We’re about to find out what the Intel deal really cost us

In case you’ve been living under a rock for the past few weeks, the big news for economic development, not just locally but nationally, is Intel plans to build a $20 billion microchip factory in New Albany, Ohio.

President Joe Biden has praised the new factory, speaking of the national security implications of keeping the creation of microchips in the United States in the face of encroachment on China’s industry.

Locally, everyone is abuzz about the ramifications of economic development. Status boosters have been quick to crown Ohio “Silicon Heartland” following the announcement. US Senator from Ohio, Sherrod Brown, said: “Today the term Rust Belt is officially buried. Dead and buried,” arguing that when it comes to losing young people in Ohio, “it’s going to turn the tide.”

All of this is perhaps a bit exaggerated. Data from United Van Lines released earlier this month showed that 56% of Ohio’s migration is currently outbound, meaning more people are leaving the state than entering it. Even a large-scale economic development project should be powerful enough to reverse a trend like this.

So let’s look at this project in traditional terms. By that I mean, let’s look at what the Intel blueprint currently looks like using the “ground rulesthat leading economic development economist Timothy Bartik uses to understand tax incentives. After all, an estimate 75% to 98% of business incentives have no impact on companies’ decisions to relocate, expand or retain workers. How do we know that this project is not the same?

What we know about the Intel project is its location. Bartik argues that areas with high unemployment rates will get better value for money since economic development projects will give people job opportunities they wouldn’t have otherwise. According to the Labor Market Information Office at the Ohio Department of Jobs and Family Workforce Development Office, Licking County is 72n/a out of 88 unemployed Ohio counties. This suggests that Licking County is not a particularly well-targeted location for a large in-state economic development project.

Likewise, New Albany is famous one of the wealthiest cities in the state, if not the wealthiest, suggesting that the area is not particularly distressed or lacking in job opportunities.

Information is still circulating about the incentives the state provides to Intel to open this factory. What we do know is that, according to Lieutenant Governor John Husted, the state spends over $1 billion on nearby infrastructure alone. Infrastructure spending is usually a better investment for a government than money, because if a business proposition doesn’t work out, it’s much harder for the company to uproot and run with roads and sewer lines. only with cash incentives. But $1 billion is still a huge amount of money in the context of state finances.

We have a lot to learn about the personalized business services and cash incentives that the state provides to Intel. It’s easy to focus on the benefits of a project like this, but the costs are just starting to become clear. What we do know is this: Intel will probably have to be at least as transformational as everyone says to be worth what Ohio is spending on it.

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