How would you feel if you found out your elected leaders had voted to hand out huge sums of public money to corporations, with some of them not even knowing who the recipient is, and the rest bound by contract not to divulge its identity or what its specific plans are?
Now what if we told you this happens all over the country, all the time, in deals involving wealthy corporations such as Amazon, Facebook, Google, and on and on?
Unfortunately, thanks to a legal tool called a non-disclosure agreement (NDA), this kind of corrupt secret dealmaking has become the norm rather than the exception in economic development deals. These agreements—signed by governors, mayors, state legislators, and other local leaders—prevent public officials from disclosing anything about a corporate subsidy deal they’re working on, including even the recipient, until it’s finished, cutting many key stakeholders, and most importantly the public, out of the process.
But a new coalition is seeking to change that. To learn more about the effort to “Ban Secret Deals”—and why it’s critical to economic justice in the United States—Rebecca sat down with Pat Garofalo, director of state and local policy at the American Economic Liberties Project, author of the book Billionaire Boondoggle and the Boondoggle newsletter, which looks at how corporations are ripping off our states, cities, and communities; and Illinois State Senator Robert Peters, an organizer and economic justice activist who now represents the Thirteenth Legislative District in the Illinois General Assembly, and who recently introduced the first state legislation to ban secret deals.
Learn more about the campaign to ban secret deals at bansecretdeals.org
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REBECCA VALLAS (HOST): Welcome to Off-Kilter, the show about poverty, inequality, and everything they intersect with, powered by The Century Foundation. I’m Rebecca Vallas. How would you feel if you found out that your elected leaders had voted to hand out huge sums of public money to corporations, with some of them not even knowing the intended recipient and the rest bound by contract not to even divulge its identity or what its specific plans are?
Now, what if I told you this happens all over the country, all the time, in deals involving wealthy corporations like Amazon, Facebook, Google, and on and on?
Unfortunately, thanks to a legal tool called a non-disclosure agreement, this kind of corrupt, secret dealmaking has become the norm in so-called economic development deals. These agreements—signed by governors, members of state legislatures, mayors, city council members, and other local leaders—prevent public officials from disclosing anything about a corporate subsidy deal they’re working on, often including the literal recipient of the funds, until the deal is finished, cutting many key stakeholders, and most importantly, the public out of the process entirely.
But a new campaign led by a motley crew of strange bedfellows is seeking to shut down these secret deals. To learn more, I sat down with Pat Garofalo, director of state and local policy at the American Economic Liberties Project. He’s also the author of the book Billionaire Boondoggle and Boondoggle, a newsletter about how corporations are ripping off our states, cities, and communities. And Illinois State Senator Robert Peters, an organizer and economic justice activist who now represents the Thirteenth Legislative District in the Illinois General Assembly. He recently introduced legislation to ban these kinds of secret deals. You can learn more about the campaign at BanSecretDeals.org. But let’s take a listen. [upbeat music break]
Pat, Senator Peters, thank you so much for taking the time to come on the show.
SENATOR ROBERT PETERS: Yeah, thanks for having me.
PAT GAROFALO: Yeah, thanks so much. It’s always great to be here.
VALLAS: And Pat, it’s been a minute since we caught up, and it’s been a minute since you’ve been on this show. But I always love getting to chat with you and so appreciate your pitching this conversation, actually. This comes out of some work that you’ve been doing. So, very excited for this conversation. Before we get into really the meat and potatoes, or I don’t know, the tofu and the seitan, depending, would love to give each of you a chance to talk a little bit about how you come to this work. Pat, you and I go way back to days we overlapped at the Center for American Progress, so I think I’m gonna start with you. And then it was you who actually introduced me to Senator Peters. So, why don’t I turn it over to you, Pat, to start with how you come to this work?
GAROFALO: Absolutely, yes. So, I’m a recovering journalist. I spent a bunch of years writing for some progressive publications and some mainstream ones, most notably U.S. News & World Report. And while I was there, I did a lot of reporting on the sort of aftermath of the Great Recession and what states and cities were doing coming out of that economic crisis. And you start to notice these patterns of states and cities handing out all this money to corporations and billionaires in the name of economic recovery, and it was happening all over, all the time. And the one that really jumped out to me was Detroit building a hockey arena for a billionaire while it was literally turning its streetlights off. So, that led me into writing a book called The Billionaire Boondoggle about how states and cities mess up economic development, which led me into my current gig, giving up the journalism and going full-on on the advocacy and research and actually trying to change things for the better rather than just complaining about them.
VALLAS: Well, and as a recovering lawyer, I appreciate that you call yourself a recovering journalist.
VALLAS: The recovery is lifelong. It is difficult, but you’re committed to it. And that’s a great segue then into how you actually have come to know Senator Peters, because you all are actually really partners in this work that we’re gonna be talking about today. So, Senator Peters, it’s so great to get to meet you, and I’m a huge fan of a lot of your work. I was getting to read about a lot of what you’ve been up to in Illinois in preparation for this conversation, but I’d love to give you the chance to introduce yourself and to talk a little bit about how you ended up in the state Senate.
SENATOR PETERS: Oh, wow. I can go on forever, but I’m gonna try not to be that politician who talks 20 minutes about myself. I’ll just say that I’m very deeply connected to my upbringing. I was born in the ‘80s and deeply connected to the War on Drugs, which my biological mom was an addict, and I was put into adoption. I was raised and adopted by a social worker for a mom and a civil rights criminal defense attorney for a dad. And I think that really, sort of what led me here, like Pat, is things that happened during the Great Recession. I couldn’t find a job. I remember my dad trying to convince me to take my résumé to RadioShack. I think if everybody’s listening, they know that RadioShack does not exist anymore. And I ended up working in politics and doing organizing. And most of my organizing is sort of at the intersection of criminal justice reform, as well as economic justice issues, and think of my work as being at the intersection of that.
And interestingly enough, how I met Pat is because of Billionaire Boondoggle, and it really sort of fascinated me and piqued my interest because it was something that I was very upset about and angry about what was happening, particularly here in Chicago, but also in this country. And I made it. I became an Illinois state senator, and I just finished my fourth session there in my second term. And yeah, that’s my short way of saying how I got here: the Great Recession. Everyone, anybody who’s upset at me for the work I’m doing, they can blame the Great Recession. [chuckles]
VALLAS: And I would love to dig more into some of your experience there. And so, hopefully we’ll have some time for some of those stories because in a lot of ways, you’re really, you’re an activist and a changemaker who now is inside of government doing what you were doing outside but doing it from inside of the Illinois General Assembly. And I always love those stories. I always love those perspectives and hearing from folks who can share a little bit about making that transition and what it’s like in this moment to be bridging those worlds. So, I’d love to come back to some of that.
