite online retail retailer and that's Amazon of course which I will be shopping through and Yeah, oh, I love Amazon and I used to be like the biggest like a hater of it Just because the interface really crossroads me as an online shopper. I just the interface. There's like eight different types of fonts There's a bazillion links. I don't know where the photos are coming from. It was just very confusing But honestly, I've really gotten sucked in lately as of the last like six months I buy if if I need anything I just check if it's on Amazon now. I don't even I don't even check anywhere else I literally buy everything from Amazon and I think we were saying in a previous feedcast that you could even if you were so inclined by yourself one of those containers and Make it a home like they sell it as like a home. Oh like a shipping container like a shipping container Yeah, I did not know that I don't really I don't really shop on Amazon. Yeah, you don't even have Amazon Prime I'm one of those weirdos. That's insane to me. You're missing so many good TV shows if nothing else Well, our producer Pavel was telling me that he has Prime But he doesn't buy anything from there and took me a second to actually understand what he meant by that He just watches the shows, right? But even though you have the free two-day delivery, I guess yeah Pavel That's really weird. Yeah Subjective value. Well, I suppose that's true. Yeah, well, so of course, you know, it's not only Amazon season because that's where many of us Are getting our holiday gifts from not all of us Zulily Zulily.com. I like a deal and I'm sorry I'm a target girl I get I have my own target red card So I get free shipping and it's cheaper. It's cheaper a lot of times than Amazon So yes, I thought my nose at Amazon. That's surprising. Well Many US cities have had their noses Thumbed at or Amazon has thumbed their noses at them. Let's say that because Amazon just wrapped up a Search for their location of their vaunted HQ2 They were looking over 14 months across the US and Canada among 240 cities For where they would cite their new headquarters. One of which was Atlanta. One of us was Yeah, and Atlanta did not get it and we'll talk a little bit about maybe some of the Good effects of that in here in a moment, but some other sort of factoids about the 14 month search They were looking for a location for of course their second headquarters because they're based out of Seattle and They were identifying a location where they could cite 50,000 high-tech workers. So these are 100 100,000 plus jobs that they were going to put into a single location at first However, what ended up happening is that they selected two locations They selected Crystal City, which is a neighborhood of Arlington, Virginia Which is literally right across the Potomac River from Washington, DC a very crowded place traffic-wise Which will be interesting to see how they tackle that they also selected Long Island City, which is Close by to Queens It's you know part of New York metropolitan area and they are now going to split their 50,000 new workforce that they're citing there between those two cities So about 25,000 in each place and all of this was done behind the scenes similar to all the other bids including Atlantis and They've just begun to now release the details of what these various Municipalities and states were actually promising to Amazon where they to locate in their respective places Yeah, the number I found was an incentive package of a total of 3.4 billion between both New York and Virginia So what do you mean by incentive package? There were performance-based direct direct incentives in New York of 1.5 billion of 295 million in Virginia Excuse me 573 million in Virginia for performance-based direct incentives and that's just so what are those you mean like tax breaks? Or do you mean like is that what that means tax credits, but also cash grants So cash grants meaning literally the city will just give them money and also promises to beef up infrastructure in the case of Crystal City to have a connector bridge built between the National Airport and the city and that's part of that figure That's part of that for 3.4 billion right okay interesting. He said tax tax cuts cash grants What else are we looking at? I mean in terms of I feel like some of those are kind of different right for talking about the different benefits Well, I mean, I'm gonna be able to give Yeah, so let's take a step back real quick because I think this is an interesting sort of way to introduce what actually happened So from Atlantis perspective, they just released the details of the incentive package today it included everything from direct cash grants from Tax breaks tax credits They were even going to put a special Amazon executive lounge together at the Atlanta Airport They were going to have some sort of dedicated Amazon Marta car on the train that goes from the airport to this to nowhere Yeah, pretty much to nowhere else and in fact the interesting story was I read recently that The Amazon advanced team when they were coming from the airport to the city Ended up going on a Marta train that broke down on its way So the truth comes out in auspicious Beginning to that examination, but all these you know, it's interesting You know you get the big numbers you get the billions of dollars and millions of dollars when it comes to these cash Incentives, but then you also get these interesting little, you know things like they were gonna open up a special training academy for Amazon employees Here in Georgia and