At the agency briefing before the Joint Finance Committee, Wisconsin Economic Development Corporation (WEDC) CEO Reed Hall revealed the fundamental bankruptcy of his agency’s economic development strategy. This is a fundamental flaw in its approach which goes well beyond WEDC’s well documented inability to track money or adhere to federal and state law.
During his testimony CEO Hall spoke at length about WEDC’s efforts to lure companies from neighboring states, and made clear that these efforts are at the core of its strategy. We call the practice job poaching, because it does not create new jobs, it merely moves them around at great public expense. Large profitable companies are in essence running an extortion racket, pitting states and cities against each other, and shirking their responsibility to support the public services their businesses rely on.
State and local governments spend a shocking $80 billion per year on tax breaks and subsidies to attract or retain businesses, fully 7% of their total budgets. In Wisconsin we spend $1.53 billion per year on these incentive programs, or the equivalent of 10% of the state budget. This is a stunning 6 times the amount per capita spent in Minnesota, and more per capita than Iowa, Illinois and Minnesota combined.
This is a national scandal. American states and cities are spending $80 billion per year to produce little additional economic value. Imagine the economic impact of this money was spent on creating new family supporting jobs? We could begin to create a more economic opportunity if we started making productive use of the money we already waste on economic development.
Some say we can’t do anything about this wasteful misuse of scarce job creation dollars because any state or city which unilaterally disarms will lose out in the bidding wars. But there are simple and common sense solutions.
First, Wisconsin could negotiate enforceable compacts with other states agreeing not to job poach from each other. WEDC CEO Hall said in his testimony that most of Wisconsin’s resources go to attempting to woo companies from neighboring states, making this approach very feasible. We could start with Minnesota and Illinois.
Second, the state could prohibit Wisconsin municipalities from job poaching from each other.
Third, and longer term, Wisconsin could also push for national legislation outlawing job poaching. As Edward Alden and Rebecca Strauss point out in the New York Times, there is a model for this kind of policy in some international trade deals that could be applied by the federal government to prevent the fifty states from poaching jobs from each other.
Its long over due that we put the public back in the driver’s seat in job creation policy, and end the costly and grossly unfair practice of job poaching once and for all.