RALEIGH – The North Carolina General Assembly came to town, spent two days negotiating with Gov. Mike Easley and various business lobbyists, and then passed a new incentives bill to replace the one Easley vetoed.
The original bill essentially made Goodyear the official tire manufacturer of the Tar Heel State, consecrated with millions of tax dollars. That didn’t go over well in Wilson, where the big Bridgestone/Firestone plant also employed thousands, and probably not in Japan, where the company is headquartered. So now both Goodyear and Bridgestone/Firestone will receive millions of dollars in cash each year directly from the taxpayers of North Carolina.
If the state is going to be foolish, it might as well be fair about it.
Actually, this perverse outcome – which will end up costing taxpayers as much as $60 million over the next decade, up from the original $40 million – is not all bad. I’m not kidding. The past two days of utter foolishness on Jones Street may well prove to be a pivotal moment of crystal clarity. Even sometime-defenders of targeted business incentives are going to have a hard time explaining to average North Carolinians why the deal makes sense. And I think more then a few politicians have just, as Rudyard Kipling’s Bi-Coloured Python Rock Snake might put it, permanently vitiated their future careers.
Let’s break these points down a bit more.
First, the clarity. While the revised corporate giveaway did pass with sizable margins in both houses, this is the first time I can remember when the legislature didn’t just surrender en masse to the incentive monster. Sixty senators and representatives voted no. A number of conservative members who voted for the original Goodyear goodies ended up voting no on the tire-bill retread, having been persuaded that their prior vote was a mistake and that it was time to stand up for the principles they claim to hold dear – the principles of free enterprise and limited government. Similarly, three House liberals — Paul Luebke of Durham, Pricey Harrison of Guilford, and Jennifer Weiss of Wake — broke party ranks and decided not to rob the poor to give to the rich.
If these members are not careful, such rectitude may become a habit.
Second, the deal. It’s ludicrous. I wish Goodyear and Bridgestone well, I really do, but on what planet is tire manufacturing considering an industry so uniquely valuable that it deserves government subsidy when dozens of other industries in the state do not? Why is it legitimate for the state to hand cash to these companies and not dozens of other large-scale manufacturers in the state who make yarn, pork products, automotive parts, industrial chemicals, pharmaceuticals, and other products? Why subsidize two plants employing more than 5,000 between them and not subsidize, say, eight other plants that employ 10,000 between them?
This is not an economic development policy. It’s a very expensive punch line to a very bad joke.
Third, the politics. By voting overwhelmingly this year to raise taxes on average North Carolinians in part to give cash handouts to big business, the majority Democrats in the General Assembly have just bestowed a dazzling gift on the state’s bedraggled and underfinanced Republican candidates. Because the new incentives are straight-out cash, and can’t be construed as attracting new jobs and tax base to the state, GOP challengers can reasonably argue that Democrats have crossed a bright and dangerous line, and are now in the business of giving taxpayers and small businesses the shaft for the sake of special interests. In this case, the Republicans are the populists and the Democrats are the elitists. State Treasurer Richard Moore and Lt. Gov. Beverly Perdue, the Democratic aspirants for the top job, were smart enough to endorse Easley’s original veto. Will they endorse the new bill, or be savvy enough to distance themselves to take a potentially potent issue off the table? We’ll soon see.
The fact that Easley and the General Assembly just added another $6 million a year in corporate welfare to the state budget is most annoying. But it may end up being simply the principal of a political investment whose future returns will be better public policy. Winning costly victories famously caused Pyrrhus to lose a bloody and consequential war. Perhaps it will do the same for the architects of this legislative disaster.
Hood is president of the John Locke Foundation.