Why Poaching Profits People

Kevin McCullough

2/17/2013 12:01:00 AM - Kevin McCullough

Critics of a free market economy are also critics of individual responsibility. Because they believe in higher taxes, centralized control, and absolute intolerance to other viewpoints, they find themselves reducing free market ideas to that of human flatulence.

At least the current governor of California--Jerry Brown--did this week.

The seventy-four year old was quite taken aback. He was asked by California media this week if Texas Governor Rick Perry's recent poaching expedition would matter much to the state's future. His reply was direct.

"It's not a serious story, guys. It's not a burp. It's barely a fart," replied Brown.

Maybe Governor Brown is just in just denial but Governor Perry's three fold plan appears to be working like a charm.

In the initial stage the Texas Governor voiced a personal public service announcement to the CEOs and gatekeepers in California's business leadership communities. He placed moderate advertising buys in San Francisco, Los Angeles, San Diego, and other specialty areas. The commercial created a firestorm of attention in the state and gained Perry additional earned media coverage.

He followed that up with a fact-finding mission and personal meetings with some of California's largest corporations. It should also be noted that he was invited to do so by some of California's elected leaders in Sacramento. It was this in-person visit that seemed to rile the California Governor's feathers the worst.

Lastly comes the elbow grease and follow-up with companies that had additional questions, and this appears to be where the real story lies.

Since governor Perry's return home--only days ago--the Greater Austin (Texas) Chamber of Commerce reports a definitive spike by inbound inquiries by California companies. And since the November elections--when California saw state tax increases passed (not even including looming federal tax and Obamacare increases)--businesses in the Golden State are investigating a move to a state that offers much lower regulatory hurdles and ZERO state income tax.

“We have had a spike of double or triple the amount of normal (business relocation) activity since the November election in California,” said Dave Porter, senior vice president at the Greater Austin Chamber.

Critics of Governor Perry's attempts to boost inbound business growth in his state dismiss the efforts out of hand.

Greg LeRoy, long time progressive, and now head of the liberal activist (and heavily pro-union and pro-green) "Good Jobs First" stated, "Interstate job piracy is not a fruitful strategy for economic growth." He argued that "poaching... amounts to a geographic reshuffling of existing jobs." (As opposed to new business activity.)

Recently numbers of governors are joining the open-poaching policy with fervor in a dispute that is raging first philosophically, but secondarily, economically.

Why else is it that states with the strongest economies are poaching from the states in deepest economic trouble?

Governor Walker of Wisconsin, Governor Scott of Florida, Governor Chris Cristie of New Jersey, Governor Daugaard of South Carolina, and Governor McDonnell of Virginia have all made direct plays for companies in California, New York, Illinois, Maryland, and Minnesota to relocate.

So while Governor Brown would like to dismiss the effort, and while leftist progressive think tanks inside the beltway claim a zero sum economic advantage, why would I still argue that poaching is good for the nation?

Significant reason number one: greater, more wide-spread fiscal accountability!

The idea of risk and competition scares progressives because there is no guarantee of "equal outcomes" (which are never actually equal, they only pretend to be.)

Governor Brown--in an already economically near-bankrupt state--could stand to lose massive tax generation from the mere number of employees that one to ten major corporations take out of state (not to even mention the corporate taxes involved.) This reality further hits the pocketbooks of the tax-payers he has promised to solve the economic woes of. If those companies leave he must find alternative solutions for balancing the cost of the state to do business which could mean: spending cuts.

The same for Maryland, Illinois, New York etc.

Significant reason number two: continued job development.

When a company saves money on regulatory costs and on taxes (which serve as a pure burden on the cost that is passed on to tax-payers--remember companies never pay taxes--their customers always do) they can create more jobs in the new location than they previously had in the higher regulatory and taxed region.

Poaching has multiple benefits most immediately for the states that are engaging in it, and long term for the states that are forced to admit that other states are beating them in the contest of ideas, revenues, economies, and contentment.

Governor Perry is right to not only brag about his state's economic growth, but he has a moral obligation to do all he can to expand it.

And while it may give Governor Brown a bit of gas, ultimately he will be forced to accommodate, innovate, or step aside.

And that's exactly the way it should be!