John Hood's Syndicated Weekly Column
RALEIGH – During a brief special session of the North Carolina legislature that began on Dec. 9, most lawmakers voted to extend hundreds of millions of dollars in subsidies and special tax breaks to a handful of large corporations who promises to employ a relative handful of people.
It was a misguided piece of legislation, an egregious blunder, and the result of an appallingly brief debate and a disgusting display of insider machination.
Obviously, I wasn’t much of a fan of Gov. Mike Easley’s proposal to subsidize one of the largest pharmaceutical companies in the world, Merck, and to subsidize the exports of the tobacco companies that he previously help to litigate into the ground. But rather than restating in detail my criticism of such incentive policies – in brief, they are a violation of free-enterprise principles and don’t typically result in net job creation or economic growth – I’d like to sketch out some other likely effects of the special corporate-socialism session.
First of all, while there was talk before lawmakers came to Raleigh about the economic problems facing rural and manufacturing-dependent counties, and some attempts by lawmakers such as Rep. Connie Wilson of Charlotte to amend the bill to address them, nothing substantial resulted. The bill subsidized projects located in Durham and Forsyth counties, which have some of the lowest jobless rates in the state.
I predict that the passage of the incentive bill will further enrage local and business leaders in places such as Cabarrus and Rowan counties (the ground zero for the Pillowtex closure) and the Catawba Valley (the site of various and costly implosions of textile, furniture, fiber-optic, and other firms). Western folks were already up in arms about what they see as the East’s continued, disproportionate power in Raleigh. Now they have a new grievance.
The dynamic isn’t entirely regional, however. Many Eastern North Carolina communities were dismayed to discover that lawmakers would not discuss possible incentives for a Boeing plant they hoped to lure to the lonely Global TransPark near Kinston. Other than some talk that the bill might boost tobacco processing in Rocky Mount, there seemed to be nothing in the deal to ameliorate chronic economic distress down east.
Within North Carolina’s business community, the legislature’s miscue is also going to deepen preexisting rifts. While some big-business lobbyists in Raleigh lined up votes for the bill, because either they represented the beneficiaries or represented others hoping to be the beneficiaries the next go-round, many corporate executives back home were steaming. Just a week before the session, members of four employer associations met in Greensboro to discuss their common challenges and political agenda. While federal trade policy was a key topic, another was the tendency for Raleigh politicians to offer goodies for flashy out-of-state companies while giving longtime North Carolina companies nothing but higher taxes and regulations.
At the legislature, the state chapter of the National Federation of Independent Businesses came out strongly against the legislation. Many lawmakers were reportedly told how upset business owners in their districts were about the selective attention. But most voted for the bill anyway, citing either a desire to go along with the crowd or a panicky willingness to vote for anything with “jobs” in the title. They may have thought their decision to at least be politically expedient, but I’m not so sure.
Speaking of, the Republican contest for the gubernatorial nomination next year was also an unspoken but important element of the special session. At the manufacturers summit in Greensboro, Senate minority leader Patrick Ballantine had set himself apart from 2000 nominee Richard Vinroot, former Congressman Bill Cobey, and other candidates by not condemning the incentives legislation outright. No doubt recognizing the damage this did within Republican circles, Ballantine offered an impressive alternative during the session that would have cut personal and corporate income taxes across the board, eliminated the double-taxation of capital gains, and otherwise improved North Carolina business climate.
But his proposal wasn’t ruled in order given that Easley’s call for the session had been so narrow. So Ballantine voted for the bill, anyway.
Don’t discount the significance of this decision. Because the GOP candidates have been so close together on most issues, it’s been hard for Republican activists and donors to distinguish among them and get excited about the race. It’s been mostly about resume and campaign considerations. Now the divides between east and west, in-state and out-of-state corporations, and big business and small business will be mirrored in the Republican primary.
All due to the precipitous actions of state lawmakers in the course of a few, depressing hours.
Hood is president of the John Locke Foundation, publisher of Carolina Journal.com, and host of the statewide program “Carolina Journal Radio.”