But part of why you guys wanted to have this conversation, and why I was really excited to have you both on the show as sort of a duo of folks working on these issues, it starts with a phrase that sounds very potentially boring and dry. That phrase is “non-disclosure agreement,” and if you wanna make it even drier, you can make it into an acronym and call it an NDA. But there’s a lot wrapped up in what that phrase means and in how it gets used. And I wanna say as just a caveat—here’s the recovering lawyer in me offering a caveat before we’re even five minutes into this conversation—I wanna offer a caveat to our listeners, which is there are a lot of types of non-disclosure agreements. There are a lot of contexts where these things come up. This is not going to be a comprehensive conversation about all types of NDAs, as they are often called.
But there’s a particular usage where they’re coming up that has a lot to do with economic development and whether conversations and policy decisions that are getting made are happening in the sunlight or whether they’re happening in the shadows or fly by night, as some might say. And that was a big part of why the two of you wanted to have a conversation on Off-Kilter about this subject. And Pat, you started to talk a little bit about your book, and I feel like that’s a great segue into what this issue is. So, I’m gonna kick it back over to you, Pat, to talk a little bit about what is a non-disclosure agreement, and how did this first come to your attention as something that matters to people who care about economic justice?
GAROFALO: Yeah, absolutely. So, as you said, there are lots of non-disclosure agreements. I think the one that most folks are most familiar with is in the employment context, right? An employee being forced to sign an NDA with an employer saying that they can’t say certain things about what occurred to them in the workplace, usually in a harassment context. A lot of states have actually moved to ban that practice. That’s not what we’re talking about today. That is very important and often horrible.
What we’re talking about is non-disclosure agreements in economic development. So, this is when a corporation comes to a state or a city and says, “Hey, we want a bunch of money to take a specific action.” These deals happen all over, all the time. If you think of Amazon’s HQ2 or Foxconn in Wisconsin, those are really high-profile examples, but they’re all over, all the time state, local, county. And oftentimes the corporation will demand that the public officials who are negotiating the deal sign a non-disclosure agreement which states that they cannot disclose anything about the deal, often up to and including the identity of the corporation that is going to be receiving public money until the deal is done and dusted. I have seen governors sign these agreements. I have seen State House member sign them, city councilors, mayors, and then people who work for public economic development offices. So, usually, states and counties have a staff that does the sort of nitty gritty negotiating work. And so, these deals say that while that negotiating is coming on, you cannot, you, a public official who is deciding what to do with public money, cannot come out and say, “Yes, we’re negotiating with Amazon for a tax break for a warehouse. Yes, we’re negotiating with General Motors for a tax break for a new factory.”
And there was a really high-profile example recently I think will really bring this home to your listeners. Kansas was debating a $1.2 billion economic development deal with a single corporation. We still do not know who this corporation is. There’s been some reporting that it’s Panasonic, but don’t know for sure. Even though the deal has been passed onto the State House, signed by the governor, we still don’t know. And the people who were in the State House, in the Kansas State House, voting for the billion-dollar handout to a specific corporation did not know who they were voting to give this money to. Only a few of them were privy to the corporation’s identity. And it wasn’t just the corporation’s identity, it was literally where in the state the proposed factory would be located. So, you had members of the State House voting to give a billion dollars to a mystery corporation, literally not knowing if it was gonna be on the other side of the state from their district or not.
And I was watching the debate over this happen. I watched the committee hearings and the actual floor debate, and you kept seeing the State House members say, “The firm. Oh, we’re doing this for the firm. We’re gonna do the firm. The firm promises to do” X, Y and Z. And you’re sitting there, and the absurdity kind of hits you. They’re saying “the firm” over and over because they literally don’t know, or they’ve signed an NDA, meaning that they cannot say. The goal of these NDAs is to keep—and we’re gonna get into this more later, I’m sure—is to keep the details of these deals under wraps until it’s too late for the public to do anything. And they’re just pervasive. They’re everywhere. I’ve built a little database of these deals. They’re all over the place, all over the country, all the time. And this was maybe too long of an explanation, but that’s at its essence, what it is, is corporations coming to public officials and saying, “Hey, sign this document that precludes you from saying anything about the deal we’re about to make.”
VALLAS: And just hearing you describe the way that the things actually get talked about on say, the floor of a legislative body, right, with everybody calling it “the firm,” I have to say what was coming into my head as you were saying that is it’s almost like the old John Grisham movie, right? The adaptation from the book where everyone’s like “the firm, the firm!” So, I’ve got this nefarious, scary people in suits all talking about the firm in my head as you’re saying that. Senator Peters—
GAROFALO: It’s actually wild. Sorry to interrupt.
GAROFALO: But you had a few of the State House members who were like, “Hey, this is kind of messed up. We’re voting to hand out a billion dollars, and we don’t even know who it’s going to.” But then you had other folks saying, “Oh well! Guess we just have to trust the process.” And it really, and again, this happened. It’s not just at the state level. There was an incident in Fort Wayne, Indiana, where half of the City Council was voting on a tax break for Amazon, but they didn’t know it was a tax break for Amazon. So, people were voting yes and just having to sort of trust that the people who were privy to the details of the negotiation knew what they were doing and were gonna get it right.
VALLAS: Right. As a former Philadelphian, I have to say, a phrase “trust the process” is—
VALLAS: —those are loaded words, Pat! You gotta be careful when you say that. But—
GAROFALO: That’s exactly what came to mind.
VALLAS: Right, right, right! Senator Peters, how did this come onto your radar in the first place? I mean, Pat’s, I think, given a really helpful starting point for understanding how non-disclosure agreements, or NDAs, are starting to get used in really big moments of economic decision making at the state level. How did this first come onto your radar?
