Programs that provide financial aid to places run the risk of adding fodder to interlocal bidding wars. For another example, the U.S. Department of Housing and Urban Development has approved the use of community development block grant funds for below market-rate loans to businesses in nonentitlement communities on a competitive basis. All four recommendations fall directly under federal control. Each would significantly enhance the abilities of subnational units of government to compete on a level playing field, without undue interference with states rights to freely compete in a global marketplace. Barring significant disruptions to worldwide growth and trade, cities, substate regions and states will increasingly become the locus of competitive advantage.
Capital markets are now fully global and very efficient.
It makes little sense for a national government to tie the hands of subnational units of government in seeking to attract investments to their areas. This is economic war, and states and localities need the flexibility to play it smart according to their economic strengths. It makes little sense for 100 Midwest economists, mostly free market advocates, to argue in favor of the federal government curtailing competition, especially when the Midwest has been the beneficiary of strategic incentive practices by states over the '80s and '90s. Incentives are a cost of doing business. Down the road it is conceivable that one or two states may adopt the contrarian strategy of competing without incentives.