ustxtxb_obs_2005_04_15_50_00008-00000_000.pdf

Professor Cobb, who has tutored ex-Soviet officials on the workings of market economies said of the Countrywide deal, “I know that this sounds negative but certainly this is an example of corporate welfare. of $10 million this year. So we try to do loans before grants. We make sure that if we do make a grant that it brings exceptional benefits. And it has to meet scrutiny. The local newspapers follow all this. And we have watchdog groups that attend our public meetings?’ \(Several telephone requests for interviews by the Observer to the Texas governor’s press office were What makes the Lone Star State’s comparative profligacy so unusual is that this is a state that reveres the workings of the free market as much as it cherishes such hallowed icons as the Alamo, cattle, oil, and Texas football. By law, the state even stipulates that every high school senior must take an academic semester of economics, “with emphasis on the free enterprise system,” says a spokeswoman for the Texas Education Agency. Yet by opting for political expediency, Texas lawmakers are flunking their real-world test on the operations of the free market. As the CPPP’s Baylor notes: “When the Legislature continues to reject raising the minimum wage, you keep hearing the arguments that ‘we shouldn’t tell employers what to pay their employees’ and that ‘people earn what they deserve in the marketplace: But for some reason that logic falls down when it comes to subsidizing the movable company?’ Consider the case of Countrywide, which has contracted with Texas to add 7,500 jobs to its payroll in the Lone Star State in return for its $20 million plus tax subsidies. Gov . Perry frames the selection of Richardson, a town with a 4.1percent unemployment rate in a state with a 5.8-percent rate at year-end 2004, as a proud Texas win over California, among other states. Of the 7,500 jobs, Countrywide promises to bring 2,500 jobs to Richardson and spend $200 million on infrastructure and remodeling office space; it is not yet clear where in Texas the remaining jobs will go. Yet, Countrywide has been experiencing good times and its business is thriving. So much so that, a company spokesman says, it expects to increase its ranks to a total of 80,000 employees over 8 THE TEXAS OBSERVER APRIL 15, 2005 the next five years, nearly doubling its headcount. When it announced expansion plans, Countrywide publicly declared that it was evaluating several states, touching off a bidding war. “Countrywide was going to have those [employment] numbers whether it located in Illinois or Florida or Texas,” says Professor Steve Cobb, chairman of the economics department at the University of North Texas in Denton. There is strong evidence, though, that Texas always had a leg up in the race. For several years now, Countrywide’s CEO and chairman, Angelo Mozilo, has openly expressed the company’s dissatisfaction with business conditions in California. Although the company operates numerous loan-origination offices around the country and employs a small contingent of corporate employees in Arizona, there has been nothing outside of California to compare with the company’s growth here. Since it first put down stakes in Texas 11 years ago, reports the Countrywide spokesman, its in-state workforce has ballooned to its current level of 7,000 employees. And its growth has been so robust that Countrywide is outgrowing its current digs in Fort Worth and Plano. Serendipitously, ample office space was available in nearby Richardson: Telecommunications giant Nortel Networks had lost its footing in an industry downdraft in 2000 and had abandoned its property. When announcing that Texas triumphed, Countrywide officials heaped praise on Governor Perry for his yeoman service that, they assert, sealed the deal. Yet the fact that Texas’ $20 million cash offer defeated an even more generous package from the state of Illinois suggests that larger forces were already at work. “They play states off against each other,” says Cobb, “to see who’ll give them the best deal.” Professor Cobb, who has tutored ex-Soviet officials on the workings of market economies, gave out a long sigh when asked whether the Countrywide deal was consonant with the tenets of free enterprise. “Being involved in business location or relocation is not something we would normally think of as one of the functions of government,” he says. “I know that this sounds extremely negative,” he adds, “but certainly this is an example of corporate welfare:’ Even if everyone does it, there is something unseemly about a well-heeled company with highly compensated executives brandishing a tin cup and looking for a handout. Countrywide’s Mozilo earned $22.6 million and cashed in $34.4 million on exercised stock options. That amounts to an annual haul of $57 million in annual compensation in 2003, the most recent figures compiled by Reuters news service. Occasionally, a top corporate executive will candidly admit that business incentives are always welcome and that they appreciate the attentive solicitude of top politicians, but that such concerns take a back seat to more weighty determinants. Consider the case of Citgo, the oil company owned by the country of Venezuela. Last year Citgo collected $35 million from the taxpayers of Texas, including $5 million from the Enterprise Fund and $30 million in subsidized, low-interest loans to move its headquarters to Houston from Tulsa. It also is upgrading its refinery operations in Corpus Christi, where