Call Corporate Bluffs

The mouse was trapped. Many writers used a variety of plays on mouse and punishment for the actions of Gov. DeSantis in Florida and his actions against Disney. Like so often in our political commentary world, the focus was on a Republican using state power to change the economic conditions for a corporation. This is unheard of! How could he??? This is a rarity, but the focus should be on what were the conditions that allowed Gov. DeSantis to forge ahead with the legislation about sex education and young children. This was the key difference compared to recent years of Republican leadership in America.

It is unusual for a Republican to go after corporate interests. One would have to go back to Gov. Palin’s changing of oil taxation to find a Republican slapping the hand that feeds. This is a marvel with the Chamber of Commerce focused GOP, but let’s take a step back and discuss Disney’s play. Florida was poised to go forward with legislation that would prevent k-3rd grade children from hearing the full spectrum of LGBT and sex education messaging that the left controls. It is not just curriculum per state controlled bureaucracies but outside consultants who often work with school and provide (even deliver) the education modules for them. Legislation must be passed and signed to go into effect. Disney expressed disapproval. They hoped to exert pressure on DeSantis to not sign it as several other governors have been cowed in the past to not sign legislation, some even watching their veto be overridden in short order. Disney did not have to make any comment, nor did it have to have its leadership come out publicly against it.

Gov. DeSantis and Republicans knew that they had Disney in a tight spot. Disney’s financials have been stretched due to debt for the intellectual property acquisitions. Covid crushed its box office receipts. Disney also dealt with California keeping Disneyland closed for a long time. This is an absolute betrayal of DeSantis by Disney as he allowed them to open up at partial capacity very early on in the pandemic, keeping them afloat. Disney brought statistics and data to California monthly to get Gov. Newsom to budge, yet he did not. DeSantis threw Disney a lifeline. This was their reward to him.

Disney had nowhere to go. Disney does not film in Florida as much as it operates the mega-park complex in the Orlando area. There is no punishment that they could inflict in retaliation. Hollywood threatened Georgia and North Carolina with boycotting those states on a filming basis. Those states caved in the past, which is silly since those states hand out tax credits to induce Hollywood to film there and indirectly boost the local economies. It might just be a prestige thing, too. This is how DeSantis could brush off Disney’s disapproval.

This is in stark contrast to a state initiative that was scaled back to toothless legislation in Indiana under Mike Pence. Pence’s Religious Freedom Restoration Act incurred the wrath of the LGBT advocacy world and the media 2 Minute Hate. Pence had weak messaging. He did not point out how over a dozen states already had the same law. He opened the door to crawling back by stating if it did discriminate, he would not support it… after signing it. He also caved to threats from employers that they would not expand operations in Indiana. The failure of RFRA made the Indiana GOP gun-shy about any social legislation, and this attitude holds today despite being a firm red state.

Pence did not understand that lack of expansion is an opportunity cost, not a loss of current economic activity. He also misunderstood the nature of his base. If Salesforce’s very liberal CEO threatens not to expand, what are you losing? Highly paid tech workers who do not vote for your party do not move to your state? Boo-hoo. What would be the harm of losing 1,000 current employees in the major metro who do not vote for you? Ancillary downtown spending effects, some lost income taxes and fewer Thai restaurant patrons. Pence’s base was in the rural, exurban and suburban areas. His base was not Indianapolis, but smaller cities who saw no gain from Salesforce’s planned expansion.

This points to a roadmap for state governments. Natural resource firms cannot go anywhere, which is also what Gov. Palin targeted. Firms tied to military bases and other immovable economic centers count as well. There is another thing to check. What firms own buildings versus rent. Right now, commercial real estate is an albatross for firms because of the remote work revolution due to covid. Firms that own skyscrapers or even large industrial complexes are much more at risk than those that rent. It’s a sunk cost, and they are not likely to off-load the property in this market nor want to build elsewhere. These firms also chose in the last twenty years to build in red states due to favorable business climates and low taxation or state mandated benefit costs. Where are chicken processors going to go, New York, Massachusetts, Oregon? They’d have to scrap their plants and set up a new pipeline of illegal workers who are managed in tucked away spots around the plant. They will not want to pay higher salaries for the higher cost of living nor provide benefits that red states do not require, on top of, paying higher taxes.

Not everything boils down to economics. The GOP still has not caught on that Trump voters were not economically anxious, but worried economically and horrified by the changes in society that are too big to ignore and do not reflect the America they envision. Corporate disapproval in firm red states is just a pressure campaign. It is from the true believers in their corporate hierarchy and the worry warts that advise CEOs. Corporations with nowhere to go are really bluffing. It is time to call their bluff.

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