Bob Orr on Corporate Incentives

In my secret life, I occasionally correspond with one of the few sane Republicans in North Carolina, Bob Orr. Over the past few months, we've developed what I consider a civil relationship, which is awfully kind of him after all the grief I've given him this year because of his symbiotic relationship with Art Pope. Mr. Orr even visits BlueNC from time to time, as evidence by this posting on his own well-written blog.

In fact, There's a pretty interesting discussion at the BlueNC blog about the controversy surrounding the question of transferring revenue from the Highway Trust Fund to the General Fund for non highway related appropriations. Now I don't usually refer readers to BlueNC unless you're looking for a frequently irrational ideological rant against all things even remotely related to Republicans. (Parental Discretion is advised since some of the content is not appropriate for sensitive youngsters!) But I will admit to having struck up a reasonably civil communication line with the blog's chief blogger Anglico a/k/a James Protzman and the liberal perspective is often interesting to read.

With all that in mind, I promised Bob that I'd think through his plan for for overhauling how North Carolina deals with corporate incentives. For starters, I have to say that the proposals are easily the most detail-oriented policy statements I've ever seen from a politician.

The first pillar of Orr's plan is to find a way to shift the crazy culture of incentives that exists nationally.

Proposal # 1 - Work with the North Carolina Congressional Delegation to seek federal legislative solutions to address interstate competition in targeted business incentives.

North Carolina cannot rectify the interstate incentives competition alone. As Governor, I will convene a taskforce to address interstate competition in targeted business incentives at the national level. The taskforce will be charged to work with our state congressional delegation to address potential federal legislative solutions. This taskforce will be comprised of business leaders, political leaders, and public policy advocates of both political parties.

Proposal # 2 - Work with Regional Governors, the National Governors Association, and the National Conference of State Legislatures to address regional and national open government initiatives in economic development, encourage the coordination of efforts for positive economic growth, and promote cooperative efforts to pursue federal legislative reform of the current system of targeted incentives to induce corporations to move from one state to another.

In my view, Orr's first two proposals are non-starters. While they make sense conceptually, in practice, they'll never happen. It's easy for North Carolina to say incentives are counter productive now that we've already given away millions in misguided attempts at economic development. That's like having an arsenal of nuclear weapons stockpiled, and getting all bent out of shape because others want them too. That's why I call this part of Orr's plan "unilateral disarmament". Rich states won't go for it, and neither will the Democrats in the North Carolina legislature. If Orr were governor, he'd be vetoing incentives bills right and left, and most would be over-ridden.

II. State Reform: Seeking a Uniform Economic Development Policy and Ending the Use of Discretionary Incentive Programs in Favor of Workforce Development.

Proposal # 3 – End special legislative tax credits and expenditures for select corporate entities and seek to uniformly apply economic development policy for all North Carolina businesses. The North Carolina Supreme Court has said that in classifying entities for taxation the "classification itself must be based on a reasonable distinction." [1] Special legislation passed to provide a tax incentive to a targeted business cannot be justified as a classification based on any reasonable distinction. In arguing on behalf of the Goodyear incentive, proponents defended the legislation by asserting the need to retain existing North Carolina jobs. However, they failed to explain the distinction that made jobs at Goodyear and Bridgestone Firestone more valuable than those at other facilities across the state. If the purpose of targeted incentives is to encourage job creation, then our Governor and our legislature have pursued the classification of businesses based on their particular opinion of what jobs are most valuable. While we do not have the revenue base to respond to every business that makes a request or "threatens" to leave without a state subsidy, that does not mean we should draft our policies to provide only for those with the loudest voices or the biggest names and the most politically influential lobbyists.

To this one I say, amen . . . and I commend Bob Orr for an eloquent and clear explanation of his reasoning:

If the goal of these economic development programs is to support job creation, particularly in economically distressed corners of the state, then our policies need to be directed to just that, not to supporting select industries or select businesses who have the lobbying power to influence decision making. Instead of focusing on special deals we should focus on improving tax conditions for all businesses. And, if and when incentives are required by the General Assembly, our incentive policies need to provide for the genuine accomplishment of job creation and apply a uniform system of credits or rebates that assists fiscally responsible growth.

