Economic Development or Corporate Welfare?


dollar-signBy: Dr. Lynn Reaser 

A San Diego City Council committee recently approved $150,000 worth of subsidies to two local breweries that are planning to expand.  Is this a good model for economic development?

The answer is a strong “no.”  Governments should not be trying to pick winners and losers but leave that to the marketplace.  That is the foundation and core strength of the U.S. economy.  The subsidy or incentive path is slippery.  What industries or firms should receive them—the most promising or those who need the most help?  This model diverts resources to lobbying policymakers and can be a door to corruption.  The granting of subsidies to some firms is unfair to those not receiving them.  It also drives one city to compete against another at the expense of the region.

This is corporate welfare and is bad economic policy.  A much better solution would be to reduce the regulatory barriers to starting and growing all enterprises.

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