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Economist says NY errs in subsidizing the rich

Mike Desmond/WBFO News

An expert on corporate subsidies and economic policy says the rich are getting richer and the rest of us are not, a pattern decades old.David Cay Johnston has spent years as a newspaper reporter, best-selling book author, and small business owner. Johnston was in town Thursday to look into the subsidies which helped Yahoo! build a computer center in Lockport and to speak to the Coalition for Economic Justice in the Buffalo-Niagara Convention Center.

The economist says there don't seem to be any clear answers on how much subsidy is involved and he isn't sure local economic development officials know. Johnston says it's a familiar pattern.

"Businesses have figured out it is easier to make money mining the public treasury than earning it in the market and they set off these competitions. We're giving, in New York State, over a billion dollars to the hereditary ruler of Abu Dhabi who's worth $20 billion to build a factory down near Albany," he said.

Johnston says the subsidy for the computer chip manufacturing plant may be even larger but state officials aren't being open on the details. He says visited economic development officials in Niagara County, but reports they were not helpful.

"When I asked them about the economic analysis of the original deal four years ago, I said 'How did The Buffalo News and the radio and TV stations come up with these numbers?' They said, "I don't know, we didn't do any calculations.' Really? You're giving away millions and millions of dollars and you don't have calculations showing that? That's not good business practice," Johnston said.

He says New York's economic development strategy revolves around giving money to the rich to do business in the state while the wages of workers continue a slide, which has been going on for decades.

Johnston is a long-time critic of subsidies, arguing the market will provide the money for the best ideas and the best research. He says one persistent problem in subsidies is in professional sports where the teams wouldn't make money without the subsidies given to the owners, especially for new stadiums and arenas.

Meanwhile, China, he says, is wisely spending money on education, innovation, and infrastructure.