Civitas Review

More Crony Capitalism from Perdue

By | Posted in Budget & Taxes |
2
Jul
24

Gov. Perdue punished the struggling NC economy with yet another dose of corporate welfare, this time to a repeat visitor to the corporate welfare trough. As detailed by the N&O:

Data storage giant NetApp, buoyed by surging revenue, is embarking on yet another major expansion at its Research Triangle Park campus that is expected to add 460 high-paying jobs over the next four years.

The California-based Fortune 500 company plans to invest more than $75 million to expand its RTP research-and-development operations, where it now employs 1,450 workers.

NetApp could receive $11.8 million in state incentives if it meets its hiring and investment goals. It’s the third time the state has offered the company incentives to expand locally. Commerce Department spokesman Tim Crowley said that to date NetApp has met all the targets for hiring and retaining employees spelled out in the incentive packages it received in 2004 and 2007, when it pledged to add 175 workers and 646 workers, respectively.

First, and most importantly, such crony capitalism should be objected to because of it is unjust for the political class to abuse its power by dispensing privileges to select companies. This creates a completely unfair economy whereby some companies get to play by different rules than others. Moreover, political meddling undermines the power of consumers to dictate which businesses succeed or fail. In short, it marks a shift in social power away from the many (consumers) into the hands of the few (the ruling class and their cronies). This would be unacceptable in a free society.

From an economics perspective, this is a bad deal as well. While many economic illiterates will cheer on the easily seen effects of this deal (the NetApp jobs "created"), we must consider the "unseen" effects. For instance, what negative impacts will there be on other businesses unable to compete because they don't enjoy the same political privileges as NetApp? How many jobs will be lost or never created because North Carolina continues to impose one of the nation's highest income tax rates, in part because the state continues to dole out these corporate welfare handouts? Our state's punitive tax rates are a significant reason we still suffer from the 4th highest unemployment rate in the country.

One day, perhaps our state leaders will decide to stop playing favorites and instead scrap the corporate welfare scams, and instead allow all businesses to play by the same rules. In so doing, we could also lower tax rates and make capital investment and entrepreneurship much more inviting.

Before that day comes, however, I have a suggestion. Every time the state wants to hand out privileges to specific businesses, they must also include spending cuts of the same amount. In this case, if NetApp cashes in on the entire $11.8 million in state incentives, state budget writers must find $11.8 million in spending cuts to pay for it. That would relieve taxpayers from having to foot the bill, and force state lawmakers to prioritize how they spend our money.

2 Comments on this post

  • Ralph Chappell says:
    Jul 24 at 09:29

    The N&O….a liberal newspaper taking issue with a Democrat? How refreshing!

    Now….will the same N&O apply exactly the same reasoning to Obama and his Administration's support of Green Energy companies like Solyndra and all the others that have actually gone bankrupt?

    At least NetApp is doing well and making a profit and adding jobs…..North Carolina taxpayers did and do get something for their money unlike the Federal Taxpayer under the Obama give-away to his political donors.

  • Brian B says:
    Jul 24 at 09:42

    Mr. Chappell,
    Actually, if you read the N&O article, they don't take issue with Perdue at all. They simply discuss the details of the deal.

    And I think you are being too charitable to evaluate corporate welfare schemes based upon the recipient company's bottom line at the time they receive the benefit. Political cronyism is wrong because it is inherently unjust – plain and simple.

    To excuse some cases of political cronyism because the recipient is profitable is to abandon the underlying principles of liberty, private property and the sovereignty of consumers.