While it is in the interest of the state to limit support to those companies which meet environmental and safety standards, pay adequate wages, provide adequate health care, and create long term versus seasonal employment, we should not choose to support only those industries or companies which special interests deem most valuable. A new nurse and a new assembly line operator, each making $40,000 a year, will encourage growth in local communities. While I am not proposing that we provide incentives to the healthcare industry, I do think it is important to not favor in our state policies the multi-national internet service provider at the expense of the small manufacturing operation. By encouraging the growth of local businesses, be they textile, furniture, biotechnology, or semiconductor producers, we are making a lasting investment in the growth of our state by providing new products and services to keep North Carolina competitive nationally and internationally well into the future.

Orr's fourth proposal is also right on the money:

Proposal # 4 – Eliminate the Governor's One North Carolina Program.

The One North Carolina Fund provides cash grants for new or expanding businesses at the discretion of the Governor. Over $42 million has been spent under the program since its initiation in 2004 in over 194 separate grants.

The nature of these grants as “discretionary” provides added complications. Discretionary incentives, authorized exclusively by the executive branch, allow too much room for political considerations to enter the decision making process. We have often heard the One NC Fund described as the “Governor’s walking around money,” a term generically applied to money used for vote buying in elections. Grants could thus be distributed to preferred businesses and industries in order to garner votes in the next election cycle. Therefore, I propose that the One NC Fund be eliminated.

The rest of Orr's proposals are also good ideas, though most depend on a level of collaboration within the state that seems unlikely to happen. Powerful business interests in the state legislature, especially in the Senate, basically control public policy around incentives, and with a couple of notable exceptions, Orr would find most of his proposals falling on deaf ears.

Proposal # 5 – Replace the Job Development Investment Grant Program with a new initiative to provide support for workforce training.

Proposal # 6 – Require local governments to develop structured economic development policies that provide uniformity.

Proposal # 7 – Eliminate targeted incentives to existing North Carolina businesses considering a move within the state.

Proposal # 8 – Require local governments to provide the same incentives to existing North Carolina operations within their jurisdiction as they do new competitors entering the state.

Proposal # 9 – Eliminate cash grant programs that return a percentage of tax revenue back to the company.

Proposal # 10 – Eliminate targeted incentives assisting companies with modernization projects that are not linked to expansion or relocation efforts.

Proposal # 11 – Require corporations applying for incentives to disclose competing offers from outside the state.

Proposal # 12 – Increase disclosure on all local incentive deals.

Proposal # 13 – Increase reporting on statewide economic development activities through the implementation of a unified development budget.

Proposal # 14 – Provide timely, comprehensive reporting requirements for economic development lobbyists and legislative activity.

Proposal # 15 – Provide enhanced accountability for regional partnerships through added oversight from the Department of Commerce and the Governor’s Office.

So yeah, I like what Orr is saying - a lot. The proposals are well-presented and thorough. But if the first proposal doesn't come to fruition - the idea of having all the states play nice when it comes to economic incentives - it seems unlikely that the big business interests in North Carolina would stand by while the legislature tied its hands and limited its flexibility in future negotiations. Collusion between state parties (both Democratic and Republican) and big business interests in North Carolina is pervasive. Legislators routinely say they can't do this or that because big companies won't go along - especially around energy and healthcare.

The problem we're dealing in North Carolina with is much bigger than corporate incentives. The broad spectrum of "rights" given to companies (otherwise known as corporate personhood is wildly out of control. If Bob Orr is going to be tilting at windmills, I'd rather see him tackle the one that matters most.

It's a good thing Orr doesn't have a chance at winning the Party of Greed's nomination for governor against Fred Smith or Bill Graham. Orr is the only one who could give Beverly Perdue a run for her money.


Hey Bob!

It will probably ruin your reputation to be caught posting at The Great Blue Satan, but I hope you'll do us the honor of a visit. (I promise not to call you any more names, even in jest.)