SENATOR PETERS: Yeah, I mean, so, let me first say Pat is like a wealth, an encyclopedia of knowledge when it comes to this. I think I was complaining about some of the Amazon distribution centers that were popping up in the South Side and South suburbs in Chicago and Cook County. And the rate that that was happening, combined with a story about basically a form of wealth extraction that was happening, and who’s paying for many of these economic deals that are happening in the South suburbs and South Side. And it’s extremely frustrating because it’s usually corporations that underpay, overwork their employees at the same time as they’re draining money from whether it’s a city or a community or a small town or village. And then at the same time, they also participate in a heavy amount of criminalization of the same people that they’re essentially taking the wealth from or overworking and not supporting, or in this case, also union busting. So, there’s just a variety of different things that made me absolutely livid combined with, I think, the fact that taking advantage of Chicago as a transportation distribution logistics hub, that would even cause more onset problems on a larger economic scale.
And so, I was just really just upset. And I think I’m pretty sure I was ranting or messaging Pat about how I was upset, and he put me onto this. And I was like, this is a problem. And I am trying to hold— I’ve been told I’m not allowed to curse. So, let’s just say my foul mouth was going off on all of this. And that sort of led me to say, okay, well, we need to actually start picking at the breadth, this large-scale economic development that I would say often is a scam with a whole host of false promises and pits communities against each other. And that is fundamentally a race to the bottom that doesn’t really do much to change the economic outcome of a struggling working-class community, particularly struggling working-class communities of color. And so, that’s sort of what led me to this.
And so, it really comes back down to the genius that is Pat Garofalo and the fact that progressive organizing that has been happening for a long period of time, especially coming out of the Great Recession, and the fact that we just have a long history of so many institutions and companies making promises about what’s gonna happen, and they never really seem fulfilled. It’s over and over again, the same thing. And then, they throw out things like, if this sector comes, it’s gonna do $80 billion in economic, you know, to be an economic engine at $80 billion or something like that. Which you never can actually track if that’s really gonna happen or true. And then when you finally do the data on there, and it doesn’t fulfill it, well, it’s already there. That center’s there; that headquarters is there. And I think it’s just still a fact that being upset at the false promise of all of this and the amount of nefariousness that goes on led me to say, okay, well, we need to start picking up this.
And especially because Illinois is just prone to this. Chicago in Illinois is just prone to having this and having competition between the city and the county, the city and downstate, central Illinois versus downstate. So, it could be electric car manufacturers promising to produce a whole host of cars in central Illinois. It could be a distribution center promising a whole host of jobs. It could be Amazon promising to have strong, well-laid foundations of their distribution centers collapsing in southern Illinois. And you just see this over and over again, and I think for many people, we’ve had enough.
VALLAS: Well, and I wanna pull on a couple of those threads because for folks who are really familiar with this and already are working on this, the dots may already be connected. But for people who are coming to this and are going, “Okay, I’m interested. This sounds a little fishy to me, but I wanna know more,” connect some of the dots to how this really, actually plays out and how non-disclosure agreements can end up providing cover for, as you’re describing, broken promises by corporations that sound really good when they’re trying to come in and talk lots about creating jobs and all the things that you hear from those types of moments, but then end up turning around and leaving behind the communities that they pledged to help when they were trying to get in the door for that headquarters or whatever other type of setting up shop. Pat, you started to talk a little bit about this as I was asking the question in the context of how this connects to economic justice. But go a little bit further for folks who maybe are new to this issue and who might be saying, “Okay, this sounds fishy, but is this really that big a deal?”
GAROFALO: Yeah. So, stepping back. States and localities in the U.S. spend up to $90 billion a year on company-specific economic development incentives. So, these are handouts from the state or the city or the county to a specific corporation for a specific thing. I say up to $90 billion because there’s so much opacity in this policy area due to NDAs and a host of other things that we actually don’t really know how much of it is going on. But best guess is somewhere in the neighborhood of $90 billion is spent on this stuff. So, that’s some real money, right? And the vast bulk of the economic research on this area shows that it doesn’t work. Giving handouts to specific companies to do specific things does not cause any of the positive economic benefits that we think it does. If you look at any economic metric we care about—jobs, economic growth, income—nothing. It doesn’t help on any of those.
What do these deals drive up? Income inequality, corruption, vote shares for incumbent politicians, they’re used as a political tool. And you can actually go back through history. The very first corporate tax incentive in United States’ history was actually given to Alexander Hamilton for a manufacturing campus in Paterson, New Jersey. The campus was never built, and a bunch of Hamilton’s associates wound up going to jail on corruption charges. So, he really set the tone going forward.
But the modern-day economic development complex that has developed over the last 50, 60 years, corporations have told us that the way to develop local economies is to hand a bunch of money to corporations to do specific things. They will bring jobs; they will bring investment. And it hasn’t paid off for anything but folks who get to go out and brag about making—air quote—“great deals,” and they’re already gone and moved on by the time the bill actually comes due in local communities. It’s a form of, as the senator said, wealth extraction. It pits communities against each other. It takes money away from the things that actually build local economic growth and local wealth: things like infrastructure, health care, local businesses, investing in workers. But they’ve got this really great story that they tell.
And then they layer on top of that really great story a process that is very secretive, that’s covered with complicated regulatory processes, closed door meetings, these non-disclosure agreements that we’re talking about. So, they get to have all of the publicity—and when I say “they,” I mean the corporate leaders and the folks who are negotiating these deals—get to have all of the publicity and none of the accountability. Their deals don’t get scrutinized. There aren’t folks going back and looking at these after the fact, as the senator said, until it’s often way too late to do anything about it. And that’s all intentional. The system has been built to exclude the public, to exclude local stakeholders, to exclude local businesses, right, who are having to compete against their usually national or multinational and subsidized competitors. And it’s all meant to perpetuate this system of extracting wealth from communities and getting it into corporate coffers in the name of doing good things for those local communities.
VALLAS: I love so much that, of course, it goes back to Alexander Hamilton. I did not know that story. That’s amazing, and I sort of feel like maybe there’s a missing song in this, right? Like, maybe this is the verse we didn’t know about, like in the room where it happens or something, right? About, like—
GAROFALO: In the room where you got scammed? [laughs]
VALLAS: The NDAs, right?! Yeah, that’s perfect. Senator, you were about to get in.
