My problem with economic incentives

My problem with economic incentives is that they are sometimes used to support projects that are not financially and/or economically feasible.

Most economic development professionals confess that they do not like economic incentives, but that they must use them to be competitive.  No argument here.  The problem is that some communities are so desperate for any project that will create jobs that they will make loans, provide infrastructure and give tax breaks to companies that would not make it without those incentives.  So what good does it do a community to provide incentives only to have the company go bankrupt after a couple of years?

Fortunately, communities have gotten wise to this situation and now are requiring clawback provisions or performance bonds.  Nevertheless, if a company can’t make it without incentives it is probably not going to be around very long – especially in this economy.

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