Yours truly,

The kinder, gentler Anglico

Sponge Bob says BlueNC is a poltical porn site?

Now I don't usually refer readers to BlueNC unless you're looking for a frequently irrational ideological rant against all things even remotely related to Republicans. (Parental Discretion is advised since some of the content is not appropriate for sensitive youngsters!)* Sponge Bob....Republican Red State fascist free speech porn fighter

Sponge Bob! I had no idea that you consider yourself a judge of content with that republican family values disclaimer. It appears that you are confuse thinking this site is a myspace operation with millions of teens hanging here for beer and sex.

Since you have fiqure out that this state is loaded with corporate fascist funding with taxpayers funds, when can we expect you to point out that North Carolina biggest fascist corporate fraud is the Blackwater group? And don't give us that old republican Orwellian war party excuse,

"That all corporations are equal, but some corporations are more equal than others"

Hey Max.

I promised Mr. Orr I'd be nice, so I'm hoping I can drag everyone else along with me. Pretty please?


PS The Blackwater question is a legitimate one for the candidate. Where does Bob stand on free-market mercenaries in general . . . and Blackwater in particular. In my view, if they aren't breaking laws, then we don't have the right laws in the first place.


In my view, if they aren't breaking laws, then we don't have the right laws in the first place.

Be the change you wish to see in the world. --Gandhi

Hey A!

I promised Mr. Orr I'd be nice, so I'm hoping I can drag everyone else along with me. Pretty please?* A

You are right! He's yours........I just didn't like the cheap shot he took at the site. Now that I think about it, he is starting to act like Republican fighting for his life in a politcal campaign......

PS The Blackwater question is a legitimate one for the candidate. Where does Bob stand on free-market mercenaries in general . . . and Blackwater in particular. In my view, if they aren't breaking laws, then we don't have the right laws in the first place.* A

Right! Even Mark B, over at the N&R finally agree that it has big time merit in the Gov race after a brief debate on it with me....

First John Hood now Bob Orr?

Step away from the dark side

"jump in where you can and hang on"
Briscoe Darling to Sheriff Andy

I know. It's scary.

Hood is a target of convenience. I've harassed and ridiculed him so much over the past two years that I don't really blame him for ignoring me. (Though in his shoes, I'd be happy to meet me more than halfway. I don't usually care about being right . . . I just want to move the ball.)

Bob Orr's different. He really is smart and thoughtful. He just got on the wrong path awhile back. He'll come around.

Given how the Democratic Party is behaving these days, I figure I might as well connect with good guys no matter where they are. Orr's one of them.

So is Mike Munger (below).

Mr. Orr's proposals remind me of an Arlen Specter speech.

It sounds really good until the time comes to vote on what was said, and then everything changes and the party of greed takes Americans for everything they can, as usual.

North Carolina. Turning the South Blue!

North Carolina. Turning the South Blue!

If it's worth it, do it.

If it's not worth it, meaning the dollar value of the incentive will never be recouped by the state, don't do it. Period.

That being said, you have to look at everything, right? Not just the direct State revenue lost when/if a company pulls up stakes and moves elsewhere; there's the cost of public support of the newly jobless, the failure of smaller businesses in the immediate area, the loss of municipal taxes and the way that impacts schools & services, etc.

I'm not sure we can totally revamp the incentive system, but we damned sure need to treat each one like a business plan/proposal, to make sure it can stand up on its own.

I see it differently.

You're ignoring the competitive part of the equation. One business gets a break from government, which effectively lowers its costs, which makes another business less able to compete.

That's wrong, no matter how much gets recouped by the state.

That's a valid point, James

But...government entities/influence impacts costs to a certain degree in almost every environment, right? Even in a county vs county comparison, the level of infrastructure and services varies widely, as do the costs of operating. It's one of the conundrums surrounding rural growth, and we've seen how well doing nothing helps that.

On a state vs state level, there can be an even greater disparity in established costs, especially if Federal earmarks come into play.

And lastly, on a global level, U.S. (based) manufacturing businesses are so far behind in the "costs" competition they're not even in the same league. A North Carolina furniture manufacturer in competition with a Chinese business, even in a niche high-end product market, is looking at a slow death.

