THE COMMERCE CLAUSE AS A CONSTRAINT ON WASTEFUL BUSINESS INCENTIVES: ROADBLOCK OR BUMP IN THE ROAD IN THE ‘RACE TO THE BOTTOM?’

Linda McCarthy

Tijdschrift voor Economische en Sociale Geografie, 2007, vol. 98, issue 4, 482-492

Abstract: State and local economic development efforts have grown during the last three decades in the United States. Some public incentives for companies may be effective, including those for high unemployment areas; others may be wasteful, especially if they retain corporations that merely threaten to leave. As companies increasingly expect incentives, however, governments find themselves in a ‘race to the bottom’– the only way to remain competitive is to offer more. Having identified arguments for and against incentives, this paper considers the prospects for addressing wasteful competition, including, in the absence of Congressional action, the US Supreme Court's application of the Commerce Clause to strike down incentives that discriminate against interstate commerce. A review of a lawsuit challenging the constitutionality of incentives for the DaimlerChrysler Toledo Jeep plant finds that the Commerce Clause is not a solution for wasteful competition. Another model to consider is the European Union's regulation of incentives.

Date: 2007
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