SENATOR PETERS: Well, yeah. So, what’s interesting on the political side is how much the bogeyman of Detroit is used, particularly here in Chicago. But anytime you’re talking about economic development, and you’re talking about, “Oh, I don’t know if this is gonna be a good deal. You know, the history is no good,” you get then all of a sudden, “Well, we can’t become like Detroit.” Which is, first of all, insulting to Detroit, but it’s always used that way. And it also plays into the insecurity of cities and localities that are like, we don’t wanna be like X, Y and Z, or we want to be like it. So, either, “We don’t wanna be ‘like Detroit’,” or “We are as good of a city as New York” becomes a thing that happens. And fundamentally, though, if you wanna have a good, healthy city, I always say the most important things that you can provide for people is a good job with good housing, being able to get from point A to point B.
If you ever look in some parts of the South Side and South suburbs, there’ll be a bus stop, and it’ll be in the middle of nowhere with no actual, real, tangible economic development. And it will lead then generally to places like a distribution center where there is, again, not a lot of housing, not a lot of other development going on. It just sits there on this cheaply made sort of distribution center or manufacturing center. And so, you’re going from one point where there’s clearly a need where we could put all this investment and stabilize people’s lives, and you’re on that bus to go to work on an underfunded public transportation system, again, that could use the economic investment and use the public’s money in the right way to go to a place where we’ve put a lot of money, where there’s nothing else really around it into this cheaply made facility to go work and to be pushed down. And if you are upset about that or you’re not happy about it, you are inherently then trying to turn the city or the area into 1970s New York or, Detroit during the aughts and 2000s.
And we can’t actually get to the fact that what we’re doing is pushing people into that space anyway, because we’re literally handing money to people. We’re handing money that could go to much better things to people who have an amount of money already who oftentimes are going to come to the area anyway, again, especially in the district I represent and the city I live in because it is a hub; it is a transportation distribution logistics hub. It would make a lot of sense for you to do the manufacturing need here, to do distribution here because we have two large airports. We have a giant inland port when it comes to railway. We’re one of the few areas where every major railway hits and intersects. It just makes a lot of sense. And so, at the end of the day, they’re just trying to squeeze out every penny they can out of that locality or out of the state for profit. I mean, that’s inevitably, that’s what they’re doing. They can see how far they can go. And then also, they’ll pit one town against another town, knowing that those towns have rivalries that are going on. And oftentimes people will vote or support on something, as Pat has mentioned, without even knowing what’s inside the economic development deal in the first place.
It is extremely frustrating, and I think the term that was very popular back in the day that I’ll bring it back here, it feels like getting gaslit over and over again when you try to bring up concerns around this: “Well, what this is gonna do to the economy of my area?” And I’m like, “How much has the economy actually fundamentally changed in your area over the last 10 years because of these deals? And if it’s been relatively stagnant, then what have you been really doing here? You’re just playing a game that’s a race to the bottom and actually not helping out the constituents most in need.”
VALLAS: Well, and Senator Peters, I wanna stay with you for a moment because a big criticism that you have levied is that these are not just, these non-disclosure agreements, this way of doing business, this isn’t just harming low-income communities, this is just bad for our economic policymaking. It isn’t just bad from the standpoint of economic justice, it’s also disproportionately harming Black and brown communities who you disproportionately represent because of your district, the Thirteenth District of the Illinois General Assembly. Talk a little bit about how Black and brown communities are in particular being harmed. And that, I think continues the case study of Illinois that you’ve been laying out.
SENATOR PETERS: Well, so, it’s important to know the first thing is where they oftentimes put a lot of these, you know, this sort of infrastructure. It’s almost always in the most segregated parts of Chicago and Cook County. So, it’s oftentimes Black and Latinx working-class communities. So, you don’t see these generally focused in some of the nicest parts of the City of Chicago where people would not be up for it. Oftentimes the debates that happen around this—we can get to, we’re getting to the extraction part in a second that’s on the clear charge [unclear]—but just the debates around this can be anything from how much money we’re giving away to how much pollution’s coming from the trucks to—you’ll see this in Latinx community here in Chicago—they got rid of a bike lane, one of the few bike lanes that you actually have on the South Side of Chicago. It’s completely gotten rid of to make way for an Amazon distribution center that makes it extremely dangerous if you’re riding a bike. That basically means it’s you versus a semi. That’s not really safe for a biker, in my opinion. Or they put it on the sidewalk, which is not how that’s supposed to go anyway, to accommodate the semi. So, a whole bunch of infrastructure debates happen, and these only really happen particularly in an area that already is struggling when it comes to infrastructure investment. So, there is that.
Then the other part is any time when you see these deals happen, they particularly happen, I would say, in working-class South suburban communities. And those are majority Black communities. And there’s a lot of history here where a lot of folks who lived in the projects were pushed out to the South suburbs with very little investment. And then their money is being used to help fund an economic deal, basically through a whole host of tax breaks that’s coming out of their pocket where they already have an underfunded and overstretched. And then they have to compete with other communities nearby who are trying to cut the same deal over and over and over again. You have both of those different levels of extraction and disinvestment happening at the same time. And that is, I think that’s just utterly problematic because we don’t have these debates in any other areas. And if you push back against it, you’re saying you’re, again, against economic development in your community.
And let me just say lastly, there’s no guarantees on who gets hired to work in this, with this level of infrastructure. So, there are people who could be traveling distances to work there because nothing is guaranteed on who gets to actually work in the distribution centers that are being built, particularly in the South Side and South suburbs. That’s not a guarantee. And even if you use language to try to tighten that up, it becomes an extremely negotiated part of the process. And that is publicly negotiated, but the wording can be even real hazy. So, there’s a lot of traps and pitfalls that happen, and you see this playing out. And it keeps getting, there’s more and more of this happening, particularly in the city and the suburbs.
VALLAS: And Pat, I feel like this probably is obvious because of where you started, but I wanna just be clear, as much as we’re focusing a lot of this conversation on Illinois because of where Senator Peters is a representative in elected office, this is a nationwide problem. And that’s a big part of what the American Economic Liberties Project is really trying to call attention to through a lot of the work that you’ve been leading. You started to offer some of the examples, HQ2, the New York Amazon deal that got a lot of attention when that was playing out because we had a lot of not just national press coverage, but we had a lot of federal elected officials like AOC and others who were all kind of part of that conversation. But it isn’t just a New York problem, either. What do folks need to know about how widespread the practice of using NDAs in this economic development context has become? Is that something you’ve looked at as you’ve been thinking about the solutions here?