on that it actually said cost incalculable TBD, oh, so the number was just that great Later, we'll make it up later. We're filling the actual details But these are all in many ways different tools inside the local and state legislator Toolbox for attracting companies to their states, right? I mean this this is not a new thing Amazon just happens to be one of the biggest Entities that's ever looked at getting these sorts of incentives. They're the bell of the ball. Yeah, except for you You're a zoo lily lady, so I don't know I'm not gonna let you live that one They're gonna overthrow the Amazonians any day now the zoo lily ends well, and so There are a lot of different opinions on this and we'll get into this in a little bit there are people who believe a that these tax credits and incentives otherwise are Corporate welfare, right? So they believe that well-placed people are Gaming the system getting special treatment from legislators and politicians otherwise and then there are people who believe, you know, whenever there's decrease in the tax burden that the government levies on Company or an individual that that's that's just and that's fine And so I want to get into that a little bit here in a minute one of the interesting pieces of information I want to launch that with is My friend Michael Farron at the Mercatus Center based out of George Mason University and his colleague and Phil pot They wrote recently Amazon HQ 2 is the only competition where the losers are winners Where the losers are winners and he's basically they're arguing that because of various things, you know targeted subsidies don't actually create growth Because they believe it's crony capitalism And they provide a lot of data that essentially says tax incentives are not the reason that companies select certain venues to put their Companies to open their offices. They basically do it for every other reason proximity to a highly skilled workforce a good public transit system an Airport that can get you from coast to coast and elsewhere. Yeah, just as an example New Jersey offered an Amazon five billion dollars with another two billion from Newark and Maryland offered eight point five billion yet Amazon picked them both over to pick their neighbors. So it just goes to show that it's not all about and that's like in tax And that's in tax incentives and things like that interesting Yeah, and so it's my opinion that I agree with with the authors of the of the Mercatus piece that it's crony capitalism but Dan you and I were talking a little bit before the program and you might have a little bit of a different perspective And we'll see if the fur flies here in a moment Yeah For me, it's not so much about Equality as it is about justice So There's this great quote from Murray Rothbard He says equality of unjust treatment can never be upheld as an ideal of justice Therefore he who maintains that attacks be imposed equally on all must first establish the justice of the tax itself And I think one way of thinking about that is to think about other issues of justice So for example drug prohibition that you know a lot of libertarians. We think that drug prohibition is unjust so let's compare let's say that there was this rich neighborhood where maybe the the people are friendly with the local police and They never get busted for their drug use and the poor neighborhood does and so Along the lines of just like well everyone needs to be equal and nobody can can have special privilege because of special Relationships then you might argue that okay Well, they the rich people should be rated for for drugs to even it out but really it's it's the fact that the the poor neighborhood should be extended the the benefits of that and in the best-case scenario or in the But the worst-case scenario would be to equal it out towards injustice Well, and so I agree with you on the drug case for sure And in this case, I would say I actually agree as well because Here's the thing. I I agree with Murray Rothbard with what you said there that Just because a tax is spread equally or distributed equally among everyone doesn't make it any more just than it is if it were targeted or whatever Totally agree with that. However, I think one of the things that and you can pipe it I don't know if I agree with that What from a policy standpoint, you know, let's let's talk maybe a little bit different from from justice Although I think it kind of hits on the same notes What Michael Farron and and Phil pot said here is using the average subsidy that each of these states were Promoting to Amazon We estimate how much state each each state could reduce its corporate income tax over the life of the subsidy So basically they're arguing let's not target the benefit toward one single company Right, so let's in the same way. Let's not target one neighborhood to enforce these drug laws But let's actually from a policy standpoint Make the corporate income tax lower across the board instead of just for this new entrant who wants to cite their office in your place They said based on the average subsidy that was offered to Amazon Each of these states could reduce their corporate income taxes by 29 percent most strikingly Three states Colorado, Maryland and North Carolina could cut their corporate income tax by 70 percent again This is this comes down at this point to a policy decision, right? Do you want to have a specialized? tax break on a one company in order to get them through the door which again the Evidence is unclear and actually dubious that that actually happens or from a policy