Civitas Review

NC Business Incentives Just a Cottage Crony Industry

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Oct
27

A recent press release from Gov. McCrory's office celebrated the announcement of 450 new jobs coming to Davie County, in no small part thanks to a grant from the state's Job Development Investment Grant (JDIG) program.  

If history is any indication, however, we'll be lucky to see half that many jobs actually materialize.

In this Civitas article (which also appeared in the Raleigh N&O), I discuss the findings of research showing dismal results of the state's largest corporate welfare programs.

A sample:

According to the report: “Almost 40 percent of the companies North Carolina officials announced would bring jobs to the state in exchange for taxpayer-funded incentive cash have failed to hire a single worker.”

Moreover, only about half of the promised jobs actually materialized during the time period being examined.

Amazingly, in spite of the significant failure of the programs to live up to their own promises, the central planners running these programs barely stop short of deifying the bureaucrats doling out the political favors.

“We should be absolutely on our knees thanking God that we have 19,000-some jobs that we didn’t have before but for the utilization of this program,” state Commerce Secretary John Skvarla said.

Glory be to government.

And the official numbers don't tell the whole story – reality is even worse. When you factor in deadweight losses from the political meddling in the economy and the fact that most of the "new" jobs supposedly created likely just represent workers being hired away from their current jobs; the net effect of these incentives programs is negative.

Still more importantly, is the inherently unfair nature of these corporate welfare schemes and the culture of political patronage they foster.

This leads us to one final point. In spite of the lackluster jobs figures, these so-called economic incentive programs are indeed a success for the group they were actually designed to benefit: politicians and their cronies.

Politicians and bureaucrats get to attend ribbon-cutting ceremonies and send out press releases to brag about “doing something” to “create jobs.” Lobbyists and corporate relocation consultants get paid to schmooze with elected officials and bargain with competing states for the largest taxpayer handout.

Meanwhile, however, taxpayers cough up more of their hard-earned dollars to finance this cottage industry of cronyism while home-grown businesses without political clout pay higher tax rates to help subsidize their competitors.

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