The Federalist: New Mexico’s Spaceport Subsidies Are A Cautionary Tale About Corporate Welfare Being A Black Hole

Originally published at https://thefederalist.com on July 25, 2022.

This past week, Virgin Galactic announced it would begin manufacturing spaceships in Arizona, “hiring hundreds,” although employment timelines were not available. The new Delta Class facility is expected to be operational by the end of 2023.

Swami Iyer, Virgin Galactic’s president of aerospace systems, said, “this will allow us to accelerate progress from conceptual design to production to final assembly at scale as we capitalize on the many advantages Mesa and the greater Phoenix area offer.”

As the crow flies, the new manufacturing facility in Mesa, Arizona, is more than 200 miles from the launch facility in Truth or Consequences, New Mexico. You might think manufacturing spaceplanes closer to the launch facility would be advantageous to the company. But as former governor of the New Mexico Territory Lew Wallace once said, “All calculations based on our experiences elsewhere fail in New Mexico.”

The announcement comes one year after Sir Richard “Six Gun” Branson’s historic spaceflight that departed from Spaceport America. Whereas it is worth congratulating Sir Richard for his accomplishment, it is also worth looking further into the lavish taxpayer-funded subsidies that backed the project.

Flashback to April 2007, Doña Ana County taxpayers approved the construction of the Spaceport America facility, launching New Mexico into the Space Age at the exorbitant cost of $275 million. Virgin Galactic did not incur any of the construction costs. It was corporate welfare, plain and simple.

It is a known problem. Billionaires like Branson flaunt projects like Spaceport America in front of politicians, dangling the potential new jobs, promises of infrastructure development, and future tax revenues as a way to encourage political types to “invest” in the future. In exchange for these promises, the government offers special, favorable treatment for corporations. It’s worth admitting that the prospective benefits are enticing: what elected person would not want to deliver economic development to their districts with flashy headlines?

Last year, Branson was able to prove that he could lunch spacecraft from any airport that had a sufficiently long runway. There was little evidence that New Mexicans would see a worthwhile return on their state’s $275 million investment. Increasingly so, it appears that they will not. Branson received a $275 million gift while New Mexicans were left holding the bag. 

However, Branson has no reason to invest in spaceship manufacturing in the “Land of Enchantment.” With New Mexico’s high crime, some of the nation’s worst public education, and a broken sales tax that makes the state unappealing to new businesses, Branson’s decision to construct his spaceships in Arizona is a smart one.

In New Mexico, politicians have been desperately scrambling for an easy way out. Rather than invest in the serious tax reform and the education reform New Mexico needs, they continue throwing cash at the elites in the hopes that someday the “investment” will pay off. New Mexico also offers one of the most generous film subsidies in the country; Hollywood is often able to take advantage of New Mexicans this way. The state’s Legislative Finance Committee reports that there is only a $0.40 return for every dollar spent on the film subsidy.

I can’t imagine Spaceport America’s return on investment is any better, especially considering that space tickets are not taxable. In fact, Spaceport America commissioned a study by the consulting firm Moss Adams of Albuquerque. The study made headlines for the implausible claim that Spaceport America began producing net benefits for New Mexico as early as 2013.

In March 2020, the total costs to taxpayers were tallied up with an analysis determining that New Mexicans have spent $275 million on the project. Revenues were reported at only $54.3 million for the state. I’m not an accountant, but that’s a net loss of $220.7 million. And that’s not including the additional $1.5 million in advertising expenses related to last summer’s Virgin Galactic flight.

This ought to be a lesson to the entire country. Taxpayer subsidies earn no loyalty from corporations. They just provide another way for billionaires to pad their bottom line. In reality, corporate welfare is a gangrenous limb that should be severed before it’s too late.