standpoint Would you prefer to lower everybody's taxes all across the board and from my perspective that seems to be a much more? Just outcome from attracting a company instead of just targeting its That single company with this better policy. Yeah, well, I wanted I want to push back on kind of your point Dan I think that so if we're using I feel like it's sometimes a shaky comparison if we're talking about a tax incentive so cutting taxes or Limiting the amount of taxes we take from someone versus when you're talking about drug law enforcement That's putting resources on to of course resources go into tax cuts But I'm saying that's putting resources on to a situation rather than removing Removing enforcement of something so if we talk about if let's say there's and you can agree There's a there's a scarce or limited number of police of time energy money that we have to spend on drug law enforcement I think the the equality component comes in where it says we're spending 70 percent of our resources on 30 percent of the neighborhood, right? Versus and so when I think about spreading or saying like we should all be equally enforced or this should be equal across the board I'm picturing we need to take the same amount of resources and make it equal across the board You mean that we should raid the yes, but raid but raid the other neighborhood the poor neighborhood less, right? And it's like if it's to me there's an there's an equity in or an equality in Spreading the resources evenly rather than increasing or decreasing because it because it does seem to me It seems in just to say why does one neighborhood get more of those resources even if they're a negative resource Would the fact that it was more balanced comfort you if you were the victim of the drug raid? um I'm not presuming any life, but I know but I'm saying no, but I am saying philosophically for me. I think that it isn't it isn't I don't know to encourage the equality of the spread of a negative resource To me seems doesn't seem as bad as saying continuing with a system that has Dispirate I guess when I'm saying um exercise of those kinds of of those kinds of resources Does that make sense? So like a tax incentive to me is more like we're taking away something we're taking away. Um I don't know. I don't know how to say I just feel like tax incentive is you're taxing one group less So that everyone else has to pick up the slack because in a typical situation You're just because you're taxing this group less doesn't mean the government's spending any less So it's got to come from elsewhere Well, that was my first question is where are these where is you know if you're talking about Atlanta Where is this where who's paying for this marda? Amazon marda bus right or train Um, and it's us. I mean, I think the same argument is made for a lot of other things that the government subsidizes So dan, I'm just wondering about your point Is it more about the ability for us all to advocate on our behalves to get government off of our backs? And if and if that is kind of your main point, um, I think naturally we all have a different ability to do that I mean in the case of amazon they have people they can hire to be lobbyists and to to shake hands and make deals whereas Your entrepreneur who's just trying to launch a business doesn't have that kind of time or resources So where I guess is the justice in that if that we don't all have that same ability to advocate for ourselves well the same justice that the rich person in the in uh, the rich drug drug user would have in Having access to being friends with the local police and and you know being in circles of power Even even maybe friends with like the the judge and and friends with politicians nearby that like If he uses that access To increase his own liberty. I don't see what's wrong with that Really what about that access by them having that access to that person who does have a limited time? Then that means that somebody else can't advocate for themselves during that time It's not a it's an excludable good. Essentially these these people's time Um, that's true. That's a good point. Yeah So I think there's a danger of taking this drug, uh, uh enforcement Discussion too far But I would say on that There there might be A demand say for example, you do enforce the law equally across, you know The rich neighborhood and the poor neighborhood never in between, right? You could imagine that there might at that point be demand for saying do we need this law at all, right? I mean like You spread the pain enough then you end up actually having an incentive to say Well, is this a just law to begin with and I suppose I come from a similar perspective when when I look at the taxes, right? And so if there's so much cash It is amazon's cash. They're getting to keep that that is true in a lot of ways when it comes to like, you know Tax breaks not cash grants. That's a different thing entirely But when it comes to tax breaks that is amazon's cash to begin with and so that gets to your point of, you know, whether It's good for a company to be more or less plundered. I would agree It's better for a company to be less plundered by taxes But anyway, um, I think the point is here If you end up having a system, uh, that favors one you end up reducing The pain generally and you might actually have less demand for the lowering of taxes generally than With that specialized situation. I think there's one issue that addresses both both of the what you both said that The justice of actions of individual actions need to be considered