All that being said, if incentives aren't being directed to address the proper issues (and it appears they aren't), the system is broken and needs to be fixed.

I'm sure Justice Orr would agree with this

All that being said, if incentives aren't being directed to address the proper issues (and it appears they aren't), the system is broken and needs to be fixed.

Being against incentives in theory is a one thing

But in practice, you need to realize that we are competing with other states that give them. North Carolina will be at a competitive disadvantage without them. Until we can have a regional or national solution, I think that North Carolina needs to continue to use them, along with good schools, educated population, and good road system (although a good rail system would help that much more).


So, time for the Dave Mason line: Been away. Haven't seen you for a while. How've ya been?

Anyway, back now. Last push for signatures (and huge thanks to Anglico, on that front, btw). We are actually going to make it on the ballot. And then ONE Gub candidate is going to press for civil unions and a moratorium on capital punishment.

On incentives: There are LOTS of studies that show that incentives of the kind being talked about here, and being decried by the good Orr, are at best marginal considerations. Here is a fairly clear study that I found quickly:

StRategic drivers of location decisions for information-age companies
Journal of Real Estate Research, The, 1999 by O'Mara, Martha A
Abstract. The location decision-making process of forty companies with high quality "information-age" jobs is examined. A typology of location decisions is presented based on the magnitude of the relocation and the impact on the workforce. The strategic business drivers of the location decisions are identified and examined. Overall, economic development incentives are less important than the "ease of living" and labor market support found in the community. High quality infrastructure is critical. Future trends and their implications for corporate real estate strategy and economic development priorities are suggested.

Roads, highly educated population, avoiding traffic congestion, access to cheap electricity, access to reliable utilities....those things dwarf incentives as causes for location decisions.

But, politicians can't claim credit for those things.

Relatively few important business decisions come down to payoffs or tax breaks.

And Anglico (and Orr) are right about another thing: Suppose you singled out one business, and said you don't like it. So, you charge it double the tax rate on everyone else. That would violate all sorts of equal protection requirements. How about two firms: you pay way more taxes than everyone else? Still no good. How about three firms, and the other 1,000 firms all have much lower taxes. Couldn't do it.

Well, why can you go all the way the other way, and charge HIGHER taxes to n-1 firms? I don't see how that's any different, or any better. Firms that come here for the right reasons, and hire people, and pay their taxes, have to pay the extortionists and the con artists.

Look: if a firm locates here ONLY for the tax benefits, they will also leave for the tax benefits. We want firms to locate here for the right reasons. Corporate welfare doesn't work, and relying on it means we don't think about our schools, our infrastructure, and our quality of life. And those are the REAL reasons people want to live here.

"It is to secure our rights that we resort to government at all." --Thomas Jefferson to Francois D'Ivernois, 1795.

Michael C. Munger

Thanks for the thoughtful response.

I've missed your sharp mind around here. Every time you show up you win me over - but then I run into the extremists who dominate your party.

I'm coming to the conclusion that parties suck, in general.

In any case, it's great to hear you're going to make the ballot. Not for competitive reasons . . . but because you really should be on it.

Good luck.

Real Libertarians never vote for funding Fascism?

And then ONE Gub candidate is going to press for civil unions and a moratorium on capital punishment.* Mike

The voters couldn't care less about those issues except it divides in this Conservative Republican, Liberal Democrat Paradigm, that seeks to push voters into political labels and the fast 10 sec sound bit. You should be raising hell about the war like Ron Paul and jumping all over Blackwater in this state and saying you are not going to send one more National Guard unit to Iraq or anywhere else on this planet.....

On incentives: There are LOTS of studies that show that incentives of the kind being talked about here, and being decried by the good Orr, are at best marginal considerations. Here is a fairly clear study that I found quickly:* Mike

BS Mike! Real seekers of political liberty are not into fascist corporate funding period. How in the hell can you say you approve of giving Skybus 3.5 million dollars in chump change for using the Greensboro airport as a hub in this state. Do you really believe that pissing away 3 million in taxpayers funds to support a discounted Airline that is giving away the service at a daily loss is not madness or insanity?

