The Phil-osophy of Economic Development
Phil Bredesen promised yesterday that, if he's elected governor, he will increase the incentives the state pays out to corporations to get them to set up new factories and such in the state. "Bredesen said as governor he will focus on industrial recruitment and put together incentive packages that are competitive with other states," reports The Tennessean.

In other words, Bredesen wants to give away more of your tax money. If Bredesen wants to dispel the notion that he gave away the store as mayor of Nashville, promising to give away the store as governor of Tennessee probably isn't the way to go.

Political considerations aside, Bredesen is proposing a dangerous shift in state policy. Tennessee has long avoided participating in the ever-escalating bidding war that has seen states like Alabama give close to half a billion dollars to lure Mercedes to open an assembly plant in the state. Tennessee's approach has been to support new industry by underwriting part of the infrastructure cost. Through the state's Tennessee Industrial Infastructure Program grants, we've paid for new roads and rail lines and extending sewerage lines to industrial parks and to specific industry sites. The result is, if the new industry fails, the state at least still has the upgraded infrastructure that may attract other industry.

Other states compete by offering to write large checks. Bredesen's approach in Nashville was similar. Because of Bredesen, Nashville pays Dell Computer per employee per year. If Dell were to leave Tennessee, Dell - named for its billionaire founder - keeps the money.

Incidentally, in the early 1990s, Tennessee was routinely losing prospective new industry operations to Kentucky. Bowling Green, Ky., landed several new plants whose owners had Tennessee towns like Clarksville and Jackson on their short list. Kentucky lured those plants by allowing the corporations to pay for construction of the plants by keeping every cent of the Kentucky state income tax owed by the employees at those plants. Kentucky could offer that aggressive incentive plan because it has an income tax. Faced with that competition, then-Gov. Ned McWherter responded by improving the TIIP grants program and tweaking other industrial incruitment programs. Funding for worker training was found within existing resources by diverting a portion of taxes employers pay into the unemployment compensation fund to train workers.

The tweaking worked. Today Tennessee perennially ranks among the most successful states in attracting new industrial plants and corporate operations, thanks to our conservative incentives combined with the state's low taxes and lack of an income tax. Economic development is the singular undisputed achievement of the Gov. Don Sundquist administration, with new records set each year for new business investment and job creation in the state. And, while Bredesen has focused on Tennessee's failure to attact one of four new auto plants built in nearby southern states in the past few years, the numerous other industrial and corporate operations Tennessee has attracted have resulted in diversifying Tennessee's economy in ways that merely continuing to attract more and more auto plants wouldn't do.

Tennessee's conservative economic development strategy - pursued by then-Gov. Lamar Alexander and continued by Gov. McWherter and Gov. Sundquist - is working. Bredesen wants to replace it with the Phil-osophy of writing big checks. That may well wreck a very successful economic development department - and put Tennessee on a costly new path that taxpayers can't afford.