What's the best way for states to generate jobs and economic growth? It's a question raised by Gov. Pat McCrory's two notable actions of 2015—his call for new "tools" to recruit business and his deal with Raleigh to sell the former Dorothea Dix Hospital campus.
McCrory's plea for tools—money—to lure corporate facilities to North Carolina came in the wake of a decision by Mercedes-Benz to relocate its U.S. headquarters, and about 800 jobs, from New Jersey to Atlanta rather than to Raleigh or Charlotte, which the company also considered.
At an economic forum in Durham last Monday, the governor asked members of the N.C. Chamber and N.C. Bankers Association to help him persuade the General Assembly to "get a new strategic program in place ... in literally a matter of weeks." He seemed almost distraught.
Putting more money at his disposal for business recruitment, McCrory said, should be the General Assembly's No. 1 priority as it starts its 2015 session.
A week later, McCrory was all smiles as he announced, with Raleigh Mayor Nancy McFarlane, that the state intends to sell the Dix campus to the city for $52 million. The 308-acre tract, which overlooks downtown Raleigh from the south side of Western Boulevard, is a superb site for the urban park Raleigh has in mind—a signature place akin to New York City's Central Park.
It's too bad we didn't get Mercedes-Benz. But in the long run, a great Dix Park will be far more important to North Carolina's and the Triangle's economic prospects than any single corporate headquarters we might've landed by writing a bigger state check.
There's very little evidence in the first place that corporations choose their locations based on how much a state is willing to pay.
But even if they did, the number of jobs at stake from these corporate moves is a flyspeck compared to the economic growth a state can and must generate by maintaining a high quality of life. Which means good schools, universities and, yes, parks, along with other public "goods" such as clean air, clean water and efficient roads, ports, airports and other transit services.
Bottom line, our state's quality of life is something the governor and General Assembly can influence by their spending decisions, unlike where Mercedes-Benz will locate, and why QOL—not tax breaks for companies—should be No. 1.
I'm no purist on the subject of recruiting business with subsidies, or corporate welfare if you prefer. Other states do it, businesses expect it, and until Congress puts a stop to it—which it should but won't—any state which refuses to play the game risks being put on some blacklist somewhere.
That said, I was struck by this comparison, taken from N.C. Department of Commerce reports, which circulated on progressive websites last week:
• In 2010, the state announced 139 new businesses or business expansions with a value of $3.2 billion, generating an estimated 15,361 jobs.
• In 2014, the state announced 96 new businesses or expansions with a value of $2.9 billion, generating 15,609 jobs.
Notice, that's 2010, with the Great Recession still upon us and Gov. Bev Perdue, a Democrat, in her second year in office, versus 2014, with the national economy growing and McCrory, a Republican, in his second year.
And, remember, Perdue raised taxes in her first year—because the recession was killing state revenues—which put her in the same socialist category as President Obama as far as state Republicans were concerned.
In McCrory's first year, with the Republicans in charge, the General Assembly cut taxes on corporations and high-income individuals on the theory that tax cuts spur economic growth.
Not much evidence of that.
But I want to make a different point, which is that these projects—the ones the state announces—makes the list after the state gives them tax breaks.
In other words, these are the very projects McCrory is talking about when he asks for more "tools." The state's biggest tool is the JDIG fund—for Jobs Development Incentives Grants—which is a performance-based program giving tax breaks to companies which create a significant number of new jobs and pay decent wages.
It's not a bad idea, although I think a better case could be made for paying the money to the people who do the jobs rather than to their employer.
But take a look at the number of jobs: Just 15,000 in both years, and that's projected job creation over several years.
It's a pittance. The Raleigh-Cary metro area alone added 19,300 jobs in 2014, all or most without any subsidies given. These new jobs weren't announced by the state. Instead, they came gradually, a few at a time, as a software company added coders, a hospital hired nurses, a builder brought on carpenters, or an engineering firm needed designers. They came from Raleigh-Cary's high QOL.
Statewide, North Carolina is still short more than 400,000 jobs if we go back to 2007, before the recession, and add 11 percent for the state's population growth.
Incentives may bring a few more jobs, and who knows, McCrory may land that Boeing airliner factory of his dreams before his quest is finished. But Boeing, when we chased it, stayed home in Seattle. And Mercedes-Benz chose proximity to its auto plant in Alabama over other considerations.
In short, the best way to add 400,000 jobs isn't by chasing a few hot prospects that every state is after. It's by growing our economy slowly, steadily, with investments in programs that add to QOL and by avoiding tax cuts and giveawaysthat limit our ability to invest.
Kudos to McCrory for the Dix deal. Next up, governor: Accepting Medicaid expansion, and more than $2 billion a year in federal aid to pay for it, would create 25,000 new jobs in North Carolina.
That would be a heck of a public good.
This article appeared in print with the headline "Using the right tools"