GAROFALO: Yeah, absolutely. And I think actually, the HQ2 example is so instructive. So, that deal was really covered up by NDAs. No one really knew where they were going to put that facility until Amazon made its big, glitzy, splashy announcement. And so, New York managed to chase its share away, and that was absolutely the right call. But there actually is still the Virginia half of HQ2 is still coming in the Washington, D.C. suburbs. And that’s actually a really important story because where it’s going—this gets at some of what Senator Peters was saying—was one of the few still kind of affordable, and at the moment, heavily Central American immigrant areas of that part of Northern Virginia is where HQ2 is going to go.
And at the time, I was screaming about it because there was a study that came out that showed that if HQ2 happens, 10,000 low-income, mostly Central American, immigrant people are going to be displaced by this new facility. And there was absolutely no plans at the time for what to do for them, how to help them. It was not on the table. None of the Virginia officials involved wanted to hear about it. And then just this last week, we saw a story in The Washington Post that showed that the affordable, again, air quote, “affordable housing” efforts that are being undertaken are actually not being successful. They’re helping middle-class and affluent folks, and the people who’ve been most harmed by HQ2 are still getting no help.
And Amazon is actually funding affordable housing loans in the area, which aren’t helping the poorest of the poor, but are helping some middle-class folks. So, Amazon is making a profit on loans off of the giant economic development deal that caused the displacement to happen in the first place. And so, as I talk about, that deal was covered up. And so, when it was finally announced, there was no real time to organize successfully against it in Virginia, it was just like, okay, it’s done. It’s coming. Here it is. And now we’re feeling the effects several years down the line. I think this is just a really instructive example of how this process works.
But these NDAs are all over. They’re all the time. They’re hard to track because by their very nature, they’re secretive. So, you usually only find out about them because someone spills the beans, or there are a few sort of little hints that you can look for in the documents and in the way that local officials talk about these deals that can kind of clue you in to the fact that there’s an NDA there. By their very nature, right, you cannot disclose unless you admit to having signed one. Then we don’t know they’re there.
But I’ve noticed them all across the country at all levels of government, which is actually why we launched a coalition called Ban Secret Deals, which is focused on not just Senator Peters’ good legislation, but the legislation in a few other states to try and start knocking this practice off at the state level. We have a bunch of great national-level partners, a bunch of great state-level partners, liberals and conservatives involved in it. ‘Cause it’s one of those weird issues where there actually is some bipartisan buy-in because this really is just endemic in the way that we have decided we do economic development in this country.
And actually, to take it back to Illinois for a second, there was a great investigation in WBEZ, I wanna say maybe like a year and a half ago, about the wealth extraction that Amazon was doing in Black and brown communities in and around Chicago. And one of the things that jumped out at me at the piece was you had the folks who were negotiating the deal would just say, well, when asked, “Why did you sign an NDA? Why did you do it this way,” they would just say, “Well, we have to. This is just how it’s done.” That was, I think a direct quote was, “Well, this is just the way it goes. This is what we have to do.” So, the corporations and the folks involved have really sold this story that this is just the way business is done. This is just how economic development happens in this country, and that’s totally wrong and incorrect. But they’ve done a really, really good job of selling this story that there is only one way of doing business, and it’s this way.
VALLAS: So, the campaign is Ban Secret Deals. We’ve got lots more about it in show notes, as we always do, also on our little nerdy syllabus page Off-Kilter, TCF.org/Off-Kilter is where you can find more on that. But I wanna hear lots more about it before we part ways.
But Senator Peters, your legislation is a big part of this campaign, as Pat mentioned, is really a model for other states. Talk a little bit about the bill. What is the solution here? How do we ban secret deals? And I would love to hear also about how this is something that is appealing to conservatives if it is something that does have strange bedfellows’ support.
SENATOR PETERS: Yeah. So, I think the bill’s main focus is to sort of, again, ban the use of NDAs in economic development deals. I think we have a very small part that we try to protect in terms of having some conversations. I need to remember the amendment, but it was very, very, we tried to limit it, but mostly, it’s the idea of both states. If I remember correctly, we did it pretty broadly with state, city, county. Am I missing anybody that we also included in this? Very broadly not to engage, I think, in NDAs or secret, like basically, a transparency effort around what they’re negotiating. The public’s involvement and engagement in the economic development deals is in there, and a very small piece, I think…. I can’t remember what we did. It was like a whole thing where I was like, I don’t know if we should include this or not.
But the main purpose is to make sure, like, I’m gonna use the state of Illinois. When the state of Illinois is negotiating with some corporation, and they have an NDA, people like, for example, myself, the level of involvement we may have with it as well as the public, if that’s something that’s essentially kept out, and they said they can’t really talk about it, it could blow up the entire deal. How are we even supposed to make a vote on such a deal, as was pointed out in Kansas? And the idea is then, that puts me and puts other people in the legislature in a position where we’re basically told we have to do a thing with very little detail and without enough information. But we have to trust that process. And that is something that we wanna kind of move away from.
We don’t do that for anything else. That’s nothing else we do in the state to say, “Trust the process,” especially in Illinois, and just sort of move away from that. And I think that’s really sort of it. It’s kind of the crux of what that, the crux of the campaign itself is kind of pretty straightforward. And it’s to make sure that there’s greater transparency and greater involvement in what’s happening in terms of economic development deals and to reduce the sort of race to the bottom where you can have—
You know, there’s been situations where Georgia and Illinois have been in some level of competition over electric vehicle manufacturing and infrastructure development, and not to get caught up into this sort of battle it out situation when we’ve already done a lot to transition a closed plant which is already there to a company to make sure that they can use it. I don’t know what else we need to give them. But the fact that came out last minute was something that was particularly concerning. And now that they’ve added Georgia to sort of compete on this manufacturing front, it’s just a shining example of how these things tend to work out and that the public doesn’t really have, they don’t really know much until people like myself speak up or till some intrepid journalist speaks out, speaks up, or some organization catches wind and sort of talks about it and goes after it. And finally, then the public might have an understanding of what’s happening. And it’s shrouded up in secrecy, or that it’s already being pre-sold as the next greatest thing that’s gonna happen to a state or a locality without actual real engagement.