Individually that there are there there might be like indirect ramifications that it might influence the way that other people do other actions But that can't be factored into when you're considering the justice of the action itself so so in uh, in the case that you just rose that like, yes, maybe maybe it might reduce the demand for, uh To to seek more justice But we don't know like so your so your argument is that we can only say From a moral standpoint or an ethical standpoint that we should not say it's it's it's um morally incorrect to To say yes, I'll take that incentive. Yeah, right It's only the the institution has set it up in an in a flawed way So similarly when you ask, where's the money going to come from? Yeah So so there's like a series of actions There's like, okay. I um, I'm not going to steal plunder this company But I still want these goodies over here. So I'm going to plunder from this company That that's very indirect like it doesn't change the fact that Not that plundering from this other company would have been bad in the first place. So let me ask you this Dan Is your position? One or both of these a That amazon is okay to have sought these special treatments Or be that it's all right for governments to offer these special treatments Well, both actually, yeah Yeah, yeah, I mean that's that's how I feel I feel that most oftentimes when you when you um take it back to its beginning If we look at an issue that we have we have problems with you unravel that and you see that there is In this situation, there's an an institutional incentive to make that decision, right? So it isn't amazon who's making the decision that's bad. That's not an unethical decision It's the the institution has encouraged an unethical a decision perceived as unethical and therefore is the institution unethical, right? The tax incentive providing institution another another analogy might be uh Say a bully and the playground is stealing kids lunch money And so maybe one of the kids is his friend. So he's he steals Less or maybe not at all or maybe just like yeah, I like that I like that metaphor even more because it's simple, right? That's simple when you talk about just like kids interacting That's a lot simpler than thinking about the war on drugs. So but but but what I'm a public policy perspective You don't want any kids having your lunch money stolen here I think there's two points that we're getting close to but maybe not touching as in the way that I would like and those two are that the encouragement of other people to get in the game of I can Take these actions. I can rent seek essentially get special favors that are outside of just the productivity of my business And that encourages other people to do it. I'll share a short anecdote when I was in the sixth grade we had spelling tests and Very slowly in the class everybody started to cheat on their spelling tests with this simple strategy of just putting the paper with the words underneath the desk next to them And it started off with just one kid and he got away with it And then the next spelling test came around and more kids and more kids and The costs versus the benefits Were really warped in this situation because in the short term I could cheat get a good grade on the test And be in good social standing with my peers or to do the moral thing into into not sheet There's the risk of getting a lower score and So I'm just trying to speak to the incentives here that other people wanting to play into it And then the second thing which I'll just quickly say is that we are removing some profit and loss signals when we manipulate incentives this way I do want to I this is this is an awesome anecdote. I do want to go back to the bully stealing the lunch money because I think we're getting a little bit Speaking back and forth on the notion of normative and positive, right? We're talking I think in some cases one of us is speaking in the ideal sense And the other one is speaking more in sort of the practical like what it is sense The problem is with that lunch money stealing story is that If you believe taxes are theft, which I believe is what you're promoting here Um All right, that's one thing to consider. However, our current system today Is rife with taxes. We are going to be taxed one way or the other Every kid on that playground is going to have his or her lunch money stolen to one degree or another It is happening. It is not not happening. And so the question is from a public policy standpoint Do you want the single kid to be able to steal? From in particular people Uh, you know and not steal from his friend, right? Or would you prefer Every person to be stolen from In an equitable kind of fashion because we're not not stealing. That's the bottom line here I think in the reality, we don't have those like batched Those clustered choices where you're you're really the choices are just boiled down to Is this kid going to be stolen or not from or not like it's it's not Oftentimes you think that that there are whole policy directions that you're choosing from but You know in in the day-to-day Lawmaking you it's just you're deciding one thing at a time. You can only look at that one decision. Interesting I don't know. I feel like it points back to I think Marianne's story with the spelling with the spelling Tests. I think that we're talking about the lunch money. I think for me it is always How can we create an institution that limits this in every way? Right, so that means the teacher wasn't looking, you know what? I mean or the incentive needs to