Economic development or merely re-arranging the deck chairs on the Titanic?



Politicians LOVE to talk about — and pat themselves on the back about — job creation and economic development.  Though, most rational people know the only sources for job creation are private businesses.

Instead of carrying out responsible economic development policy — like cutting back government and rolling back taxes — bureaucrats and politicians are using more and more targeted tax incentives and payments to lure business from one jurisdiction to another.  Are you really growing the economy by doing that, or are you merely encouraging governments at all levels to focus on poaching from their neighbors’ tax base? 

At the state level, MetLife is getting more than $100 million in state and local incentives to move some jobs to Cary and Charlotte.  We’ve been told that roughly 40 percent of the proposed MetLife jobs will be people moved in from out of state.  

Will state government cut back their spending to compensate for this giveaway?  Gosh, no.  The rest of us will be expected to help make up for the unexpected shortfall.  Politicians get to crow about “job creation,” while we get  even more money sucked from our wallets.

Last year, we had Republicans in Raleigh beating Bev Perdue over the head for offering incentives to a tire company considering relocating a plant in North Carolina or South Carolina.  Derisive cries of ‘corporate welfare’ went up across the countryside.   The NCGOP even added a plank about corporate welfare to its 2012 party platform.  Now that the NCGOP owns state government, corporate welfare appears to be JUST FINE.

Locally, we’ve learned that Southern Pines is giving First Bank $15,000 per year for TEN YEARS for moving their corporate headquarters 40 miles down the road from Troy.  Moore County is also offering up incentives.   The move is a smart one for First Bank. Troy and Montgomery County are dying a slow death economically.  A good chunk of First Bank’s business is in cash-rich Moore County.  But most of the employees working in the headquarters will likely be just transfers from the corporate offices currently in Troy.  First Bank is also one of the most cash-rich banks in the state.  Does it really need the money?  Was the money really all that important to their decision to move?

Pinehurst tried a game similar to this by trying to lure an existing microbrewery from Aberdeen — about five miles down the road — to relocate in the Pinehurst resort’s dilapidated, bombed-out former steam plant in the heart of Old Town Pinehurst.   Village government secured about a half million in grants to facilitate the building renovation.  A handful of mostly hourly jobs were going to be moved a few miles down the road.  How much of a boost to the local economy was going to be provided here to justify investing $500,000 in tax dollars?  It ended up being a moot point.  The deal fell through.  The village still has all that money earmarked for renovating that building.

Instead of working so hard to shanghai jobs from a nearby jurisdiction and handing out freebies at the expense of residents and businesses who are already invested in your community, why not implement reforms to make starting-up a business or relocating a business to your community a no-brainer?  Simplify the planning and zoning process so that people seeking to grow their businesses are not harrassed to the ends of the Earth.  (Are you listening, Pinehurst?)  If you’re going to offer tax incentives, why not open them up to ANYBODY — even people seeking to start up businesses?  Why not adjust downward the first year’s taxes for a new startup?  Why not roll back regulations so that you have a more conducive environment to start up a business?  Why not work with and encourage utility providers — with their monopolies — to set up business incubators for new entrepreneurial ventures?

We’ve got one of the roughest economic situations in the United States.  Rearranging the deck chairs on this sinking ship — moving jobs around from one troubled community or county to another — is merely temporary window dressing and far from a realistic, long term solution.