Jeff Bezos the businessman is creating the very problems Jeff Bezos the philanthropist wants to fight

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Call it a coincidence but there’s no denying the irony.

Amazon is getting $2.2 billion in tax breaks to open new facilities in New York City, Northern Virginia and Nashville, Tenn. That happens to be roughly the same amount of money CEO and founder Jeff Bezos pledged just two months ago to fight homelessness and fund early childhood education in the United States.

Bezos giveth and then he taketh away.

People credit Bezos for taking the long view on his business. But I wonder if he has the vision to realize that a lack of affordable housing and quality education stem in large part from the concentration of wealth in the hands of the few, whether we’re talking about the 1 percent of richest Americans or a handful of geographic areas.

By choosing New York and Washington DC area, two regions hardly in want for jobs and economic stimulus, as Amazon’s headquarters, Bezos will contribute to the very things his philanthropy has pledged to fight. Tens of thousands of Amazon employees will move to these cities, straining an already tight housing market and pushing out people who can no longer afford the cost of living.

Public subsidies of private businesses is bad economic policy. For one thing, companies like Amazon don’t need taxpayer help. But economists say companies that receive the subsidies don’t create new jobs so much as they shift them. So one state’s job gain is another state’s job loss. Corporations have playing states off each other for many years but states fail to wise up.

But I originally had great hope for Amazon. When the company initially announced plans for a second headquarters, Amazon said the move would hire 50,000 people on top of its existing workforce. Since Amazon is growing so rapidly, the company’s plan seemed highly credible.

For economically depressed cities like Oakland, Detroit, St. Louis, or Pittsburgh, spending taxpayer dollars to lure Amazon seemed like a better investment than spending public money on stupid sports stadiums, which never generate the economic returns politicians promise.

Instead, Amazon chooses to build its second and third headquarters in New York and the DC metro areas, two cities in the midst of sustained economic booms.

According to recent data by the federal Bureau of Economic Analysis, the New York-Newark-Jersey metropolitan statistical area (MSA) generated $1.7 billion in GDP activity last year, more than any other MSA, and a nearly 20 percent gain from 2012. The DC-Northern Virigina MSA generated $530 million in GDP activity in 2017, good for 5th place.

The rich keep getting richer.

Moreover, the New York and DC areas are not only the most expensive places to live but also experienced some of the highest cost of living increases in recent years, including rent and food prices. In other words, already expensive cities are getting even more expensive.

Bezos’ choice to focus his philanthropy on early childhood education particulary caught my eye. In Minnesota, Art Rolnick, a respected economist and former research director at the Minneapolis Fed, is a fierce critic of public subsidization of private firms, especially sports teams.

Rolnick has also been a long time proponent of directing taxpayer dollars towards early childhood development (ECD). Instead of making just a moral argument, Rolnick has pioneered research that shows funding ECD would generate far superior long term economic benefits than subsidies for a company headquarters or a sports stadium.

“The conventional view of economic development typically includes company headquarters, office towers, entertainment centers, and professional sports stadiums and arenas,” Rolnick wrote in an influential paper published in 2003. “In the future, any proposed economic development list should have early childhood development at the top. The return on investment from early childhood development is extraordinary, resulting in better working public schools, more educated workers and less crime.”

The big concept we’re taking about here is what economists called “opportunity costs.” In other words, state and local officials should think about economic development dollars this way: to achieve the greatest economic return, is the money that we want to spend on sports stadiums and corporate headquarters better spent on other things?

In Amazon’s case, the state should be investing taxpayer dollars not on company headquarters but on early childhood education.

I’m sure Bezos can find other worthy causes for his money. After all, spending money to fix problems that you’re creating doesn’t seem to be a particularly efficient use of resources.


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