As a liberal Democrat, I was always discomfited that I agreed strongly with the North Carolina GOP in one important policy arena: opposing financial incentives for business recruitment.
Now, that discomfort has been lifted. Gov. Pat McCrory and his administration have seemingly caved in to the allure of incentives by offering MetLife almost $100 million to come to Charlotte and the Triangle, hardly areas of economic distress.
For years, the John Locke Foundation and like-minded political leaders have railed against incentives, rightly calling them corporate welfare and market distortions. Some of us were hopeful that this administration would end the practice, but the MetLife deal is the largest Job Development Investment Grant in North Carolina history. Charlotte and Mecklenburg County have added almost $3 million in tax rebates.
And now both Democratic and Republican county commissioners in Mecklenburg County say the company had planned to come to North Carolina before the board was asked to grant incentives. As is typical of these “deals,” local officials had almost no notice and little opportunity to study the incentives request. Republican county commissioner Bill James has said, “We must conclude that if we don’t give them the money, they won’t come.” That reeks of a form of corporate extortion.
As many have opined, recruitment incentives are bad policy.
Almost all scholarly literature has shown that they really do not work, yet they cost states and localities dearly – according to a March 2 Congressional Research report, between $40 billion and $70 billion per year. Particularly vulnerable are localities that do not have the analytical capabilities to determine the soundness of incentives and are told at the last minute to “put up or shut up.” Further, as recent announcements indicate, the well-intentioned policy of the General Assembly to help distressed counties has fallen apart.
This massive amount of misspent money would be much better used building infrastructure, educating and training workers and leaders, investing in programs of entrepreneurship and supporting research and innovation in higher education. These are the real factors of job and wealth creation, not the game of “beggar thy neighbor” that just rearranges jobs and rarely results in a net creation of jobs for the nation. Robert Orr, a Raleigh attorney who has sued the state over incentives, makes this very point.
It is important to remember the state of North Carolina did not even play the incentives game until passage of the William S. Lee Act in 1986, long after other Southern states. Until then, this state was considered the leader in the South in economic development. We managed to attract and build some of the best companies in the world without state incentives.
The big beneficiaries are, of course, the companies that pit states and communities against one another in a bidding war and the site consultants who reap millions of dollars in fees orchestrating the game. McCrory recently left the law firm in Charlotte that made big fees representing MetLife, Nucor and Fidelity Investments, all of which got handsome incentive packages.
The lure of being able to announce new jobs and cut the ribbon won out over years of thoughtful opposition to this practice by the N.C. Republican Party. The McCrory administration should be red-faced. However, it has given this old liberal some solace to know that his disagreement with the state GOP is now without asterisk.
Jesse L. White Jr. of Chapel Hill is former executive director of the Southern Growth Policies Board and federal co-chairman of the Appalachian Regional Commission.