EconWar




A Conversation with
Representative Daniel T. Blue, Jr.

House of Representatives Raleigh, North Carolina



Rep. Blue has represented Raleigh-area Wake County in the North Carolina House since 1980. From 1991 until Republicans gained control of the House in the election of 1993, Blue served as Speaker of the House. His current committee assignments include the committee on Business and Labor, among others. Blue is managing partner of the Raleigh law firm of Thigpen, Blue, Stephens, and Fellers.

Incentives vs. Investments

The concept of doling out money to industry by way of tremendous tax breaks, tax incentives, or tax offsets, not to mention just handing out cash is foreign to my idea of what the government's role ought to be. The whole reason for incentives is to lure specific industries. In my mind, this is a misuse of funds. Whatever the government provides must be broadly available to all.

Let me give you an example of where I set my limits. When I was Speaker, the General Assembly wrestled with what kinds of incentives might be appropriate to offer Mercedes in response to what Alabama and South Carolina and some of the other southern states were offering. The way that we looked at it then probably captures my philosophy about incentives as well as anything. I was perfectly willing, and I think the House in general was perfectly willing, to strengthen existing institutions in the state, such as our long-standing use of community colleges for industry-specific training.

Our notion was to locate a multi-million dollar training facility adjacent to the proposed $800 million manufacturing plant that would be a "center of excellence" in high-tech manufacturing processes. The facility was to have been owned by the state, since the taxpayers were paying for it, and available to train Mercedes workers as well as others involved in high-tech production. It would have been an annex, if you will, of the local community college with ties to the engineering schools at surrounding universities, all connected into the state's information superhighway via fiberoptic trunk.

I don't view this as specifically preferential; although no doubt Mercedes stood to benefit because of its proximity to the facility. But we were seeking to set up similar centers of excellence throughout the community college system in a variety of different fields. We had already created one relating to furniture. We created one relating to textiles. So it was in the context of these ongoing educational efforts. The Mercedes proposal fit in perfectly with our notion of an appropriate investment.

Moreover, together with the local community, we were willing to help improve roads, put in rail lines, help lay the foundations for a cutting-edge information infrastructure -- the fiberoptic trunk lines -- that would make their facility state of the art. Here I'm talking about funding ongoing state activity to make the state competitive both in its educational infrastructure as well as its physical infrastructure. I thought the information superhighway part of it was the most ingenious because you're providing a big firm like a Mercedes with something of tremendous benefit, but the existence of such network capabilities could be a boon to all businesses, small, medium or large.

Walk-around Money


Right here in my district, I've seen how the misuse of incentives for specific firms can lead to harm. I'm from one of the rather more prosperous counties and we've had instances with the governor's competitive fund of giving incentives to businesses to relocate from one county to the other. A couple of industries took money from the state fund and then took their jobs out of my county when they relocated to an adjoining county. We raised these issues with the Commerce Department and, supposedly, they have taken steps to prevent that from happening again.

Frankly, I'd like to see the elimination of these cash giveaways period. That's been my position from the moment the Competitive Fund was created. Harold Brubaker [current House Speaker and Republican Representative] likes to call it the Governor's Walk-around money, but that's a phrase we [House Democrats] came up with long before he was using it.

Community Building


I'm told that we have to do something to stay competitive. But the fact that incentives are common practice in other states doesn't mean anything except that other states like Alabama and South Carolina feel they must gamble. Anytime you get into a specific incentive war, for whatever size project, the have-nots will keep bidding up the price if they've already decided that this is the game they have to play.

When you rely on incentives targeted to specific firms, you don't build the kind of loyalty to the community that makes a firm want to stay put and invest in the people that are part of your company. The firms attention gets focused on the cash, the bottom line. But also, the government ends up diverting dollars that ought to be used to improve the skills of your people and make them more trainable and cross-trainable in a lot of given areas. Those dollars aren't available to educate your workforce or to build the kind of infrastructure that may help other industries and businesses emerge on their own.

Small businesses, by the way, provide 80 or so percent of the jobs. Where are the incentives to boost these kinds of businesses?

I'm not opposed to a broadly-based tax policy that's not specifically geared toward any one or any very small number of identifiable private firms. For example, we give tax breaks to families when they buy a home, every family, not just the Jones's or the Smith's. I happen to be very supportive of that. Then there's Chapter 105 of our tax code, riddled with property tax exemptions for various industries, whether the pig industry or poultry or tobacco or lumber. Now, I've worked to overturn these for a very long time, but they're tough to attack precisely because they're industry-wide; they aren't targeting a specific producer or a small number of producers. I don't like them, but I don't consider them direct gifts offered to one particular business operation.

How far down the road?


But such policies still makes me wary of going down the road to greater acceptance of the necessity of specific incentives. Once you open the door, there's always going to be pressure to open it a little further, and a little further, and a little further. Once you cross over the line, the purity of your motives dissipates.

We were the state that was basically adding more manufacturing facilities than any other in the early 1990s. Ohio may be leading the country now but we've been doing it without giveaways. I know you always have to change your method because whatever you're doing that's worked in the past is going to be copied by everybody. You've got to figure out how to stay ahead of the game.

By the same token, if you are adding jobs and adding new facilities quicker than almost anybody else, you know there have to be some other reasons for these companies to come rather than what you are willing to give them upfront. My suggestion is to keep your sights focused on the quality of the labor force, and particularly, strong support for the kind of broadly-available information infrastructure that will help prepare our people for whatever the future brings.


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