Time for incentives that work

Paul C. Brophy


Kai Ryssdal: Part of the problem towns and cities are having as they try to figure out where their next dollar's coming from is how to replace old economy jobs with new ones. The traditional way to get new businesses to open up shop has been to offer huge tax incentives.

Commentator Paul Brophy says it's time to teach old municipalities some new tricks.

Paul Brophy: You hear lots these days about our general economic problems but not much about our urban economy in particular. Yet America's 100 metropolitan areas represent 65 percent of our population and generate 75 percent of GDP.

Many older industrial metropolitan areas are seeing their foreclosure, unemployment and poverty rates rise. Meanwhile, tax base, infrastructure and real estate values decline.

Many of these places are still making the transition from industrial-based economies to knowledge-based ones. Their difficulties aren't merely an effect of increased competition from China. They're partly a result of our own hide-bound urban policies.

A recent report called "Retooling for Growth" found plenty we can do to make our declining metro areas more globally competitive.

For example, we should stop playing the zero-sum game of luring business from one area to another with bigger tax breaks. Most job growth comes from the growth of existing businesses and local entrepreneurship, not from outside.

More metro areas can do what the Research Triangle in North Carolina did: invest in businesses that build on an area's existing strengths. In the Triangle's case, it was biotech and research. In other cities, it might be alternative energy or precision manufacturing. This strategy of focusing on an area's economic base helps a metro region compete globally.

Metro areas should invest in workforce development programs and quality-of-life assets -- things like good parks, safe streets, good transit -- to attract and retain skilled workers.

We can allocate state and federal subsidies in strategic and accountable ways instead of through earmarks and political grab bags. Minnesota, Illinois and Maine require annual performance reports as a condition of subsidies. Why can't Congress?

America is largely a nation of metro areas and their global competitiveness is a huge factor in the national economy. If the Fed and the Treasury can spend billions on shoring up banks and credit markets, surely we can find some new and better ways to invest in metro America's future.

Ryssdal: Paul Brophy runs a housing and community development consulting firm in Columbia, Maryland.

Log in to post3 Comments

The Retooling for Growth report is a lot more nuanced in its policy prescriptions than could be hinted at in this brief commentary, and incorporates the thinking of a lot of experts, policy types, business people who gathered at conference on this organized by the American Assembly of Columbia University. Paul Brophy was the project director, and gives a great overview. But it's worth wrestling with the specifics. You can download a pdf of the report and view the contributors and other material at: http://www.americanassembly.org/programs.dir/prog_display_ind_pg.php?thi...

Mr. Brophy makes a wonderful suggestion. The only problem is that accountability is something Congress has fought tooth and nail for as long as most of us can remember. How can we expect a government institution that so resists such a practical solution to effectively impose it on others?

I have three cautionary words for any town, city, or region that considers non- or narrowly diversified economic development policies: Pittsburgh, Cleveland, and Detroit.
It seems that Mr. Brophy is advocating the very same policy that got many American cities in the the shape they are in. Diversify, diversify, diversify is the key to economic stability (first) and (then) growth!

As a recent refugee from the Memphis, TN area, I can assure you that, putting all the eggs into the "new economy" basket (especially in low skill/wage areas like transportation and warehousing) makes a community no more immune to boom/bust cycles than what the steel and auto cities have experienced in the past.

With Generous Support From...