Wednesday, January 7, 2015

The Governor’s Bag of Tricks Is Empty and That’s a Good Thing

The Governor’s Bag of Tricks Is Empty and That’s a Good Thing

Most state governors have a bag of tricks designed to lure companies into their states.  These come in a variety of tax credits, property tax abatements, and other subsidies.  Our governor in North Carolina, Pat McCrory, is warning us that his bag is almost empty, and that we’re about to lose unspecified opportunities for new jobs if the General Assembly doesn’t replenish its economic development incentives.[1]  The Governor is so worried that he’s thinking about calling the General Assembly into a special session to address the looming crisis.

However, the crisis Governor McCrory is trying to avert isn’t an economic one.  Rather it is a political one.  Without the tax incentives, the Governor might not be invited to as many ribbon-cuttings, and the list of potential donors to his campaigns and political party might stagnate.  To be clear, Governor McCrory isn’t acting in a partisan manner.  Governors of both parties, as well as legislators, county commissioners, and mayors all want to get in on the game.  It’s not how the economy really works or jobs are created, but it is how politics really works.  You’re not going to see businesses criticize this model.  For one, they are the beneficiaries of all the tax breaks and incentives.  Moreover, they’re disinclined to criticize the politicians who preside over the state tax code, regulations, and permits.

State and local government certainly have a role in the economic wellbeing of their respective states.  Unfortunately, the stuff that supports the economy doesn’t translate into gubernatorial press releases and photo ops.  The roads need to be paved, the schools need to be able to educate, our citizens need to have health care, and state and local agencies need to have the resources to make decisions.  Our governor and his colleagues in the General Assembly aren’t tending to these matters.

So why has North Carolina’s economy recovered, especially in the three largest metropolitan areas?  In my view, it is because we are rapidly consuming our seed corn.  Our road system is still one of the most extensive in the country.  Our public universities and health care facilities are still nationally recognized.  However, we’re no longer making the long-term investments that fueled our growth over the past twenty to thirty years.

Rather than having the Governor and his Commerce Secretary flying all over North Carolina and beyond, we ought to ground the state’s air fleet and demand that they tend to the problems in Raleigh.  We’re running a sizable budget deficit, our Medicaid program is in disarray, our schools have been starved for resources, and our roads and bridges are deteriorating.

Instead, the General Assembly will probably refill the governor’s back of tricks with the help of Democrats so he can continue to hobnob with CEOs and turn over the first shovel load of dirt for a project that either would have happened anyway or shouldn’t have happened at all.


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