New series investigates corporate welfare schemes
Published October 14, 2014
by Brian Balfour, Civitas Review online, October 13, 2014.
WRAL.com today launched an investigative series examining the use of economic incentives (i.e. corporate welfare) in NC. Of note in the article is the proliferation of government handouts not only in NC but nationwide.
Although not all these performance-based grants will fully pay out, the legislature's fiscal research division says the state has committed to paying out nearly $800 million through 2027.And across the country, according to a 2012 New York Times investigation, state and local municipalities pay out more than $80 billion annually for incentive programs.
Unsurprisingly, yet still disappointingly, defenders of the crony capitalist schemes display economic ignorance to justify the greater concentration of economic control into the hands of the political class:
"If you want to be in the recruiting game today, incentives are part of the deal. If you don't have incentives, you are going to lose opportunities," Norris Tolson, who served as the state’s commerce secretary in 1997, said. "Some of the opportunities you lose you may not even know about."
Lost opportunities….that's an interesting concept. But don't folks like Tolson ever stop to think about the real opportunity cost involved when government does pay out incentives to politically-connected corporations? When the state bribes corporations, that money comes from taxpayers. Less money in the hands of taxpayers means less economic activity and lost opportunities. The higher tax rates imposed on those businesses not incentivized discourages investment, meaning more lost opportunities. When scarce resources like capital and labor are utilized by incentivized projects, they are no longer available for other potential investments; resulting in more lost opportunities.
Corporate welfare schemes are not all benefit and no cost. It is easy to see the ribbon-cutting ceremony and headlines when an incentivized company expands. But such efforts come at a very real cost of foregone investment opportunities and jobs elsewhere in the economy. I wrote last month about what it could look like if NC got out of the crony capitalist game and instead lowered taxes for all and treated all businesses equally.