be you're going to fail this test if I catch you cheating, right? It's about how the institution or the even the context creates or incentivizes people to make those decisions That's what matters and is the teacher paying attention to the bully that's stealing It is what's the context around which these decisions are made. Why is the bully stealing? Why are the class members cheating, right? I mean so I agree with you the context matters And I also agree with Dan in a sense on you know, you have to look at these decisions individually However, policy is not individual policy is policy is policy And so, you know, that's the way it works a policy cannot have exemptions to it in order to be something that actually works across the board But what if in that situation like say it was the question of okay the bully Decides, oh, I'm only going to steal half of from you because you you're my friend and then A third person comes up and says wait a minute steal more Because instead of that you should steal Less from everyone across the board, but then it's not more stealing. It's the equal amount of stealing right just theoretically unequally or Inequally, yeah The bully might say like okay, you convince me I'll steal more from this kid And then he never gets around to to following through on stealing less from the other kid I just think the analogy is flawed because we're not talking about a schoolyard bully. We're talking about a government that you know Taxes all of us to one degree or another And they are Empowered to do that. Yeah, and the other factor to to that is that The bully we don't presume them to have any really further motivations whereas we assume that if government is issuing a tax or if they're Giving a subsidy to someone that there's a reason for that We're expecting there to be some greater societal good to come out of it and yeah And I do think that your point earlier about having everything being about access To power is a good one. Yeah, everything about the the the game that you're playing is no longer serving the customers, but but Convincing influencing power and I think I think it's why Amazon chose dc totally even though other cities were offering even A sweeter deal. Oh interesting. So even beyond the incentives and what we talked about the The metro infrastructure and things like that. You think it's it's getting closer. Yeah an article from on reason Eric boom writes of course being close to the seat of political power matters too Virginia's deal comes with the unwritten promise that amazon will just be a stone's throw away from not only the country's top lawmakers But from the most important lobbying firms too Yeah, I mean to quote my favorite. I love jeff proctor. He talks a lot about this In some of his lectures and he he I mean his basic argument is that if somebody's handing out power and influence You as a business are going to take that right? You're going to use your money to get that absolutely So it's about like I said again to me. This is institutional or this is about the game or it's about how the game is set up It's why are we allowing this much power to be given right? We shouldn't we shouldn't we should limit the amount of power That's that's available to private entity You know fredrick bost out makes the point that if you make plunder easier than production Then people will choose plunder over production and no amount no amount of education or or morality or religion Will will stop that because the incentives are misaligned. Yeah, absolutely And so I guess I would sort of implore you To change your mind dan and and and we'll have many conversations on that this otherwise But I mean I regard the amazon tax breaks as an example of plunder over production. Yeah, I believe what they are taking Despite the fact that it would be foolish for them not to take it because it would be a competitive disadvantage Because everybody and their mom who has a company now is getting tax breaks from the government if they're big enough, right? And that's the key is if they're big enough I would say they are Falling into the trap and they're influencing us to believe that we can actually Get special favors Ahead of and above of what other people have and and I find that to be one of the sort of you quoted bostiott One of the unseen consequences of this these big Corporate giveaways that happen and I sound a lot now like alexandrio casio cortez are favorite democratic socialist new member of congress from New york city Because she's been talking about this as a corporate giveaway program as well But we may have different reasons for saying this And yet we're both somehow Somehow except for dan who's taking a very principled stance on it, which I respect. Yes But I but I think there is some Reason that we we agree on this and I would implore folks to look at that unseen consequence of going to the state The government and asking them for special favors over others because that then sets up a situation where that continues going forward Well, unfortunately, we have exhausted our time together Thank you each of you. This was a fun conversation And uh, we look forward to seeing everyone on the next fee cast by the way We are now on several other audio only platforms including apple Uh, the apple podcast platform spotify and eye heart radio, which is awesome And uh, we just got on eye heart radio. So please you can't stand our faces and you just want to hear us talk Please check us out on anywhere you can get podcasts all the podcast places And we'll see you next week on the fee cast You