John Sugg writes in Reason magazine that southern states are leading the way in doling out incentives to lure businesses:
Consider three deals finalized in 1995, all of them in North Carolina. This End Up, a furniture manufacturer, accepted $230,000 and other incentives from the state for a new plant near Fayetteville that would employ 200 people; then it closed a Raleigh plant that employed 150. Quaker Oats received $98,000 for a new 98-worker plant near Asheville; then it closed another North Carolina operation where 70 people worked. Seffi Industries took $300,000 and promised to create 300 new jobs. It not only failed to open a new plant or hire a single new person but a few months later went out of business altogether.
Trendy businesses—particularly technology firms—have the greatest leverage in demanding government subsidies. In February, for example, biofuel manufacturer Range Fuels, based on lit?tle more than its word that it could deliver a economically competitive product, was offered $6 million in state cash, a 97-acre tract in central Georgia, and a set of tax abatements. At best, the company will employ 70 people.Other beneficiaries of business welfare in??clude low-tech factories in the mid-South; call centers in the Tampa Bay area; auto manufacturers in Alabama, Tennessee, South Carolina, and Georgia; and biotech firms in Florida and North Carolina. Publicly financed sports stadiums are common across the nation, and the South is no exception. Tampa built Raymond James Stadium for the Buccaneers a decade ago as part of a deal that will divert $1 billion in taxpayer money to team owner Malcolm Glazer over 30 years. Glazer, in a style common to team owners, threatened to move the football team if he didn’t get a new stadium. To win voter approval for a bond issue to finance the project, city officials attached it to a referendum providing money to alleviate crowding in the city’s schools. The stadium was built long before most of the new schools.
My libertarian impulse is to look at such giveaways as just another example of graft, and Sugg goes on to make the argument that incentives can lead to corruption, though it is not exactly widespread (as far as I know).
The one example he cites that really got me, though, was the money chase for the NASCAR hall of fame. Virginia was in the thick of that race, too, with promises to give NASCAR millions of dollars (including a “large taxpayer investment”) if only they would locate the Hall in Henrico.
While the bid wasn’t accepted, the willingness of state and local government to toss around taxpayer funds for big business prizes still seems to be the preferred magic bullet in economic development. Sugg’s interviews people who say that it’s not the incentives that matter most, but the quality of the workforce, infrastructure and the general business climate. That’s where the attention (and the money) ought to be spent.