Why New York and D.C. should tell Amazon to take a hike
The quest for "HQ2" has left America's cities looking like a bunch of suckers.
When Amazon first announced that it was looking to open a second headquarters, it set off a massive, absurd competition between states and cities. The company promised 50,000 new jobs to the winner, and $5 billion in investments over two decades. In an unprecedented public contest, localities fell over one another to offer tax breaks and other incentives, often risking their own fiscal health in the process. In more than one instance, the bidding process got outsourced to local private firms. Plenty of city officials were left in the dark about what their own governments were even offering the tech behemoth.
It now looks like Amazon will probably split the baby, with one new "headquarters" in a neighborhood of Queens, New York, and the other in Crystal City, a Virginia suburb of Washington, D.C.
This is bad for everyone except Amazon.
What exactly is this supposed to achieve for Washington and New York? Both cities' unemployment rates are already near or below the national rate. They are both already high-pay, high-education hubs. And both are already straining under booming populations and sky-high housing prices that Amazon's arrival will only exacerbate.
New York's subway system in particular is already plagued by delays, budgetary neglect, and a host of other problems. Washington's metro is not quite as bad, but it's lost ridership amid shutdowns and long-delayed upkeep, even as the city's economy has boomed and its snarled traffic problem has gotten worse.
Both cities also have a significant homelessness problem, not to mention broader affordability issues, which are bound up with the housing costs Amazon will further juice. "When Amazon drops on Long Island City, it'll set off a tsunami of hyper-gentrification that will push out whatever remains of the working class — and much of the middle class," Jeremiah Moss, a blogger and author who writes about gentrification and real estate issues in New York City, told Rolling Stone. "We've seen it in the Chelsea neighborhood of Manhattan when Google moved in."
Moreover, setting up two different campuses would presumably dilute that $5 billion in economic investment Amazon promised to the winner. It's not even clear what "headquarters" would mean under this scenario.
"They've duped more than the bidders. They've duped all of us," Robert B. Engel of the Free & Fair Markets Initiative told The New York Times. "They can't even live up to a promise that wasn't fair to anyone but Amazon."
Of course, the deal has its supporters — and they see things quite differently. "I'll change my name to Amazon Cuomo if that's what it takes," New York Gov. Andrew Cuomo (D) enthused. "Because it would be a great economic boost." New York City Mayor Bill de Blasio added, "It's not just tens of thousands of jobs, it's also that this consolidates New York City as an international tech hub."
It's also worth noting that the pressure brought by Amazon's offer may have spurred both cities to make some genuine improvements. New York City recently released a plan to upgrade the subway lines serving the area Amazon would set up shop in, and possibly even build a new train station. The incoherent governance structure of D.C.'s metro system managed to pass a big $500 million investment earlier this year, and is fiddling with other improvement plans. Those are genuine win-wins for both Amazon and the cities' populations.
At the same time, these sorts of state and city corporate-care packages also often include tax breaks and other giveaways. Those are pernicious, since they undercut a city or state's ability to invest in the public good, even while fattening the coffers of the company it's trying to woo. De Blasio explicitly said he doesn't believe in attracting Amazon that way. But no one really knows exactly what New York or D.C. offered. Cuomo could very well have tried to woo Amazon with hundreds of millions in tax giveaways. "None of it has been made public," Riley Edwards of the Citizens Budget Commission told City & State. "The argument is that this is better for competitiveness, that the other places that are bidding to have this headquarters don't know what they're up against. But it really does the public a disservice to not have that information."
Cuomo merely let on that "we have a great incentive package."
Adding insult to injury is the fact that Amazon itself has massive resources to deploy if it wants to. The company's CEO, Jeff Bezos, recently mused that he has so much staggering wealth he can't think of what to do with it other than go into space. If the company is looking for top-notch infrastructure, public transit, education, and technological know-how, it could provide those things itself.
You could imagine an alternative scenario in which Amazon picked a less obvious city, where it could do some real local good. A place that has some of its priorities — good schools, decent public transit, airline connections, or a vibrant local culture — but that also has more need for the jobs and isn't being buried under housing prices. Think Detroit, Atlanta, Louisville, Cleveland, St. Louis, Pittsburgh, Madison, Indianapolis, or Philadelphia. Or Amazon could've really surprised us, and picked some burgeoning college town that wasn't even on anyone's radar. Whatever such places lacked in terms of infrastructure or technological know-how, Amazon could certainly have invested in building those localities up itself.
Instead, Amazon effectively outsourced that investment work to the city and state governments clawing over one another for the scraps from the company's table.
That's not just a case of New York or D.C. getting taken for a ride, either. It's part of a trend that's making the whole economy worse. Take skills and know-how: For years, on-the-job training has been on a steep decline. Companies used to create the skills they needed by training hires themselves. Now they feel entitled to sit around and tap their feet while local governments, or even workers themselves, fork over the money and resources for skill-building. Amazon's HQ2 contest was just a particularly brazen instance of that trend.
When companies do that, it also means that already wealthy and resource-rich cities get all the business. Amazon's contest ended with two already-rich "superstar" cities getting even richer.
For both their own sakes and everyone else's, New York and D.C. should tell Amazon to take a hike.