Who the Hell Cares?

Apparently another interest group is claiming that Arizona is "missing out" on jobs in some critical growth industry, and therefore (wait for it) that industry must be subsidized to come to Arizona.

Arizona is getting its "clock cleaned" in the competition among
Western states to land solar-panel manufacturing companies within their
borders, according to the economic-development group that is losing the
fight.

At least nine companies that make solar equipment have passed up the
Valley of the Sun in the last year in favor of neighboring states,
according to the Greater Phoenix Economic Council.

From those nine projects alone, Arizona is missing out on more than 3,800 jobs, $2.3 billion in investment and $732 million in state and local revenues during the next decade, GPEC President and CEO Barry Broome said.

I am too tired to do my usual fact-checking on "incremental" state revenue numbers, but suffice it to say that $732 million in state and local tax revenues is a pipe dream.  There are three or four million people in Phoenix -- why is it we need the government to focus on someone employing 3,800 people?

The article's main "logic" is that our sunny climate should attract solar panel manufacturers.  Why?  I know they're customers may be here, but since most panels today come to Arizona from Japan or Germany, I don't think shipping costs are a big deal for panels.

The proposal is for a transferable income tax credit and property tax relief.  The author says the group is opposed to straight cash handouts, though.  Uh, OK.  And explain to me why a "transferable income tax credit" that the author says can be sold to other companies for cash is different than a cash handout?

I sometimes find it hard to identify the consistent element of what makes for a "desirable business"  (ie deserving of such subsidies) vs. one that is not so deserving.  The only consistent element I can find is that my business is always in the latter group, paying our taxes so that someone else's business and job can be subsidized.  It is for this reason that I generally barf when some group cries that they are not recieving equal proection (ala the 14th ammendment).  Take on tax and subsidy policy that takes from one group to fund another more politically connected group, and then talk to me about equal protection.

Postscript:  Here are the favored industries I can remember in the news of late in Arizona for getting special tax treatment:

Rock and Roll themed amusement park
Solar panel manufacturing
Neutriceutical production
New shopping mall parking lot
Spring training baseball parks

Readers are encouraged to add others in the comments.

Another Thought: I would dearly love to see a solar panel technology that can be rolled out of the factory cheaply in sheets like carpet out of Dalton, Georgia.  However, while I am increasingly convinced that someone is going to invent that technology soon, that technology will not be related to traditional silicon fabrication methods.  Therefore, nearly all of the plants that Arizona is desperately trying to subsidize to move here are likely using dead-end technologies, driven in part by bubble economics and subsidies that are not sustainable as the market grows (see ethanol).  Current silicon and germanium panels make no economic sense anywhere, and survive only due to massive (50% subsidies) and a desire to make a token green statement.

I am sure our local paper was cheerleading for ethanol plants in years past, and it is good we did not subsidize many here, because they are failing all over.  And I can't prove it, but I wouldn't be a bit surprised that one of the reasons our local semiconductor manufacturing operations have shrunk is because of this same effect, with subsidies attracting the least, not the most, viable enterprises.

  • will

    Konarka Technologies is working on what they call power plastic. Solar cells that are not silicon based but painted unto plastic. The technology looks very interesting since they do roll out solar cell on rolls of plastic sheets. So, I think you are right Coyote that silicon panels are a dead end.

    Konarka web site is http://www.konarka.com/ for those interested in what they have to say.

  • Yoshidad

    I'm not sure its realistic to expect the current crop of opportunists...er, I mean politicians, to do anything intelligent. But the public that elects these guys is pretty clueless about what's even accurate, never mind what's possible.

    An interesting look at what's possible appears in the "Special Features" on Leo DiCaprio's "11th Hour" video. A scientist specializing in manufacturing processes that mimic biological processes appears after we've heard from a carpet manufacturer who says that typical industrial processes discard 32 truckloads of waste for each single truckload of goods produced -- not exactly sustainable.

    The Biomimetics scientists starts talking about how animals' natural processes don't just preserve the next generation, they typically preserve the environment for the 10,000th generation. So while man's industrial processes can produce Kevlar, it takes a temperature of thousands of degrees, and the fiber is pulled through sulfuric acid. Meanwhile, a spider makes its silk (stronger than steel) at room temperature in water.

    Humans manufacture ceramics with similar high temperatures, but the abalone makes its shell in sea water by laying down a small layer of protein, and precipitating the calcium out of the sea water around it. The abalone shell is "self-healing" -- that is cracks within it actually strengthen the ends of the cracks so they don't get bigger (unlike an auto windshield, for example). We're just now learning to make dental ceramics this way.

    Some amazing possibilities like this exist, but I doubt they have lobbyists as powerful or as well funded as the amusement park industry, or Exxon-Mobil.

