States Spend Billions on Economic Development Deals With Little Return
As large companies determine where to invest their development dollars, state governments compete to gain or keep those projects within their borders. As such, each state has some form of an economic development agency (EDA), either within the state government or a nonprofit that works closely in tandem with it. According to a 2016 report by the Urban Institute, EDAs “are tasked with supporting existing businesses, encouraging entrepreneurship, recruiting new businesses, and coordinating the economic development activities” of local government interests.
A 2012 white paper from the National Governors Association said that “policies to boost innovation, competitiveness and job creation are top priorities for the nation’s governors.” But new data would seem to suggest that state actions are rarely worth the expense.
The Center for Economic Accountability (CEA), a think tank that advocates for free market alternatives to corporate welfare, published a report today finding that even by states’ own metrics, EDAs have very little positive impact despite significant investment of taxpayer money.
Analyzing data from all 50 states and Washington, D.C., the Center determined that all EDAs “collectively claim to have ‘created or retained’ a combined total of fewer than 625,000 jobs in their most recent fiscal years.” By comparison, the U.S. economy added 4.8 million jobs in 2022.
To get that relatively low return, EDAs spend tens of billions of dollars, with one estimate as high as $95 billion annually. Previous CEA reporting determined that 2022 also saw the highest number of state economic development deals with billion-dollar subsidies.
Proponents say that incentives are simply a cost of doing business: The head of Georgia’s EDA told Reason, “There’s almost an expectation by companies that they ge
Article from Reason.com