Where is hell did you attend economic school? The Von Weasle Reveral school of Fascism!

Mike! Oil is at 90 bucks a barrel and most likely will be at 150 bucks in a couple of months after we do a Shock and Awe on Iran. Do you have any idea how much it costs to fire up a 767 with fuel?

Bob Orr weighs in

First a note about Bob: He told me he made a decision to steer clear of blog commenting early on in his campaign and he is sticking to his guns. I can't say I blame him given how easy it is to slide into the black hole of the blogosphere. In any case, he did give me permission to relay his reactions to this discussion:

Thanks for taking the time and evaluating and commenting on my “incentives” proposal. I enjoyed the responses…uh maybe not Max’s diatribe…but find it amazing how many intelligent, publicly spirited people still want to play the (incentives) game. I am under no illusion that I can end the game but there are so many small steps that can be taken to at least make the system better. I think many of my proposals would do that and I think I can enlist bipartisan support to push for change.

Your new kinder, gentler demeanor helps move forward a constructive discussion of policy changes that need to be addressed in this campaign. And just think, if you actually have switched to unaffiliated, you can vote in the Republican primary for me!!!

Also, if I get past the primary, I’ll be happy to do an interview for BlueNC for the general election.



I suspect "incentives" is in quotes because the proposal Orr made involves much broader issues of economic development - not just incentives. I stand corrected.

And as to voting in the Republican primary . . . wow . . . I never even thought of that possibility. If I could influence the Republican primary for Governor and vote Democratic for everything else, that could be kind of interesting. Can you imagine Bob Orr beating Fred Smith and Bill Graham by one vote? It's tempting to want Graham or Smith to win because neither of them could compete very well against Perdue or Moore. Orr would be tougher, assuming he could come up with the money.

I wonder what Art Pope is thinking right now.

Since when does a political opinion becomes diatribe?

Thanks for taking the time and evaluating and commenting on my “incentives” proposal. I enjoyed the responses…uh maybe not Max’s diatribe…* Sponge Bob

I wouldn't either Sponge Bob! It simply means that you consider me and some of my associates as your enemy in this fight against state fascism. I do have you and the Pope neo-con operation attention don't I?

I hate to tell you Sponge Bob, you are much more thin skin than I thought. Do you have any idea how "diatribe" sounds so elite country club republican?

What if...

If I could influence the Republican primary for Governor and vote Democratic for everything else, that could be kind of interesting.

What if we all did that? *evil grin*

Left on 49

Well, it would be interesting

But I don't think you can vote in more than one primary at a time. :)

I was asked to vote in the Republican primary a few years ago, to vote against Richard Morgan. I couldn't do it. I just couldn't do it. And as much as I consider it sometimes, I won't switch affiliation because of bad decisions made by party "movers and shakers".

I may not have a lot of money - but I can move and shake with best of them, and I'm a from the womb Democrat.

That said- I really appreciate Orr's semi-dialogue here - and wish that more political discourse happened like this.

Thanks for sharing it, A.

Be the change you wish to see in the world. --Gandhi

Hi, Judge Orr!

(Michael Bacon here -- played basketball with your son Robbie at the YMCA in Asheville. No, my jump shot isn't much better now than it was then.)

Cash incentives aren't just a bad idea because they are giveaways and unfairly spend public money. They're a bad idea because aside from the very lightweight commitments you can extract from the companies involved, they're a very risky investment. I can't remember the details of the Dell or the Google deal right now, but after some relatively short period of time (I think it might have been five years in both cases), there's no penalty for either company picking up and moving. At that point, all of the incentive money you've spent effectively has just gone to paying some income taxes for a few years, then it's gone. You might actually make your dollar back in the end, but that's a pretty weak use of public dollars.