  • Rocky Mountain

    Yoshidad's comments are so typical of people on the left, insisting as they do that everyone besides themselves is either stupid or venal. Is it really likely that "amazing possibities" exist that are being overlooked because of the power of an amusement park lobbyist? I don't think any amazing possibility would be overlooked if it was doable at a cost that made sense. And so what if Leo DiCaprio trots out an unnamed scientist specializing in manufacturing processes. I bet I can trot out an unnamed scientist that would refute every word he said. Besides do we really need another Hollywoodian lecturing us everytime he gets a break from raking in millions of dollars practicing a highly suspect profession in an industry that has its own carbon footprint that needs to be examined?

  • http://www.classicalvalues.com/archives/2008/06/better_than_pri.html SuperMike

    Follow the link (not mine) to classicalvalues and see that printing solar cells is probably going to happen.

    http://www.classicalvalues.com/archives/2008/06/better_than_pri.html

  • Mike

    I am simply posting this for people's thoughts/opinions. I personally found it an interesting read. However, I am not a solar physicist/scientist, and do not know enough to see if this is simply an "ooooo...wouldn't that be cool?" kind of technology or something that is practical (i.e. is it as easy as the article suggests to "flash heat" water in black tubing to produce steam using a device like this?)

  • Mike
  • Yoshidad

    I have to ask Rocky Mountain whether he gets a prize for arguing? Is it a toaster? Free checking? What?

    Rocky Mountain says:

    "Yoshidad's comments are so typical of people on the left, insisting as they do that everyone besides themselves is either stupid or venal."

    Sorry bub, but I can be as stupid as anyone, just ask my wife...8^) And I usually find even my right-wing friends (I have many) aren't so completely wedded to their misconceptions that they'd rather "win" an argument than discover the truth of the matter.

    You can be right, or you can be satisfied. Pick one. As for whether I really know what I'm talking about, I'll leave that for you to research.

    My comment about how the "public that elects these guys is pretty clueless about what's even accurate" is perhaps poorly expressed. I really meant to refer to the way the public realm, the idea of shared goods and services, or the "commonweal," has been under a concerted attack from the likes of Cato, AEI, Heritage, and the rest of Richard Mellon Scaife's minions.

    The promotion of inaccuracy, or "voodoo economics" as truthful has a certain predominance in the public's mind that is undeserved, and makes simple inaccuracies somehow gain credence. You wouldn't argue about whether the earth is flat, and would think anyone promoting that idea was crazy, or at least eccentric. Nowadays, having to argue with such fictions is a commonplace because Exxon is hiring biostitutes to promote their particular profit-producing fantasy.

    And politicians love it when you're ignorant -- then they can do anything they want.

    ...and they have!

    Rocky Mountain says:

    "Is it really likely that "amazing possibities" exist that are being overlooked because of the power of an amusement park lobbyist? I don't think any amazing possibility would be overlooked if it was doable at a cost that made sense."

    Yep, and that's why biomimetics is something being hotly pursued in research now. That's why the ceramics in my dental work contain some of that abalone-inspired crack-resistant variety. The rest of the stuff I quoted is not disputable, at least factually. Unless, of course, you *just* want to argue.

    Rocky Mountain says:

    "And so what if Leo DiCaprio trots out an unnamed scientist specializing in manufacturing processes. I bet I can trot out an unnamed scientist that would refute every word he said."

    You have a scientist who believes the human process for manufacturing ceramics is as low-temp and sea-water-based as the abalone's process for manufacturing its shell? Wow! Can I have whatever he is smoking?

    Rocky Mountain says:

    "Besides do we really need another Hollywoodian lecturing us everytime he gets a break from raking in millions of dollars practicing a highly suspect profession in an industry that has its own carbon footprint that needs to be examined?"

    I recommend this Chinese riddle:

    Q: Who learns the most when a wise man and a fool go walking?
    A: A wise man would learn, even from a fool. A fool would not learn, even from a wise man.

    So Rocky, my brother, where's the love here?

  • Rob

    Charlotte, NC
    We competed against Daytona Beach, FL and some other city for the opportunity to build the Nascar Hall of Fame. What did we win? I guess Nascar thinks it awarded the chosen city with economic benefit. I know I paid an increase tax on rental car while mine was in the shop and that night out on the town where I decided in a hotel got taxed... but I thought the tax increase on rentals/hotels was only supposed to affect out-of-towners?

    Like most projects in Charlotte, the cost will overrun and no one, except the taxpayer, will suffer.

    1. outer beltway - not completed after 20 years, expected completion is 30 years after start. The damn thing has already outgrown it's initial plan. The plan puts in a mile away from my house which I will hope increases the real value of my home... to bad I have to wait 7 more years :(

    2. light rail - over budget of course. here's the kicker, many of the cost overruns are from mistakes made by the developer (like wrong color of paint), but no worries, the developer doesn't cover that goof...

