- North Carolina continues to make headlines for its economic development incentives
- These projects are lauded for creating jobs, but in reality, the projects rarely meet the job goals and are often terminated before the full funds can be dispersed
- Only politicians and those who benefit from short-term publicity continue to laud the programs
Business Facilities magazine awarded North Carolina “State of the Year” for economic development in 2022. According to the article, the state’s economic developers at the North Carolina Department of Commerce and the Economic Development Partnership for North Carolina “have reported the landing of nearly 30,000 jobs and multi-billions in investment for 2022,” winning our state the top spot for last year.
My calculations found the state pledged nearly $1.1 billion in 2022 to just 49 companies using Job Development Investment Grant (JDIG) and One North Carolina (OneNC) grants. This is a slightly lower total than 2021 ($1.3 billion) but significantly higher than years prior ($146 million in 2019 and $519 million in 2020), setting precedence for more wasteful spending in years to come.
Though some consider this increased spending a cause for celebration, it is actually an indication of increasingly more taxpayer dollars being unfairly diverted from taxpayers to major corporations and a further concentration of economic power into the hands of the political class.
As I wrote previously, corporate giveaways are increasingly popular in Raleigh because politicians like taking credit for “creating jobs.” But that presumption is flawed. Politicians do not have special knowledge of the economy. That type of central planning is antithetical to the free market. There are many more factors at play than a handout from the state when a business decides to open, expand, or relocate. Corporate giveaways, funded with taxpayer dollars, come at the expense of jobs and economic activity elsewhere.
North Carolina is, unfortunately, in a corporate welfare cycle where lawmakers on both sides of the aisle applaud spending taxpayer dollars to woo corporations to our state that would have come here anyway.
Fortunately, opposition to these handouts is similarly unified. Organizations with differing policy viewpoints can agree that the state’s corporate welfare programs are inherently unfair and a waste of taxpayer dollars.
Looking back at reports that examine the historical data on these corporate giveaways reveals why we shouldn’t applaud increased incentives.
In a 2015 report, the North Carolina Justice Center found that over a 12-year period, 60 percent of JDIG projects had to be canceled after failing to meet their promises. The failures were not due to a lack of funding. Instead, the report stated, “giving away more money actually would do nothing to ensure that these projects succeed at creating jobs.”
The report on Economic Development Grants from the North Carolina Department of Commerce found a similar result. Since 2003, the state has awarded more than $4.6 billion dollars to 384 companies through JDIG. Currently only 183 grants are still active (most JDIG awards typically pay annually up to 12 years), but 153 have been terminated with some or none of the funds dispersed. The outstanding potential liability for the JDIG program was $2.6 billion, according to the report.
In total, roughly 43 percent of companies receiving JDIG grants terminated or withdrew their agreements before the end of the term.
Another report from WRAL investigative reporter Tyler Dukes found that 37 percent of incentives projects failed to create a single job. Just over half of the jobs promised were actually created.
This poor success rate is telling. The government has a bad track record of choosing winners and losers. These incentives packages may sound beneficial at first, but our economy is complex and ever-changing. No government committee can possess the intricate and localized knowledge required to accurately predict which businesses will enjoy future success.
North Carolina’s “State of the Year” award for economic development is not something to commend.
VinFast, Boom Aviation, and Wolfspeed are celebrated as “major wins” in the article detailing our “State of the Year” award. These three largest giveaways for 2022 total over $1 billion (Wolfspeed, $76 million; Boom, $87.2 million; and VinFast, $854 million — more if you include local incentives).
These big giveaways may grab headlines, but history has shown they have little potential to succeed and meet their end of the bargain in the incentives program.
Indeed, VinFast pledged to create 7,500 jobs in North Carolina last March. But less than a year later, the company is already having to cut jobs, delay deliveries, and consolidate its operations, raising questions about whether it will be able to meet its promised goals.
Government should not be in the business of marketing to businesses in the first place. Instead, governments should focus on creating a business-friendly environment in the long run. Lowering taxes benefits everyone, for example, while targeted handouts may benefit a politically chosen few at the expense of others. Economic development packages are a feel-good program for politicians who attend ribbon-cutting ceremonies and take credit for bringing business and jobs to the state. These actions may make headlines, but they do not benefit North Carolinians.