The North Carolina
Published 2:45 am Saturday, October 4, 2008
bailout mindset rolls on
There could be an unexpected benefit from the Congressional debate and public outrage about the Bush Administration’s $700 billion bailout of Wall Street, a new understanding of the extent of support for corporate welfare among policymakers at the state and national levels.
Handouts to businesses come in many forms. They are not all massive billion dollar packages that garner intense press scrutiny and heated debate. On the state level, they are most often business incentive programs expanded late in a legislative session or new tax breaks for individual corporations or a whole industry snuck into a bigger tax bill or even the state budget with little or no discussion.
The timing is not an accident. Lawmakers would rather not spend a lot of time debating business incentives in public because they don’t make much sense, giving money or tax breaks to one widget maker in the state but not another, subsidizing companies that locate in urban areas that have no trouble attracting jobs, and wildly overestimating the economic impact of the jobs associated with the giveaway.
In the last weeks of this summer’s legislative session, state lawmakers voted to expand the Job Development Investment Grant Program that provides cash grants to companies that locate in the state.
JDIG doesn’t live up to its promises in terms of accountability, as Elaine Mejia with the N.C. Budget and Tax Center has pointed out, and effectiveness, judging by questions raised in a report about the program from the Commerce Department the day before lawmakers voted.
But those concerns were brushed aside and the cap on expenditures on JDIG was increased from $15 million a year to $25 million. Most legislators claimed they were voting to bring jobs to the state no matter what the report from the Commerce Department says.
That was also the attitude when the General Assembly voted to end the sales tax on electricity paid by big manufacturing companies, creating another sales tax exemption at a time when legislative leaders say they are committed to reforming the tax code and applying the sales tax more uniformly.
The House and Senate met in special session last year to give Goodyear and Bridgestone-Firestone up to $46 million to keep jobs in the state, not create new ones. No one really questioned if an incentive package would pass. It almost always does.
This summer the Goodyear plant in Fayetteville that received the incentives last fall announced temporary layoffs of 3,000 workers because of a downturn in the national economy. So much for the incentives ensuring the success of the plant.
Dell opened a plan in Winston-Salem in 2005 and received $300 million in state and local incentives. The company is now reportedly considering selling the plant and leasing it back from the new owner, a prospect that can’t thrill state officials.
Policy groups on the right and left have found rare common ground in fighting corporate welfare in Washington and in Raleigh. The Institute for Constitutional Law points out that media reports in the last week included announcements of state incentives for three businesses totaling close to $300,000. Just another week in the corporate welfare world.
An ICL report last year found that local governments in North Carolina approved $400 million in incentives from 2004-2006. That’s on top of JDIG and other state grants and cash and tax breaks.
North Carolina’s corporate incentive program may not be a direct bailout of wealthy interests, but the arguments to support both have a lot in common. The public is told that lawmakers have no choice but to approve the corporate welfare packages. Never mind the incomprehensible salaries of the CEOs or the lack of accountability in the giveaways or the promises broken after the votes are taken.
It is all to help the overall economy and protect jobs. It is an offer that policymakers say they can’t refuse, and one the rest of us pay for over and over, while a few corporations and their executives make out like bandits.