    3. bobcat's arena - the citizens of the city defeated that proposal on the ballot. the fact that exists must tell you something right away.

    4. bonds for schools, road, police/fire were approved by the citizens... but wait? why did we subsidize the bobcat's arena, nascar hall of fame, and an art museum if we didn't have the money for the necessities? "Oh sorry Charlotte, I went on a $3000 vacation this year and I can't pay my property tax, can we put a line item on the ballot?"

  • NASCAR Wife

    Phoenix's semiconductor industry went bye-bye because it was based on a few large companies that closed factories for various reasons. Motorola, Intel, ST, and Microchip were the four large manufacturers in the Phoenix region. The rest of the Semiconductor economy was based on supporting these companies. None of these companies closed factories because the tax subsidies ran out.

    Hector the Sector Wrecker (Hector Ruiz, now of AMD) wiped out Motorola’s semiconductor presence in Phoenix by moving the headquarters to Austin and closing a site with six large factories. The move was done because he did not like living in Phoenix. The move cost the company $52 million and Hector left less than six months after the move. The site Hector closed was fully depreciated and fully loaded, but with older, less glamorous products. Hector thought Motorola should only be producing leading edge products; forgetting that old products pay the dept to invest in new products. Freescale, the Motorola semiconductor spin-off, is still trying to climb out of the hole that bastard put it in. By the end of 2008, Freescale will have only one factory in Arizona, down from a high of eight.

    ST is pulling up stakes because it is pulling all its manufacturing back to Europe. This is typical of European manufacturers when times get tough. (Wish American companies thought this way sometimes). The Phoenix site was ST’s most profitable factory when the decision was made to close it. ST will also incur huge importation taxes because that site was an international free trade zone, which ST used to import its products to America duty free.

    Microchip purchased a huge factory in Portland, Oregon for ten cents on the dollar. Economies of scale make it more lucrative to invest in that factory than a mature and undersized factory in Phoenix.

    Intel is still going strong in Chandler. They are building out Fab 32. Fabs 12 and 22 are at full production. The site is large enough to accommodate three more factories, I believe. Chandler will give tax breaks to attract more business from Intel, but so will every other city that is competing for Intel’s business.

    Except for small specialty houses, Texas Instruments, and Intel, semiconductor manufacturing has mostly moved overseas to the foundries (companies that make chips but do not design them). Cheaper labor and HUGE, HUGE, HUGE government subsidies overseas have made manufacturing chips in the US uncompetitive. The US tax subsidies were only a tiny part of the reasons behind the collapse.

  • eCurmudgeon

    Proving once again that the only thing we ever learn from history is that no one ever learns from history, it's just a matter of time before "solar technologies" fall into the same industrial policy fiasco that Japan followed with HDTV...

  • JPGR

    I wonder what tax incentives, if any, are available in AZ. Obama cursed NAFTA in my home state of Ohio during the primaries, and a great article came out in the Columbus Dispatch about how we've gained more in trade than we've lost in jobs. In addition, while unions are trying to squeeze all they can out of this state, those jobs are going away...and since getting several Honda auto plants in the 80's, we've lost out to southern states with Toyota and Hyundai due to our tax rates on businesses. I found that enlightening, to say the least.

  • Anonymous

    Coyote,

    I've just wrapped up a decade in the public sector investment promotion game, so let me try to answer your question ["I sometimes find it hard to identify the consistent element of what makes for a "desirable business" (ie deserving of such subsidies) vs. one that is not so deserving. The only consistent element I can find is that my business is always in the latter group, paying our taxes so that someone else's business and job can be subsidized."]

    In short, you fall between the two extremities of political support.

    Most importantly, politicians want to buy the votes of their friends in struggling industries, which tend to be heavily unionised and (in any case) can be counted on to repay their elected friends through the usual money-go-round of political contributions and other support. In broad terms, that accounts for assistance programs for any sort of big, uneconomic manufacturing operation.

    Apart from that, by their very nature politicians want to be Leaders with a capital L and Intellectuals with a capital I. Of course, it's easy to be fearless with other peoples' money, so they can't help themselves in trying to pick winners from among the new technologies. That explains the lust for government meddling in biotech, renewable energy, ICT and so on. Our masters will show the right way forward!

    In each case, you'll recognise the urge toward central planning and contempt for free markets.

    Sometimes businesses in the middle can get assistance, too, but that's often more of a collateral incidence than the main aim.

    Anyone could find plenty of examples to contradict me, but in my experience this explanation goes a long way toward explaining why public money gets spent on business support. Doubters, ask yourself this: how often have you seen a credible cost analysis alongside the claims of benefits? Yeah . . . that's what I thought.