I want to preface my talk by saying that not all incentives are bad, but some are. Also it’s clear that some of you work within the existing incentive rules, even though you are frustrated with them.
The recent series on economic development incentives by the New York Times and the numerous follow-up articles in national and local media has made this common and disputed practice better known to the public. It has also raised the question “Should we eliminate economic development incentives?”
People are questioning public sector incentives that use money you paid through your taxes to the government so that your money can be given to for-profit companies. The irony, of course, is that these companies then sell you products that were built using your own tax money.
Locals also question if it’s fair to give financial assistance to out-of-town companies when local businesses that have supported their communities for decades never received it. And whether economic developers artificially create winners and losers by choosing special companies that don’t have to pay taxes when all others do.
Here is what we know: Relocations end up with no net job creation for the USA. Taking jobs from one state and putting it in another doesn’t increase national employment or reduce unemployment. There is no national benefit to Americans.
Also, the magnitude of spending on incentives is massive. The New York Times estimate of $80B per year equates to almost $300 per person in the USA. For comparison, Tennessee could take its incentive dollars and increase the state’s budget for higher education by half. http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-bankroll-corporations.html?_r=0http://ppinys.org/reports/jtf/educationspending.htm
If someone marries you for your money, the marriage isn’t going to last. If a company locates in your city for the biggest incentive package they aren’t in love with you either. Government incentives are being used to buy businesses. An honest slogan could be “the kind of place you wouldn’t move your business to unless we paid you”
The politics of eliminating incentives should be easy. Democrats hate corporate welfare. Republicans hate government intervention that distorts market competition. But I want you to think of a different era in which our nation heard, “Ask not what your country can do for you -- ask what you can do for your country."
This was the call to put the interests of our nation above region, party, or self. And it is through this lens that Americans that put America first can eliminate incentives. My plan is the eradication of all public sector incentives for any business relocations within the United States.
People hate being forced to do things and, in this plan, no one is forced to give up their incentives. Instead this plan offers the voluntary participation of “alliance states.” An alliance state agrees that it will not use public incentives to recruit and relocate companies out of other alliance states.
The benefit of this model is that through cooperation, the alliance states will be able to eliminate competitors. Non-alliance states will have to compete with everyone. You may think this won’t work unless every state supports this plan, but to achieve success, you don’t even need a majority to participate.
You could get to 40% of the population with just 20% of the states or – what I think could be a tipping-point success that would lead others to join - if you had just 5 of the 10 largest states join an alliance it would cover 30% of the US population.
Of course alliances could develop many ways. Imagine a SEDC, MAEDC, or NEDA alliance of states. Collaboratively working by region or size makes tactical sense. Participation means less state competitors and you can save your public funds for public improvements.
As a disincentive, cheating states could agree to pay two-times the economic impact back to the state it stole from. But the bigger penalty is that states that don’t participate will live in a dog-eat-dog world in which every other state uses incentives to take away their businesses
By now you must realize that my focus is actually narrowly defined. I’ve picked what is clearly the worst use of incentives for America. The plan is even voluntary and doesn’t stop many of the other bad economic development incentive practices.
But when it is implemented it may be the drop in the ocean that starts a tidal wave. We have plenty of practice coming up with new incentives. The act of eliminating an incentive is a new experience. And we might like it so much that we do it again and again until we’ve expelled all the bad incentives.
We all work in a profession that uses public tax dollars to recruit American businesses from other needy communities. We do not have to keep doing this. We know this isn’t a good economic development model. It’s just our bad habit masquerading as tradition.
We should consider the historic significance of our profession and how historians will chronicle our legacy. Economic development has had proud moments such as the Marshall Plan and the electrification of the rural south. But it also has a history of failures like the destruction of African American neighborhoods for urban renewal.
How do you think history will look back on the use of taxpayer money to relocate businesses from one part of our country to another? Will historians look at us as a generation of economic developers that competed with ourselves instead of the real competition? Will we look back with pride and success from careers filled with stealing jobs from the communities of our American brothers and - and that didn’t grow our nation’s economy? We should not. But maybe today, we can put the past away.
How to get rid of economic development incentives
How to Get Rid of EconomicDevelopment Incentives in America Anatalio Ubalde CEO & Co-Founder
Can we eliminate economic development incentives in America?• Insert multiple pictures of the NYT article
Spending Per Person$500$450$400$350$300$250$200$150$100 $50 $0 US TN TN Higher Economic Incentives Education Incentives
I love your money The kind of placeyou wouldn’t move your business tounless we paid you
The Ubalde Plan Ubalde plan foreliminating economic development’sparticipation in corporate welfare in America Time for an All-American incentive plan RUSS RIBLETT, STEVIE FIELD, PABLO MONZON, JEF
Alliance State/əˈlīəns//stāt/Noun1. A state government that agrees that it will not use public incentives to recruit and relocate companies out of other alliance states.2. A relationship based on an affinity in interests, nature, or qualities for good economic development.Synonyms: union - league – association - partnership
Alliance States Non-Alliance States HELP! 49Number of Non-Alliance State’s Competitors = Number of Alliance State’s Competitors = 25
Largest states 10 of 20 5 of 10 participating US Population 40% 30%State Participation 20% 10% rate