We’re about to find out what the Intel deal actually cost us
WASHINGTON, DC – JANUARY 21: Intel CEO Patrick Gelsinger (C) speaks alongside Ohio Senators Robert Portman (L) and Sherrod Brown. Gelsinger announced that Intel Corp would invest an initial $20 billion to develop a new semiconductor manufacturing plant in Ohio. (Photo by Chip Somodevilla/Getty Images).
In case you have been living under a rock for the past few weeks, the big news in economic development not only locally but nationally is Intel’s plan to build a $20 billion microchip factory in New Albany, Ohio.
President Joe Biden has come out praising the new factory, talking about the national security implications of keeping microchip creation within the United States in the face of encroachment on the industry from China.
Locally, everyone is abuzz about the economic development ramifications. State boosters have been quick to crown Ohio “Silicon Heartland” in the wake of the announcement. Ohio U.S. Sen. Sherrod Brown said “today the term Rust Belt is officially buried. Dead and buried,” arguing that when it comes to Ohio losing young people, “this will turn that around.”
All this may be a bit overblown. Data from United Van Lines out earlier this month showed that 56% of Ohio migration is currently outbound, which means that more people are moving out of the state than are moving into it. One economic development project, even a large one, would have to pack a pretty big punch to reverse a trend like this.
So let’s take a look at this project under traditional terms. By that I mean let’s look at how the Intel plan currently looks using the “rules of thumb” that leading economic development economist Timothy Bartik uses to understand tax incentives. After all, an estimated 75% to 98% of business incentives have no impact on the decisions of firms to relocate, expand or retain workers. How do we know this project isn’t the same?
Something we know about the Intel project is its location. Bartik argues that areas of high unemployment will have a larger bang for public dollar buck since economic development projects will give people opportunities to work they would not have had otherwise. According to the Bureau of Labor Market Information at the Ohio Department of Job and Family Services’s Office of Workforce Development, Licking County is 72nd out of 88 Ohio counties in unemployment. This suggests Licking County is not a particularly well-targeted location for a large economic development project within the state.
Similarly, New Albany is famously one of, if not the, wealthiest cities in the state, suggesting the area is not particularly distressed or aching for employment opportunities.
Information is still coming forth about the incentives the state is providing Intel to open this factory. What we do know is that, according to Lt. Gov. John Husted, the state is spending over $1 billion on nearby infrastructure alone. Infrastructure spending is usually a better investment for a government than cash because if a business proposition does not work out, it is a lot harder for the company to uproot and run with roads and sewer lines than with cash incentives. But $1 billion is still a massive amount of money in the context of state finances.
We have much to learn about what customized business services and cash incentives the state is providing Intel. It is easy to focus on the benefits of a project such as this, but the costs are just starting to become clear. What we do know is this: Intel will likely have to be at least as transformational as everyone is saying it is in order to be worth what Ohio is spending on it.
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