In a working paper published by the Mercatus Center at George Mason University, Mercatus Research Fellow Michael Farren and Center for Economic Accountability President John Mozena propose that states be required to end targeted economic development subsidy programs as a condition of receiving any federal COVID-19 “bailout” of state finances.
Farren and Mozena note that governors from across the country — and across the political spectrum — have said that they would rather not engage in economic development subsidy deals, but feel they cannot “unilaterally disarm” their state while others continue offering incentives. A federal bailout of state budgets in the wake of the COVID-19 pandemic would provide a perfect opportunity to have every state disarm at the same time, creating an environment similar to the European Union’s relatively successful prohibition on subsidy competition between member states.