GE to Massachusetts: Give Us $25 Million or We'll Fire People (Another Legacy of Big Sh-tpile)

Keep in mind that this GE plant primarily makes parts for defense contracts--these jobs are provided by a guaranteed contract:

General Electric Co. has made an unusual offer to the state: Give us $25 million in tax credits, and we won't cut any more than 150 positions at our aircraft engine plant in Lynn.

The conglomerate has already cut the Lynn plant's workforce by 600 jobs and could cut 150 more. But General Electric said that if it receives the state aid to help fund a $75 million retooling of the plant, it would maintain the remaining 3,000 jobs for six years.

If you're thinking this sounds odd--don't states give tax breaks to lure jobs in, not keep them (a dubious proposition in the long term)--you would be right:

Typically the state grants tax breaks to companies that create -- not cut -- jobs, making the General Electric request unusual. State officials said they cannot recall another case of a company asking for tax subsidies while warning it will continue to reduce employment.

"We're now having to pay companies not to fire people,'' said Deirdre Cummings, legislative director of the Massachusetts Public Interest Research Group, a consumer group. "This is throwing economic development subsidies on its head.''

Personally, I think GE is bluffing because the $25 million is a paltry sum:

General Electric receives billions of dollars in taxpayer funds annually in the form of government contracts, including $1.8 billion in military work at the Lynn plant in fiscal 2009....

But some policy analysts said that given the size of GE and the contracts awarded to its Lynn plant, the $25 million subsidy is too insignificant to matter.

"If the market is not working for them in their current location, I don't see how the state incentive is going to change that fundamental reality,'' said Benjamin Forman, research director for the MassINC, a Boston public policy research firm. "I don't think there's an economic case for that.''

Meanwhile, look at the underlying finances that are driving this:

Last year the company reported $11 billion in profits on $157 billion in revenue.

Yet its federal income tax bill for 2009 was $0. The global conglomerate reported losses on its US operations, largely because of difficulties its GE Capital unit faced from the financial crisis, according to GE's annual financial report.

Yes, workers could lose their jobs thanks to the ineptitude of the banksters. Seems to be a lot of that going around. Go 'free markets'!

Isn't the whole point of military Keynesianism to provide jobs? Of course, will either Senator Kerry or Brown do anything? Probably not.

An aside: It's not even clear we need this engine--it sounds as if we don't need it. But if we're going to build one, then why are we having to pay even more (the $25 million subsidy) for it?

Update: More here.

More like this

"defence contracts"? No. War contracts, or even empire contracts but not defense.

By Matt Platte (not verified) on 20 Nov 2010 #permalink

It sounds to me like they're planning to make those layoffs anyway; this is just a ploy to shift the blame.

Sounds like a racket to me: "Sure is a nice state ya gotz here, Massachusetts. Sure would be a shame should sumptin happen to it!"

The state should say, "fuck 'em". $25 million to save 150 jobs? For $25 million, the state could pay those people $100,000 to do nothing and still come out $10 million ahead.

Of course, that would be evil socialism. Much better to have the government pay inflated fees to the corporations, who just might maybe think about spending a little of it on workers.

By Phoebe Fay (not verified) on 20 Nov 2010 #permalink

It's not $25 million to save 150 jobs. It's $25 million for GE to only fire 150 people, instead of some unspecified bigger number.

They do a lot of non-government contracts as well, as in engines for commercial planes. I suspect that's where they are really hurting. But a guaranteed government contract does not necessarily mean it guarantees all the jobs for infinity. A lot of contracts involve a lot of initial engineering that will drop down to a lower level later on. Smart companies restructure, dumb companies fire/rehire/rinse/repeat. I suspect they just want some of the money that all the banks and car companies got their hands on and figure it doesn't hurt to ask. Kind of like the raise I'm never going to get, things are tough in the defense industry what with the 1% budget cut and all!