Infrastructure, on the other hand, can't pick up and move. Let's say that instead of giving whatever that ridiculous sum was to Google, we paid, oh, 10 times that much, but used it to drag ultra-high speed internet backbone out to Lenore, set a discounted rate on it, promised Google a fixed chunk of it, and sold the rest to any other business that wanted to set up in the area. Or imagine if we'd given Dell a top notch, subsidized rail connection from Greensboro down to the new port at Southport. Yes, that costs a lot more, but in my opinion, it's money much better spent. Even if the companies you built them for go bust, you now have infrastructure which will last decades and serve general economic development, not just the handful of jobs you get from the incentive payment.

The attractiveness of incentives comes from the late-20th century obsession with tax rates and the bottom line of government spending. (And yes, I'm looking at your former employers, Judge, along with all the libertarians in the crowd.) The absolute cheapest, in terms of dollars in the budget and ease of implementation, way to attract businesses is with these cash bribes, but that doesn't make it the best. Careful government spending on construction and administration of high quality infrastructure means you can attract jobs, increase your tax base, and help your residents at the same time, but it doesn't make for flashy press releases, takes a long time to implement, and costs more in the short term. Absolute abandonment of any government involvement in economic development, however hard the libertarians long for it, leads to economic stagnation. Wise spending on infrastructure, which all but the most strident of Randroids can agree is actually what government is supposed to do, boosts your economy continuously over the long haul, rather than in little fits and starts that ultimately become insignificant.

Michael Bacon
Writing (at the moment) from the First Public University in America of the Good Roads State

Anyone mention Lee Act (did

Anyone mention Lee Act (did not see it and other like items)? Most of what
Munger says is reasonable if found mostly correct. Incentives founder on a number of things: (1) time, (2) equal treatment and (3) needs of business and governments vice real people.

Incentives work over time. Forecasts of economic and social impacts over time are nearly (high 90s) wrong and as time passes, more wrong. So, how does one set up a policy(ies) which essentially distribute favors by fiat using tax money, no matter how structured, strung out and based on "accomplishments" by grantees?

You don't, you can't and neither can anyone else. Time severely and permanently erodes intent, irrevocably, catastrophically. Any study of incentives should be conducted by really independent sources and then across not less than 50 years and the entire state (which would mean they will not be done).

If one is concerned about some forms of equal treatment for corporations, businesses, noxious and sychopantic lobbyists and propagandists (ie. Locke), then I assert that is cranial rectitis of the first order. By that I mean treatment equal to abuse taxpayer gets from all this idiocy. Screw corporations. If they want to be citizens, then let them take their lumps and pay taxes proportionate to their gains from and damages to the common. Also, put taxes on the NCCBI, Chamber, or whatever name by which they may pollute the body politic and see how long they stay around. Also, severely limit their capacity to speak (citizens you say?). Insure the indignitites visited on the people paying for all this are compounded on the backs of the government fat cats and corporate clowns. You want to favor corporations, then nail the large cartels which are the result of 50 years of much vaunted "competition" to favor small business without going nuts over these folks either.

Once again, the issue is the needs of real people vs corporations and their malign "citizenship". The only way to solve this issue, is as Orr suggests, and outlaw any manner of bribe to any corporation for any reason. Personally I would also raise their taxes 6X. They want, or are using, our labour, infrastructure, commons for externalizing their wastes, governments for law, contracts and courts: why in hell should we pay them. And, if we were to do so, I have not seen any competency in negotiating so far which would lead to the least benefit for the citizens and taxpayers.

Kill off every single incentive and charge corporations to come here; the ones here, charge a fee for services used to leave or move. They will come if only because we are not sychophants and pushovers--as is now the case.



Threads like this

give me hope. Libertarians, republicans, democrats, progressives, liberals, and conservatives in thoughful debate on the usefulness of a public policy. Each being respectful of the others.

At this point, I seem to grab any sliver I can find. Thanks, Anglico.

Bob has convinced me

about the wisdom of more civility.

That doesn't mean I won't go ballistic from time to time, of course, but I do like the idea of more cross-cutting discussion. It's possible I've burned too many bridges to engage . . . and there are some folks who are so far gone on the right that it's not really worth the trouble.

So thanks for the encouragement.