Good Jobs First has just completed an upgrade to our “Megadeals” dataset, by adjusting all subsidy values for inflation (we define “Megadeals” as $50 million or more for a single project). Considering that the first reported Megadeal took place in 1976, they now span 46 years. So adjusting for inflation matters for accurate comparison of deals many years apart.
As you’d expect, the earliest deals are much larger when expressed in inflation-adjusted 2021 dollars. The 1976 Volkswagen subsidy in Pennsylvania grows from $100 million to $411 million, and its rank rockets up from a tie for 259 to 76. The 1980 Grand Hyatt Hotel deal in New York City increases from $359 million to $1.1 billion. This raises its rank from 63rd to 24th; it is also the first “billion dollar” incentive package known in U.S. history.
Among the many other deals, the 1989 subsidy to move the headquarters of Sears & Roebuck from downtown Chicago to suburban Hoffman Estates is more than doubled in real value by the adjustment, and increases from 100th to 54th largest Megadeal. A 1988 package for Chase Manhattan rises from 103rd to 53rd. Indiana’s 1986 Subaru deal in West Lafayette shoots up from 305 to 179.
We used the inflation series CPI-U-RS, a version of the Consumer Price Index (CPI) which is for urban consumers, covering all goods. It retroactively incorporates numerous improvement to the CPI-U that have been made over time. The data begins with December 1977 set equal to 100 and then provides monthly values and annual averages for the CPI, through 2021. Hence, we show Megadeals in constant 2021 dollars.
The adjustment requires calculating a conversion factor for each year, then multiplying it times the prices of deals that year. The conversion factor equals the 2021 average CPI divided by the target year’s average CPI. Thus, all deals in a given year will have the same adjustment factor. For example, the 2006 conversion factor equals 399.0/296.2 or 1.35.
We are pleased to be able to provide this upgrade to Megadeals for anyone interested in the evolution of subsidies over the long term.
See all Megadeals here.