During days when the Treasury Department is writing checks for $85 billion to AIG, the Federal Reserve is pumping $300 billion into global credit markets, and Washington is devising a plan to take over the massive amount of debts on the balance sheets of America's banks, it should hardly raise an eyebrow when North Carolina hands out $30 million to tire makers Goodyear
It's not uncommon for states to offer economic incentives to lure businesses to the state. Over the past decade or so, New Jersey handed out $22 million to Bristol-Myers Squibb
New Mexico gave Intel
Sporting goods retailer Cabela's
Many times the money comes with strings attached, called "clawback provisions." If the company doesn't expand or grow a predetermined number of jobs or generate a certain amount of tax revenue for the state, the government gets a portion of the funds back.
Not so with Goodyear. While it has to upgrade its facilities in the state by 2012, so long as it doesn't lay off any of the 2,400 workers employed there, it gets to keep the $30 million doled out. Bridgestone has to invest similarly and not lay off its 2,100 employees to get the loot. To overcome the governor's original objection to the handout -- it had applied only to Goodyear last year when it was vetoed -- they included Bridgestone in the plan, a company that was already upgrading its plant in the state.
There's always some rationale for accepting the tax dollars. Cabela's says its stores are a tourist attraction, bringing dollars to the state. Intel notes it has been a good corporate citizen for decades in New Mexico and helped build a local high school. We apparently saved the world's financial system by bailing out AIG.
Putting the taxpayers on the hook for private enterprise can become a costly endeavor. It's a zero-sum game being played by the states, positioning themselves against one another to offer the biggest subsidy, but it's also one they're not about to voluntarily choose to be the odd man out on. Goodyear and Bridgestone are merely the latest winners.
Cabela's is a Motley Fool Hidden Gems recommendation. Pfizer is a Motley Fool Income Investor selection. Pfizer and Intel are Motley Fool Inside Value recommendations. Try any of our Foolish newsletters today, free for 30 days.
Fool contributor Rich Duprey owns shares of Goodyear and Intel but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.
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