Another Lousy Case of Corporate Welfare
Virginia is for cronies.
Earlier this session, the Virginia General Assembly spiked proposals to drug-test welfare recipients. Executives at Newport News Shipbuilding must be grateful: They're in line to get a huge government handout.
The shipbuilding company is now a subsidiary of Huntington Ingalls Industries, which is valued at almost $6 billion. Why it needs $46 million from the taxpayers is anyone's guess. Yet that's what it might get thanks to state lawmakers.
Suffolk Del. Chris Jones (R) took the lead by sponsoring the legislation, which will help underwrite a new, $750 million production facility to build the Navy's new Ohio-class nuclear submarines, and create at least 1,000 jobs in the process. The legislation makes the grant, which could be paid out over four years starting in 2022, conditional upon meeting certain criteria.
That's an important safeguard, given Virginia's recent experience with another economic-development handout. The state ladled out $1.4 million from the slush pile known as the Governor's Opportunity Fund to a Chinese-run venture that was supposed to create almost 350 jobs in Appomattox County. The governor's office boasted that the deal was "a direct result of the Governor's meeting with company officials in Beijing." Gov. Terry McAuliffe (D), with his typical reserve, called it "transformational." But it was all a scam. Nothing ever got built, no jobs materialized, and now the state is trying to get its money back.
Granted, NNS is hardly the type of company to take the money and run. If it wins the $13 billion Pentagon contract, or part of it, then it will build the manufacturing facility and hire the workers to get the job done.
But that's precisely the point, isn't it? The shipbuilding company would love to win the contract, and if it does, it is going to build the subs—and it will have all the funds necessary to do so from the Pentagon, which is to say from U.S. taxpayers. So why give it another $46 million from state taxpayers to do what it plans to do regardless? That's like paying a hungry man to eat.
To make matters worse, the subsidy won't even help NNS land the contract. The Pentagon expects to award it by 2017. The state's payments to NNS wouldn't start until 2022.
A representative for NNS says the state money will support "capital investments" to aid building warships "more efficiently and cost effectively." Sure it will. People are always so much more tight with a dollar when they're spending somebody else's money rather than their own, right?
There is a case for some corporate welfare. It's a bad case. It's usually supported by made-to-order studies that gin up dubious assumptions and laughable projections to promote the desired conclusion. But at least it's a case. It says that if our state pays a few bucks to Acme Consolidated, we all stand to reap much bigger economic gains—whereas if we don't, Acme will go to some other state and we'll lose out. Corporations have become expert at playing states off one another in just this way.
Some politicians are wising up to the con game, at least regarding subsidies for Hollywood movies and sports stadiums. But even if it were not a con game in those cases, it still has no relevance to building nuclear submarines.
The state grant will not affect whether NNS builds Ohio-class subs. NNS is not trying to decide whether to put its operations in Virginia or Oklahoma. It's not threatening to pull up stakes and move to Nebraska. So not only do state lawmakers have no good reason to give the shipbuilder a fat wad of cash—they don't even have an excuse.
A few days ago, Republican lawmakers professed to be shocked at the amount of money Virginia was shoveling out in economic-development incentives. Since 2010 the state has spent $679 million on such sweeteners. A House Appropriations Committee presentation says incentives have grown 298 percent over the past decade, which one is supposed to take as Not a Good Thing.
The chairman of that committee, by the way, is Del. Chris Jones, sponsor of the shipbuilder's handout. Perhaps it's time he sat down and had a tough conversation with himself.
This column originally appeared at the Richmond Times-Dispatch.