For several decades we have been conducting an economic-policy experiment in state and local governments, and now it's time to stop the testing because the results are clear: The dominant paradigm, incentive-fueled competition among these governments, does not create economic prosperity.
Two big facts confirm this conclusion. First, as the New York Times reported last December, states, counties and cities are giving up more than $80 billion each year to companies in tax breaks, outright cash payments, and buildings and worker training. Second, the wages of the taxpayers who have been footing the bill for this stuff have been flat since at least 1979. Indeed, some economists, including stalwarts of the establishment like Larry Summers, have concluded that we are now in an economy whose normal state is one of mild depression as a result of inadequate demand. It seems obvious that the lack of demand is the result of depressed wages.