May 21 - 22, 1996
National Academy of Sciences, Washington, DC
MORE THAN 70 ECONOMISTS, policy makers, lawyers, tax administrators, and business and labor leaders helped frame the discussion of the Economic War Among the States at a national conference May 21-22, 1996 at the National Academy of Sciences in Washington, DC.
The day after the conference, attendees made a presentation on Capitol Hill regarding the role of the federal government in the incentive wars. Legislators in attendance included US Senator Jeff Bingaman of New Mexico and Congressman Frank Meehan of New Jersey.
Principal conference speakers included Alice Rivlin, director of the Office of Management and Budget, and Robert Reich, US Secretary of Labor. Opening
the conference was Chris Farrell, editor of Business Week and contributor to Minnesota Public Radio's nationally-broadcast program Sound Money.
Conferees defined six key questions for further policy review:
1. What goals and criteria should drive the use of incentives, especially given the disparity between depressed and affluent communities?
- Educate policy-makers; but first, establish good data and settle the disagreements on the economic questions (for example, are incentives a zero-sum, positive-sum or negative-sum game?).
- More discussion is needed on the value of tax incentives, with a special focus on global investment.
- Encourage local decision-makers to take a broader perspective on the issue and consider their development issues in a regional and national context.
2. What can the states do to address the economic war among the states?
- Full disclosure of incentive offers during the bidding process, including disclosure by company and the role and compensation of auctioneers, and make all disclosures publicly available - including political contributions.
- Initiate a multi-state compact that would share information, create an analysis model, identify "best" and "worst" practices, and note legal risks and costs.
- Encourage legislators to adopt uniform standards and accountability measures.
3. How can decision-making and accountability be improved (specifically addressing the questions of standards, disclosures and enforcement)?
- There must be standards for awarding incentives that derive from best practices. States and local governments should include in these standards an assessment of the quality of jobs and their availability to local populations.
- These standards must include performance and enforcement mechanisms.
- A multi-organization task force should be established to promulgate uniform reporting standards that would measure and evaluate the costs and benefits of incentives. These standards would be voluntarily enforced by states and localities. Also, the task force effort must be staffed and funded, perhaps by foundation money.
4. How does the competition among states affect our global competitiveness?
- To prevent the economic war from undermining essential state functions, Congress should require state attorneys general to issue opinions on the constitutionality and trade agreement legality of each subsidy/incentive.
- Adopt international trade negotiating positions that require a "levelling up" of wage, environmental and similar standards as a price of access to United States markets.
- Shift recruitment activities away from subsidies--such as tax breaks--and toward infrastructure and human capital. Doing this unilaterally makes a state more competitive in the long run nationally and internationally.
5. What role should the courts, and federal and state government play in addressing the economic war among the states?
- Get a study underway that will bring reputable data on the table (for example, from the Government Accounting Office).
- Encourage attorneys general from various states to test the legal waters and bring lawsuits that challenge the legality of preferential tax and subsidy treatment.
6. How should we develop better information on costs and benefits of economic development incentives?
A summary document of these recommendations and key presentations will published in the July issue of The Region, the quarterly magazine of The Federal Reserve Bank of Minneapolis. Copies will be available to any interested person upon request Written requests can be sent to: Office of Public Affairs, The Federal Reserve Bank of Minneapolis, 250 Marquette Avenue, Minneapolis, MN 55401-2171. Requests can also be sent by fax to (612) 335-2855 or by e-mail to: mailto:email@example.com.
- Establish a federally "mandated" form that would reveal the specifics of deals, such as: who receives the funding, how much by category, who pays (local, state or federal), prior location of jobs, impacts on employment, housing and schools.
- For general tax credits (for example, job credits), develop a Securities and Exchange Commission-type disclosure that would reveal the nature of the subsidy, the amount of taxes paid, job growth and review the promises made by the company.
Alice Rivlin, Keynote Speaker
Alice Rivlin, the director of the White House's Office of Management and Budget, has been one of President Clinton's key economic and budgetary advisor's since her appointment in 1994. She was recently nominated by the President to be Vice Chairman of the Board of Governors of the Federal Reserve System,
a nomination that seems likely to be affirmed by the time of the Economic War Among the States conference on May 21-22.
Rivlin, who has her Ph.D. in economics from Radcliffe College was director
and senior fellow in the Economic Study Program at the Brookings
Institution from 1983-1993. She has written more than dozen books on
economics including "Reviving the American Dream: The Economy, the States
and the Federal Government."
"Rivlin is one of the nation's foremost experts on how to keep the economy
growing. 'She always calls it as she sees it.'"
The Philadelphia Inquirer
Robert Reich, Conference Speaker
Robert B. Reich is the nation's 22nd Secretary of Labor. As a member of the Clinton administration, Secretary Reich has focused on
training and education in the American workforce. Before coming to the Labor
Department, Reich was on the faculty of Harvard University's John F. Kennedy School of
Government. He served as an assistant to the Solicitor General in the Ford
Administration, and headed the policy planning staff of the Federal Trade Commission in
the Carter Administration. He has written seven books and more than 200 articles on the
global economy and the U.S. workforce. Reich graduated from Dartmouth College and Yale
Law School, and received a degree from Oxford University, where he studied as a Rhodes
The Economic War Among the States is produced by Minnesota Public Radio's Civic Journalism Initiative and is made possible by a major grant from the