The Fallacy of State Economic "Unilateral Disarmament"

Nov. 10, 2003

The Editor, New York Times
229 West 43rd Street
New York, NY 10036

To the Editor:

Louis Uchitelle points out that Indiana Gov. Joseph Kernan of Indianapolis recognizes that subsidies to businesses are unnecessary ("States Pay for Jobs, but it Doesn’t Always Pay Off," Nov 10). He also writes that Kernan, nevertheless, refuses to stop handing out these subsidies because no state would "unilaterally disarm."

It is not "unilateral disarmament" when a state treats all firms fairly and equally, and focuses on doing its own job so well that its schools, roads and business climate are powerful magnets for firms who want to do business, not politics. Indeed, studies have shown this approach to be a far better economic development strategy than parceling out ephemeral favors to a chosen few businesses at the expense of the un-chosen many.

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Politicians claim they can’t "unilaterally disarm." But, to push the arms-control metaphor a step further, when is the last time any politician has called for "multilateral disarmament" talks with another state? The point is that government attempts at picking winners and losers in the marketplace are primarily political development programs, not economic ones. They are designed to protect votes, not jobs.

Michael D. LaFaive
Director of Fiscal Policy
Mackinac Center for Public Policy
Midland, MI