Veronique de Rugy of the Mercatus Center reports that North Carolina ranks No. 15 among the states in corporate welfare, both in terms of the number of subsidy deals targeting private companies and the amount of money devoted to those targeted giveaways.
Targeted state subsidies to private businesses are often promoted as a “market-friendly” means to boost growth, jobs, and development. However, the empirical studies on state subsidies find that these programs have little to no effect in producing their intended goals.
What’s more, as Christopher Coyne and Lotta Moberg write in their recent Mercatus working paper, “The Political Economy of State-Provided Targeted Benefits,” these subsidies are often ultimately damaging. Targeted state subsidies misallocate scarce public resources while encouraging rent-seeking, regulatory capture, and cronyism. To encourage sustainable state economic growth, policymakers should shift their focus away from tailoring policies to benefit specific firms toward policies that create a general environment in which all can flourish. The first step is to end the practice of targeted state subsidies.
One could hope that enlightened public officials would read the previous two paragraphs and conclude that North Carolina should aim for a lower ranking on the state subsidy list. Given recent evidence, though, it’s more likely that North Carolina leaders will see that No. 15 ranking and decide it’s not high enough. If they make that assessment, it’ll be time for Jon Sanders to draft another installment of his Drawing the Wrong Conclusion series.
