Which Carolina is ahead?

Published June 25, 2014

by John Hood, John Locke Foundation and NC SPIN panelist, June 25, 2014.

Within hours of the announcement last week that two Charlotte-based companies, LPL Financial and The Lash Group, would relocate thousands of jobs across the border to South Carolina, political and civic leaders in Charlotte and Raleigh began pushing the panic button on business incentives, arguing that North Carolina’s current package of corporate giveaways is inadequate.
The resulting furor was a perfect illustration of why you can’t make good public policy on the basis of a few hyped anecdotes.
To argue that North Carolina ought to be more generous with incentives — as if shelling out $17 million in tax money for an Advance Auto Parts headquarters in Raleigh wasn’t already recklessly generous — is necessarily to argue that North Carolina is currently falling behind in economic development. If North Carolina was matching or exceeding its competitors in job creation and economic growth, the case for expanding the state’s incentive programs would be weak.
So let’s compare the two Carolinas in actual economic performance:
• Since the start of 2014, payroll jobs in North Carolina have increased by .44 percent. Payroll jobs in South Carolina have increased .40 percent. If you look only at the private sector, North Carolina has posted a .74 percent rise in payroll jobs so far this year vs. a rise of only .47 percent for South Carolina.
• Since the start of 2014, a separate measure — employed persons in the BLS household survey — has increased 1.4 percent in North Carolina, compared to 1.2 percent in South Carolina.
• More generally, North Carolina’s gross domestic product grew by 4.2 percent in 2013, faster than the national average (3.5 percent) and South Carolina’s GDP (3.1 percent). For the economic sector for which incentives might be relevant, private-sector GDP, North Carolina’s 4.9 percent growth rate exceeded the national average (4 percent) and South Carolina’s (3.5 percent). The difference isn’t just explained by population flows. Real per-capita GDP rose 1.3 percent in North Carolina during 2013, compared to 1.1 percent growth in the nation as a whole and only about .1 percent growth in South Carolina.
When governors and legislators craft economic policies, the proper goal is to maximize the growth of jobs, incomes, and opportunities for the people who reside or do business in their respective jurisdictions. In theory, offering large cash grants or targeted tax breaks to favored companies might constitute good economic policy — if the result were a net increase in jobs, incomes, and opportunities. Advocates of incentives often assert this to be the case, however, rather than actually proving it.
They assume, for example, that incentives are all benefit and no cost. That’s not what happens in the real world. If giving cash or tax breaks lures a company into town, that typically increases the demand for public services. Who pays for them? The companies and households that didn’t get incentives. By attempting to steer resources towards industries that politicians believe to be more “deserving,” incentive policies also tend to warp the private markets for investment and job creation that ought, as much as possible, to be free from central planning by state or local governments.
If incentives were available to all companies, they would just constitute across-the-board tax relief — and there really is good empirical evidence that such policies boost state economic growth. Selective incentives, on the other hand, fare poorly in the economic literature. Most academic studies find that states and localities accrue no quantifiable net benefits from them, although the recipient companies certainly take the loot.
Rather than panic every time an incentive deal gets made in South Carolina or a neighboring state, North Carolina officials need to take some deep breaths and then refocus on what truly drives long-term economic growth. It isn’t gimmickry or giveaways. It’s a sustained strategy to deliver high-quality public services at the lowest possible cost, thus creating a business climate that welcomes investment, innovation, and entrepreneurship.
If anything, recent trends suggest that South Carolina officials might want to consider following North Carolina’s lead on economic policy, not the other way around.

http://www.carolinajournal.com/daily_journal/index.html

June 25, 2014 at 10:15 am
Norm Kelly says:

Somewhere, someone with intelligence once said 'follow the money'. Who said it is irrelevant.

What does offering incentives accomplish? It makes the people in positions of authority FEEL good. Who are the major proponents of incentives? Libs! What drives all lib pols and the majority of lib voters? Feelings. Truth? Not recognized. Facts? No concept of what these are. Fairness? No, simply justification. Somewhere along the line someone knows someone who knows who controls the money, the paperwork is filled in properly, and the right hands are greased, finally some business gets special treatment, and suddenly taxes for a specific favored business are lowered or eliminated. And just like every financial transaction created by, supported by, endorsed by libs, there is NO COST! Money simply grows on trees, if you know which tree in the forest to pick from. Or money is nothing to be concerned about when you are a lib.

At some point, even lib pols need to admit that when giving money to one group or individual or business, the money MUST come from somewhere. Thinking people KNOW that money does not grow on trees. Thinking people know that when money is given to someone it MUST be taken away from someone else. But it seems that ALL pols are more interested in their personal power and authority than they are in being honest and/or fair. How does ANY government official, elected or otherwise, sleep at night when they attempt to tell me that some auto parts store is being given money but it won't affect anyone or anything else? How can ANYONE, even pols, claim that money out does not affect money in?

Let's take a page out of the lib playbook. I know their playbook is extremely short, less than 10 pages total; and that's being generous. Even if only 1 play is listed on each page, I expect the book would end much before the 10th page. But humor me on this one. The play I'm talking about is the one where they claim income taxes aren't fair unless they get the opportunity to steal as much as they want from successful people. Think about their position on this for just a moment. They claim they want to level the playing field. Their method/scheme/technique for doing this is to punish success claiming it helps others succeed. So they raise taxes. To buy votes from low-information residents and non-residents. After they raise taxes to pay for their schemes, they then turn around and say that they MUST encourage businesses to move to the area by lowering ONLY the taxes for that specific business. Without incentives, the lib pols are specifically saying that the tax policies THEY HAVE PUT IN PLACE are punitive and discourage a business from moving to the area. Is this the sign of a concrete mind: all mixed up and permanently set? If not, then how would you describe it?

If the tax and benefit system actually were fair, then incentives would NOT be necessary. Every time money is given to one chosen/favored group/business, by DEFAULT the only place for that money to come from is OTHER TAX PAYERS! Government money can only be spent AFTER it is stolen from producers. The government CAN NOT provide a tax incentive to ANY company until they penalize another company or group of people to PAY FOR that tax break. Somehow, libs ALWAYS find a way to claim that playing favorites, allowing them to spend OUR money ANY WAY they want is justifiable. But if WE ask them to spend OUR money wisely, the response always is that the budget has been cut to the bone and the state CAN'T afford to do anything else. Remember the tea cup museum. Remember the lake rated ferry to be used on the ocean to transport school kids. Remember Gov Mike stole money from the E911 fund to compensate for an unbalanced state budget. Remember when the Gov stole money from the county sales tax fund to compensate for an unbalanced state budget. Yet, they continue to promote the state giving away money to favored/chosen businesses. Instead of BEING FAIR or actually leveling the playing field!

I know that some Republicans also like incentives. Think of the film industry incentives. Supported by too many Republicans. But we have to start somewhere. And being honest is ALWAYS a good place to start. John's current post is a good honest starting point. This type of info needs to get out to more people. There are those who desire to be informed voters rather than low-information demon voters. Only informed legal voters will make the proper (and right!) choice at the voting booth when provided information. Some Republican candidates are being challenged by TEA people who believe in actually being fair rather than appearing fair or speaking of fairness. TEA people are successful when they are able to articulate their message clearly and demonstrate a difference between themselves and those pols who only talk a good line but have nothing behind them. If you have the opportunity to vote for a real TEA candidate, please take the chance. It's possible that the majority will benefit, rather than a chosen, favored, few. And when everyone benefits, it means jobs, economic growth, lowered taxes, lowered expenses.