The Conservatives betray the fact that they are democrats, once again, by aligning with the present mayor of New York, democrat Bill de Blasio, and the democratic mercantilist monopoly, Amazon. In this, they display their ignorance of economics in their eagerness to dismiss the economic positions of Alexandria Ocasio-Cortez. The point at issue in this case is whether the city or state has $3 billion available for other programs in the wake of New Yorkers’ rejection of the Amazon bid to take over New York City with its proposed siting of a main office. In the magical thinking of Conservatives and de Blasio, Amazon will wave its wand and create twenty-five thousand allegedly “high-paying” technology jobs, at a paltry-for-New-York $150,000 on average, and that this will magically generate $27 billion in new tax revenue, even though the jobs, themselves, would account for only $3.75 billion in gross income and $1 billion in tax revenue. In the de Blasio and Conservative fable, the $3 billion can only be used from this pot of gold at the end of the Amazon tax-exemption rainbow. In the Conservative group-think, this means that AOC knows nothing about economics and the once-despised de Blasio has been elevated to economics sage, at least for the moment. As an economist who critically read his first economics text at the age of ten, I have the opposite assessment.
We first need to examine the claim of “creating jobs” or, more accurately, generating income, as opposed to re-distributing income from other sources. For this, we must point out that Amazon is a merchant with one industry component, book production, and one technology component, Amazon Web Services. Their industry component competes with hundreds of book printers and publishers in New York City. Amazon Web Services competes with many other multi-tier platform vendors in New York City, including “cloud” multi-tier vendor Google, as well as the thousands of New York based software developers, like myself, who have created proprietary, multi-tier systems for hundreds of companies. As a merchant, they produce nothing, but compete in the delivery of goods, including perishables with their acquisition of Whole Foods. Amazon can be expected to push their monopolistic way into the prepared food delivery service sector, competing with GrubHub, Uber-Eats and the thousands of restaurants using their own staff or independents on bicycles to make deliveries. For every tentacle of Amazon which it proposes to reach into the New York City market, there will be many thousands of jobs and hundreds of businesses lost. Therefore, Amazon will contribute nothing to the NYC economy that it has not first taken from it by its monopoly power. The technology and publishing jobs that Amazon is promising will first be lost in technology and publishing positions and business revenue.
The roughly sevenfold revenue multiplier which de Blasio and the Conservatives are imagining, from New York City residents generating roughly twenty times the income from the Amazon jobs in new economic activity, is based entirely on the Amazon jobs creating new income. We have just shown that the Amazon bid would redistribute old jobs and income, proving the multiplier fallacious. Indeed, a savvy monopolist like Bezos would reduce the replacement income from his jobs, enabling him to beat out his competition in the near term. After that, he and Amazon have no incentive to increase salaries as they increase prices and fees to gain their $3 billion tax-free profit. Instead of an increase in revenue, the city and state would have an unforeseen decline, even as Bezos was able to show twenty-five thousand hires.
To put it in layman’s terms, Cuomo, de Blasio, and Bezos were playing a con, a shell game, on the public and we, the public, called them out on it. The so-called “new tax revenue” was actually old tax revenue redirected through Amazon. For Jeff Bezos, the smart businessman, the new tax revenue is less than the old, because it saves him labor costs on Amazon’s expanded market share. What AOC and her allies are saying is that, if Cuomo and de Blasio were willing to give up $3 billion of the new tax revenue, plus take the loss of old tax minus new tax revenue, on the Amazon shell game, then they should be willing to use those funds for purposes other than a confidence game.
Even more simply, the three-billion-dollar tax exemption was a sucker’s bet on the twenty-five thousand jobs pea ending up under the Amazon shell. AOC is spot-on about that avoided wager having more salutary uses.