But so did an aggressive industrial policy pursued by state and local governments from Virginia to Georgia. Lure industry with generous incentives. Woo foreign manufacturers. In the Southeast between 1985 and 1995, nonfarm employment rose at a 2.5 percent annual rate vs. 1.8 percent for the nation as a whole. No wonder state governments around the country are using economic development incentives to attract business and jobs to their borders.
Problem is, costs are soaring in the battle for business.
The arms race for jobs and income is spiraling out of control, and alarmed researchers at the Federal Reserve Bank of Minneapolis have called on Congress to end the internecine conflict. Opponents charge that these giveaways divert government money from supporting traditional public goods like education, frequently cost far more than any realized benefits, misallocate resources and make everyone worse off. Tax incentives range from credits for jobs created to exemptions from corporate taxes to property tax abatements. Financial aid includes everything from tax-exempt bonds to loan guarantees. Employment assistance typically means the state will train a company's workers, often at a nearby community or technical college.