I think it’s just, at the end of day, it’s about the fact that without transparency, it’s easy to have a race to the bottom, and it’s easy to pit people against each other. And it’s also easy to get people to make a decision around a vote that can get them in trouble without even really knowing it. Because you’re telling that person, such as myself, to trust a thing where we don’t have details is a very risky proposition, not just to the community, but to the elected the community is supposed to, the person who’s supposed to serve for. So, that’s sort of the idea behind the bill. And my hope is that we can maybe get this moving. There are a lot of folks who have a lot of vested interest in this. I think the main point here is—and we can get into larger detail about some organizing going on that connects these things together—but that sort of answers the second question, so.
VALLAS: Yeah, we should, and I would love to get into some of the organizing as well, ‘cause you’ve really got that perspective from the inside and the outside. And I’d love to hear about how some of that is coming together. Hearing you say, “We don’t just say ‘trust the process’ in other kinds of policymaking,” right? I mean, coming into my mind at that moment was like, just imagine if we were having a conversation about, say, I don’t know, public assistance, right, and a state wanted to, had some lawmakers who wanted to make sure that people who were struggling to afford food and housing and health care could actually make ends meet, I don’t think you would hear “trust the process,” right? You certainly wouldn’t hear, “It’s fine. We won’t tell you who these people are who are gonna get this money,” right? It would take all kinds of analysis, and there would be scores and cost analysis and all kinds of layers of scrutiny. And then there would be all kinds of program integrity rules put into place to make sure that we didn’t have a single dollar that went to a person who wasn’t eligible, right? We could go on and on with what we know that conversation would look like because that happens all the time when we’re talking about money going to not wealthy corporations, but say, folks who are struggling to make ends meet. But in this context, “No, no. It’s money for an unnamed firm. Just trust the process,” right? It’s like double standard doesn’t even really begin to scratch the surface of what we’re talking about here. I also, I really hope.
SENATOR PETERS: If I could—
VALLAS: Go ahead. Yes. Yes.
SENATOR PETERS: It’s important to note that oftentimes when this happens, the information about what’s happening in an economic development deal is led by the company getting the deal on what’s gonna happen. So, you would have Corporation A wants to go into, let’s say, Illinois. And then they come. They say, “Well, we did an economic impact study. So, we did our own economic impact study, and we worked with this trusted firm that we paid for. And what we can tell you is that it’s gonna do X, Y and Z. So, you just need to know that that’s what’s gonna happen.” And what they do know is that it…. Like, I’m not gonna pretend I’m the world’s smartest person ever. We’re busy. We have a lot of things we have to work on. So, how many times you’re gonna question someone when they start talking about their economic impact study, and then they fill it up. They’ll just use a whole bunch of buzzy words that sound great, with multiple syllables, that may have nothing to do with what’s actually gonna happen. And you sit there, and you have to ask yourself, do I wanna risk it? Do I wanna challenge this? And am I going to win this argument? Or is it better for me to just be like, “Cool. I trust you. I’m moving on?” And the issue is that you have to then go, “Okay. Well, actually, what we wanna do is our own study.”
So, there was somebody trying to do an economic development deal here in Chicago, and they were doing that buzzy, big economic, “We have our own economic impact” thing. And I just kind of, I just laughed, and I said, “Well, I would also like to, can I find out what model you used? You used modeling. I would like to know what model you used. I’m gonna send this to someone to also do some modeling, and I just wanna check.” They did not wanna talk to me after that. They’re just like, I don’t wanna talk to you anymore. Like, that’s not a question you’re supposed to ask. You don’t ask that question. And I said, “No, no, no, no. My uncle did a lot of economic development stuff.” This is where we had some disagreement, was that compact. And he did this stuff! So, I was like, “I would love to send it to my uncle so that I can get my own independent review of what you’re talking about right now.” And you could just tell there was an immense amount of frustration. And so, that’s a thing that happens.
And a lot of that is because of the secret of like, how secretive these deals are, is that you can actually even make it more secret if you’re providing the information to the different stakeholders and saying, “We’ve already done the work for you on what’s gonna happen here. You don’t even need to do it. I’m giving you this information.” And so, then at that point, you have to say, a, is it worth me questioning it? Because it’s a whole host of things that go on there. And b, am I gonna even understand what I’m looking at and how this is gonna work? And I always say that there’s actually a lot of people who will read economic development deals and read the modeling going on and come up with their own assessment.
So, the question to ask isn’t to say, “Can I get your economic impact study?” It’s, “Can I get how you came up with these numbers so I can actually compare that to what could actually really be going on here and give this to someone else?” And then that point, it’s not about whether you’re specifically questioning them, it’s actually the fact that you have someone independent, which I think is an important part of this, coming up with how this policy will actually play out for the community and for the state. And I think that, to me, is what you almost always see, is someone else, especially if they’re large, has already consulted with a firm to come up with their solution to how it’s going to improve things. And it’s not even the state or the local municipality that’s coming up with those numbers. It’s literally coming from the corporation themselves.
VALLAS: It’s a pretty slick effort at preempting any kind of due diligence or critical thinking, right? It’s, “Oh, don’t worry! We’ve already done all the analysis! Here you go. We aren’t gonna tell you what assumptions we made. We aren’t gonna tell you what went into this model. But don’t worry! You’re really gonna like the analysis ‘cause it’s gonna tell you that all of our promises will always come true.” So, it’s really, really important getting into how the sausage gets made. And I love the legislator perspective here, right, as you’re sitting up there on the dais being handed the slick folder.
I would love to give both of you a chance to talk a little bit about the organizing going into this, how this campaign is being received, some of the other states maybe, Pat, that you think might be getting into the game. But I also really love giving guests on this show the opportunity to kind of take down the straw man. So, I wanna do that quickly for anyone who’s listening and still kind of wondering.
Pat, you alluded to this before that there’s kind of a talking point out there that, “This is just how business happens. This is just the way this is done,” right? And that is often sort of an unstated limiting belief in policy making that causes people to say, “Well, I guess I’ll just work within the system the way things are done.” Is there, for anyone who’s wondering, is there an argument to be made that states who might take up sort of sunshine policies or transparency policies like what Senator Peters is championing are gonna put themselves at a disadvantage compared to other states that don’t do this because then they’re gonna be the people that businesses don’t wanna do business with? And is that part of the game here? How do we address that kind of a concern? How do you respond if someone says that?
