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 Lost Decade Proof of Failed Economic Development Policy
by Tom Campbell
January 14, 2010
During the past decade North Carolina had a net gain of three hundred jobs, according to UNC Charlotte economist Jack Cannaughton, who calls this our “lost decade.” No doubt the continued loss of manufacturing jobs and two recessions has been a major contributor but we haven’t created more jobs because of North Carolina’s failed economic development policy.
Prior to the 1990’s our strategy was to make our state the best in the nation in which to do business. North Carolina would offer funding for job training at community colleges, pay for water, roads or other infrastructure improvements and give tax credits for new jobs created, but we steadfastly refused to participate in big incentives to lure companies to our state. In twenty years that policy has completely reversed; our state is one of the major players in doling out millions of tax dollars to buy jobs. Even our counties and cities have joined the incentives game. Curiously, more than a few of those three hundred net jobs created come from organizations that have sprung up to assist corporations maximize tax incentives from government. Our economic development strategy isn’t working and needs revamping.
Governor Perdue admitted as much this week in saying that her number one priority is to keep and grow jobs. Her “Biz Boost” initiative, modeled after a similar program in Charlotte, recognizes the simple fact that most current jobs and most new jobs come from small businesses. In our haste to throw money at large companies we have turned our attention from the real engine driving this state’s economy: small businesses. It may not be as sexy, but local people hiring local people is a surer and steadier way to grow. Locally owned companies plant deep roots in the community, support local causes and aren’t as likely to pull stakes and move away. Even so, losing fifty jobs won’t have the same economic impact as losing 400 or more will have.
A shift in policy is needed. What can North Carolina do to make our state a better place to start and grow a business? We can do much more to ensure that small companies can go to one source for information on permitting, employment laws, taxation and regulation; one source where government cuts through bureaucracy to obtain solid answers and help for business owners who might not have the expertise and resources to wade through the government maze. But the two primary areas where entrepreneurs and small business owners need help are in getting affordable and available credit to expand and in tax relief.
News headlines may talk about loosening credit but most small companies will tell you they can’t get affordable loans at terms that aren’t overly restrictive, denying them the capital to grow. Equally important is tax relief. Most small companies are closely held and, at least in early stages, most profits are reinvested in the business to fund growth. Allowing the first 200 thousand dollars or so in profits to be tax free would result in the creation of new jobs.
North Carolina needs to get out of the elephant hunt for big companies that require big tax incentives and return to policies and real help to encourage small companies to thrive and grow. If successful, this decade will be the one where we find our way to prosperity instead of having lost it. |
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