NCPA - National Center for Policy Analysis

Will Spending Billions to Attract Jobs Work?

May 2, 2011

Ohio is preparing new industrial parks and high-tech office buildings, loaning money and giving grants to businesses, and subsidizing clean energy, websites, nanotechnology and warehouses, among other things.  The state will spend $1.4 billion on economic development this year.  Ohio's attempt to revive its economy is a real-life case of how states act as a laboratory of democracy.  This industrial state is testing a provocative economic question:  Can government direct the economy into the future, or is that best done by a free market?

  • A USA Today review of two dozen of Ohio's state-funded projects found many behind schedule or failing to deliver the jobs or investment returns promised.
  • For example, a proposed multibillion-dollar plant that would make synthetic natural gas in Lima (population 38,771) is still an artist's rendering in search of financing.
  • It has received $70 million in federal, state and local aid and has been in the works for a decade.

Ohio cities and counties routinely add tax breaks for almost any business or developer that asks.  One unusual Ohio subsidy: collecting municipal income taxes from workers and giving half the money to their company as a location award.  Free-market advocates say subsidies and tax breaks favor bigger businesses skilled at lobbying.  That pushes the burden onto others and unintentionally smothers small entrepreneurs.

Source: Dennis Cauchon, "Ohio Is Spending $1.4 Billion to Attract Jobs.  Will it Work?" USA Today, April 25, 2011.

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