GAROFALO: Yeah, I think that’s probably the best talking point against it, but I don’t buy it. And the biggest reason is that because most of the research shows that individual economic development deals have no bearing on where a company actually decides to locate. And that makes sense, right? Tons of stuff goes into a particular location decision. You need the right workforce, you need access to your customers, you need the right infrastructure, you need the access to your supply chains. Do you wanna be in a place where people want to live, generally? And so, the studies have shown that anywhere between 75 and 95 percent of economic development literally had no bearing on where the company actually chose to locate. They just pocketed the money and said, “Thank you very much. You’re paying us for what we wanted to do anyway.”
So, I think if states start saying, “Hey, we wanna bring this process into the sunlight and doing right by the public, doing right by taxpayers, doing right by our local workforce,” they are actually going to find that nothing dramatically changes for the worse. They’re actually going to be a more attractive place for a lot of reasons. So, I just sort of don’t buy that this process needs to happen behind closed doors. And honestly, it’ll be better for the public because something that corporations depend upon is information asymmetry. The fact that Senator Peters can’t go and talk to his counterparts in Indiana or in Minnesota about what’s going on in order to craft a better deal for his state, they wanna have all the information for themselves. So, I think in the long run, you will actually drive down and maybe even potentially eliminate the high cost of these economic development deals by allowing the people making the decisions to share information with each other. Because again, the explicit goal of these NDAs, right, is to cut the public out of the process.
There have been documents FOIA-ed from Google where folks were very explicit: “We want this NDA because we don’t want the public to get involved in this subsidy decision” because then we might have problems. And I think Senator Peters is right. There are tons of people out there.
And from doing this work, I write a newsletter called Boondoggle, and from being out there in the wilderness, there are lots of people who just in their spare time want to see these documents, want to get involved, want to know what’s happening in their community, want to scrutinize these deals. And so, the NDAs are really explicitly meant to cut them out. Local businesses, again, that are seeing their money go towards their often dominate competitors, like if you’re a small retailer in New York or Illinois or Pennsylvania or wherever, and you’re seeing the state subsidize your most dominant competitor? Of course, you have an interest in that and a stake in that debate.
So, I think folks would get involved and actually would push us towards much better, more inclusive economic development policies writ large. So, I just don’t buy that this stuff has to happen in secret. And again, that’s just a story that we’ve been told for 50, 60 years that this is the way it has to be. And there are plenty of places that don’t do this, and their economies are fine. So, yeah, just, I just don’t buy it, there will be that knock-on on anyone who goes first.
But I think particularly when you’re talking about a place like Chicago, which is appealing for tons of reasons, as the senator laid out, folks wanna do business in Chicago. That’s the absurd thing about Amazon going to New York, right? You’re telling me the most dominant e-commerce company on Earth doesn’t want to be in New York City if it can’t get a billion dollars? Like, come on. And it’s expanded in New York since, exactly proving the point. So, I think particularly in places that have some strong economic policies—and we had a good budget come out of Illinois recently, a lot of good stuff in there—so, for places that are doing things right, I think they will find that their economies do better and that they do have more inclusive economic development, real economic development, over the long run if they were to shed some of this secrecy stuff.
VALLAS: And Senator Peters, I don’t know if you wanna get in on that as well. You look like somebody to me who likes to take down straw men.
SENATOR PETERS: I mean, I think the main part is that if everybody in the country is already doing these NDAs and race to the bottoms and giving out as much money to as many corporations as possible, and that we have not seen actual true systemic improvement, then I think I’m creating a new straw man. I don’t know. But then we kind of have an answer to what this whole competing against each other, they’re gonna go somewhere has already kind of done. Like at this point, the result is, okay, well, everybody’s actually already doing this. It hasn’t fundamentally changed working-class communities and even the lower end of middle-class communities for the better during a state of stagnation that’s absolutely brutal. We should actually switch it up and see sunshine and transparency as an economic development advantage.
Because the other one is that we can actually start preparing, if we’re gonna put investment into something, where should that investment go that’s gonna actually maximize the return on that investment or maximize the…or improve the life and the quality of the people who live there? And once we can actually make that clear determination, then we can actually truly see the gains of economic development. But when you can’t do that, and you can’t do that until way after the fact, then you’re never gonna get, you’re never gonna be able to make the best decision on what needs to happen for a particular community or state.
So, the best way to put this is often, it used to be Illinois was always concerned about Indiana. That’s always like a thing that happens. But the one that I think always shines through is California versus Texas where there was this whole thing about economic development between California and Texas. But what I would say is California’s biggest issue is actually housing. So, [chuckles] it’s not one corporation moving to Austin that’s the issue. It’s actually the fact that if someone’s even trying, if they’re working class, trying to get a starter home, California has been a particularly difficult place to do that, or you see high rents and that the debate on economic development should be focused on are we improving people’s lives through housing? Is that where we need to put investment? So, it’s funny because the debate’s always centered on like, someone wanting to put a Gigafacility or whatever in Austin compared to in someplace in California. And then they’re like, oh my god. This is where California’s gonna lose to Texas, and oh my god.
But maybe the actual one that we need to focus on is how much investment are people gonna do for the people currently staying there so that they can stay there? And what is their biggest concern? And from what I understand, it seems to be very housing heavy combined with a whole host of things on climate change. And it just goes to show that oftentimes when we have these debates, they’re actually disconnected from what people are telling us they seriously need.
So, if you think about here in Cook County—so, I’m in Chicago. Cook County’s the county—people in the South suburbs have been worried about housing. They have issues with infrastructure and water. That’s a whole thing that we don’t talk— Literally, people are paying extra money to get water from another community because they can’t drink water in their own community. So, you have that going on. You have a whole host of things around pollution and the fact that schools, the difference between how much they spend on property taxes, 30 percent of their income going to pay for schools in the South suburbs. So, kind of telling you if you have money that you can give to people, how about we reduce the burden when it comes to property taxes? And what if we could actually drink our water? And that’s more likely to do and give people what they need, especially since most of them aren’t even gonna actually work in the facility that’s gonna be built there in the first place. So, that’s my long rant there, answering that question, I think.
