The incentives war between the Midwestern states has heated up over the past few months, especially between Illinois, Indiana and Ohio, which, are fighting over Sears and the CME Group. Here is a look at how states use incentives to keep or steal companies, and how that effects overall economic development.
Think back to Political Science 101 and what you learned about game theory. If you need some help, think about the premise of one of my favorite 1980s movies: War Games.
Remember the ending? (No? Keep reading.) The movie’s star, Matthew Broderick, wants to show Joshua, the computer, that there’s no way to win a zero-sum game. He gets the computer to play itself, first Tic Tac Toe, then a simulation of a nuclear war between the then-Soviet Union and the United States. In the end, Joshua realizes no one can win.
Keep game theory in mind, because we’ll come back to it later. But that’s kind of what’s happening between Illinois, Ohio and Indiana. These states have spent the past few months waging an economic incentives war worth millions of dollars and thousands of jobs.
Continue reading “…Shall We Play An Incentives Game? (Midwest States Are)”
Three stories making news across the Midwest today:
1. Lansing-area Local 602 could authorize strike. Members of UAW Local 602 are voting today and tomorrow on whether to authorize a strike. The union, which represents approximately 3,430 employees at the General Motors assembly plant in Delta Township, Michigan, has failed to reach an agreement on a local contract with plant management. According to the Lansing State Journal, a strike authorization gives union leaders the authority to call a strike, but does not necessarily mean one is imminent. Changing Gears profiled Local 602, one of the three locals that defeated the GM-UAW contract, in September.
2. Illinois lawmakers regroup. Lawmakers will give a second effort to keeping CME Group and Sears in Illinois. After rejecting two bills that would have provided the Chicago-based companies with $250 million in tax incentives last week, they announced the House would hold a special session Monday in hopes of trying again. House members have now raised the prospect of splitting the bill into several pieces of legislation and holding multiple votes, our partner station WBEZ reported. The two companies have threatened to relocate elsewhere in the Midwest if a deal isn’t done by the end of the year. Illinois Gov. Pat Quinn said Ohio offered Sears $400 million in incentives to relocate to Columbus.
3. Milwaukee capitalizes on workspace-sharing trend. A Milwaukee developer is bringing a West Coast trend of small businesses sharing office space to the Midwest. Soon, William Waldren will open the Hudson Business Lounge, where 180 small-business owners have already signed up to share work space, according to the Milwaukee Journal Sentinel. “There’s definitely been a pickup in people wanting to do this,” said James Carlson, who runs Bucketworks, another Milwaukee-based shared workspace building. Hudson offers various levels, starting at $55 per month for part-time access to group work tables to a $795 per month package that includes private office space. Across the U.S., 450 to 500 co-working sites exist, according to the newspaper, but most cater to tech people. Walden wants to broaden the appeal to other businesses.
Three stories making news across the Midwest today:
1. Midwest Economy Gains Ground. The Midwest Economy Index showed improvement in the regional economy in October for the first time in six months, according to the Federal Reserve Bank of Chicago. The monthly index, a combination of 134 state and regional indicators, ticked upward from -0.37 to -0.33. Manufacturing was the only sector measured to make a positive contribution to the index at +0.20, although it had ebbed from +0.23 in September. The pace of manufacturing activity decreased in Iowa and Wisconsin, but increased in Illinois and Michigan. Indiana held steady. The service sector and consumer spending showed improvements overall, while construction and mining activity fell.
2. Emergency Manager Takes Over Flint. Michigan Gov. Rick Snyder appointed an emergency financial manager for the city of Flint on Tuesday. On Thursday, Flint’s former mayor, Michael Brown, will begin serving in the position. Under the state’s revamped emergency manager law, Brown will have authority to control the city’s operations and finances, including the power to terminate employee contracts, merge departments and reduce pay. It’s the second time an emergency manager has been appointed in Flint, which had a $15 million deficit in the 2010 fiscal year. Emergency managers are already in place in Benton Harbor, Pontiac, Ecorse and Detroit Public Schools.
3. Illinois Lawmakers Reject Incentives Bill. Two of Chicago’s most visible companies, CME Group and Sears Holdings Corp., have threated to move elsewhere if they weren’t given tax incentives to stay. Illinois lawmakers are calling their bluffs. The Illinois House of Representatives rejected a bill, 99-8, that would have provided $200 million in incentives Tuesday, the final day of the legislature’s fall session. House Republicans wanted the bill to focus solely on tax breaks for businesses they hoped would lead to job growth, while Democrats wanted tax relief for workers and low-income families included, according to the Chicago Tribune. Gov. Pat Quinn said “ample” time remained to reach a deal, but in a written statement, a Sears spokesperson said, “Our timeline for making a decision about our future by the end of the year has not changed.”