VALLAS: No, I appreciate it so much. And also, I mean, I think where you landed there is just such an important place for us to continue to come back to in this conversation because the money isn’t coming out of thin air. And what’s happening is policymakers are making choices about what to do with state budgets. Budgets are moral documents. Budgets are about who are we prioritizing. And so, ultimately the money’s gonna go somewhere, to oversimplify the state legislative and state budget process only slightly. The question is, is it going into the fat cat corporate pockets, right? Or is it actually going to the communities that those said fat cat corporate pocket owners are promising to do things for, that, as you pointed out, are generally just a lot of blowing smoke before a deal gets struck? Pat, you were about to get in there as well.
GAROFALO: I mean, I think that the senator is exactly right, and I think it’s important to think about how we’ve warped the term “economic development.” Why is it economic development to give Tesla $750 million for a new factory, but replacing those pipes and putting new ventilators in the schools and fixing everybody’s potholes isn’t economic development? But how is it the case that we have defined this term down and so narrowly to mean this one specific, highly ineffective thing? And I think a long-term goal of mine and of the folks who are in the coalition and a lot of people who work on this issue is to completely change the terms of that debate. Investing in people is economic development, not investing in corporations. Making a place as appealing as possible to live, work, raise a family is economic development. And that honestly, at the end of the day, is going to draw businesses in because businesses want to be in places where people want to live and work and raise their families.
VALLAS: And we’ve had a series going on at different points this year on Off-Kilter about putting people at the center of policy change, right, and what does that look like across issues? I feel like you just summed that up really well when it comes to what it looks like to put people back at the center of economic development where people were supposed to be at the center in the first place. But we’ve had a, shall we say, a little bit of mission creep.
In the last few minutes that we have, I would love to give both of you the chance to talk a little bit about where this campaign goes from here, some of the organizing Senator Peters was talking about. And maybe that’s a good way, Senator, to give you a chance to talk a little bit about what it’s like to be doing this work from inside the legislature as really someone who is an activist at heart.
SENATOR PETERS: Yeah, I mean, I think Pat can talk about the larger organizing effort that he’s been really leading on and building here. I think in Illinois, I think that there has been, there’s a tug and pull on some of this. People are increasingly upset. Organizations that generally kind of focus on economic development deals but not at this level are starting to wrap their arms around this concern. And then to add into it, we had a very tragic incident down in southern Illinois with the tornado and the collapse of a Amazon distribution facility, where it turned out that they’d built without, I believe they didn’t even have a foundation really on parts of the facility. So, it was susceptible to storms, leading to a massive loss of life. There was a whole host of things in which they were texting people not to seek protection. It was just a really horrible tragedy that shined a light onto the extent that these economic development deals and the lack of transparency around them are fundamentally actually hurting and killing people. It’s a real problem.
And I think a lot of people who kind of focused on one part of that, so the people focused on people who work there, started seeing we need to actually start coming around these transparency fights. People who are small businesses who feel like they’re not getting the amount of support that they actually need at the state because it’s going to these large corporations are starting to jump in into these fights, and it’s starting to actually have different places of where good government, small business development, workers’ rights, and all that kind of come together as part of a campaign. And that people who didn’t think that they would be interested in this are deeply invested in this because they understand that this is a behemoth of an issue that requires a broad coalition to deal with it.
VALLAS: And Pat, you’re gonna get the last word in our last minute. Use it well, my friend.
GAROFALO: I think that’s exactly right. Yeah, there were two sort of galvanizing moments. The first was HQ2, and then the second was the pandemic. And I’ve just noticed such an uptick in interest in this from stakeholders all over across the political spectrum, folks who don’t work together on very much. You have businesses and the employees that may not like their employer but joined together on this issue. I think the senator’s exactly right that this is at the center of a lot of the debates that we have at the state and local level about how to build those economies and how best to spend what, at the end of the day, are finite public resources. And that if you can’t have the community putting their own two cents in over how their own public resources get spent, then not only are you gonna end up with an economy that doesn’t work for the local community, you’re gonna end up with a democracy that doesn’t work for the local community, right? ‘Cause at the end of the day, what we’re talking about is local input into local decisions and being able to hold businesses and politicians accountable for the decisions that are made in the name of local economic growth. And so, there are times where I’m not very hopeful about this, and it feels like you’re always slogging uphill against Jeff Bezos and Google and whatever else is going on. But there’ve been a lot of encouraging signs, and the uptick in interest has been extremely noticeable over the last couple of years. So, there are days in which I feel very confident that we’re gonna come out on top of this thing.
VALLAS: Well, and it sounds like today is one of those days, so I really appreciate you guys pitching this conversation. I am really, really excited about what prospects this campaign has both for policy change, but also really for changing the conversation about how we do business and what it looks like for, and how we do economic development, I should say. But I was gonna say how we do business, we as policymakers, we as people who care about policymaking, how the collective we does business with major, major wealthy corporations who have really stacked the deck and have all the power in these kinds of deals, right? This is just one facet of that larger conversation about what it looks like to be at the mercy of major monopoly forces. And Pat, that’s a lot of what you really, your bread and butter is in the Boondoggle newsletter, so I’ll give another plug to that. Folks should check that out if they wanna know lots more where this came from.
But Pat Garofalo is the director of state and local policy for the American Economic Liberties Project. State Senator Robert Peters represents the Thirteenth Legislative District in the Illinois General Assembly. And I’ve really enjoyed talking to both of you for this conversation. Pat, say that website one more time where folks can learn more and get involved if they wanna join this campaign.
GAROFALO: It is BanSecretDeals.org. You can sign our petition, you can read the bills that are out there, and you can pick up some tips for how to spot secret deals in your community. And let us know if you see one because we will come on out and help.
VALLAS: And more where you can subscribe to Pat’s newsletter, Boondoggle, the Boondoggle newsletter, in show notes. Thanks to you both for taking the time. And Senator Peters, it was so wonderful to meet you. [theme music returns]
SENATOR PETERS: Definitely. Same here. It was amazing.
VALLAS: And that does it for this week’s show. Off-Kilter is powered by The Century Foundation and produced by We Act Radio, with a special shoutout to executive producer Troy Miller and his merry band of farm animals and the indefatigable Abby Grimshaw. Transcripts, which help us make the show accessible, are courtesy of Cheryl Green and her fabulous feline coworker. Find us every week on Apple Podcasts, Spotify, or wherever you get your pods. And if you like what we do here at Off-Kilter Enterprises, send us some love by hitting that subscribe button and rating and reviewing the show on Apple Podcasts to help other folks find the pod. Thanks again for listening and see you next week.