Gov. Pat McCrory labeled it “a good day for North Carolina,” but that’s certainly not the way advocates of limited government should respond to the announcement of the largest grant ever from one of the state’s most objectionable economic development incentives programs.

News that state officials lured insurance giant MetLife to Cary and Charlotte with roughly $90 million in targeted tax incentives signals that McCrory and his Republican administration have not abandoned the flawed economic development model employed by their Democratic predecessors.

By issuing a so-called Job Development Investment Grant, JDIG, to MetLife, McCrory’s administration pledges that the state will pay the company up to 12 annual grants equal to 75 percent of state personal income tax withholdings from newly created jobs — up to $87.2 million. Media reports suggest that this is the largest JDIG in the program’s history, topping $54.6 million promised to Fidelity Investments in 2006.

“Governor’s Walking-Around Money”

That’s not all. McCrory’s announcement also featured another $2 million grant from the One North Carolina Fund, often described informally as the “governor’s walking-around money.” That grant requires a local funding match, according to the governor’s news release, so taxpayers in Cary and Charlotte are presumably on the hook for even more money than the state is providing.

All of this is troubling. The John Locke Foundation has been speaking out against the JDIG program for years, and for good reason.

Though official documents suggest “JDIGs are awarded only to new and expanding businesses whose benefits exceed the costs to the state and would not be undertaken in North Carolina without the grant,” that last qualification is highly suspect. In 2004, JLF’s Carolina Journal documented that then-Gov. Mike Easley had awarded a $7 million JDIG to lure a Verizon Wireless call center to Wilmington, despite the fact that construction of the center already had started.

“I get the idea that proving whether a company would have come to North Carolina without the incentives is difficult, but that’s an argument against playing this game at all, not throwing away all the penalty flags,” JLF President John Hood wrote at the time. “Politicians can hold all the press conferences and mouth all the rhetorical blather they want, but the direction we are going in with economic-development policy is not likely to end well.”

Three Governors, Same Policy

That policy did not end under Easley or under Beverly Perdue, a fellow Democrat. Thursday’s announcement signals it’s not likely to end under McCrory.

Last year, as McCrory campaigned for office, the John Locke Foundation’s Agenda 2012 document offered the following assessment of the economic policies pursued under Easley and Perdue:

“Economic development policy has come to mean state efforts to pick winners and losers by using tax breaks and direct subsidies to promote specific businesses and industries deemed worthy by government officials. It is a form of crony capitalism. On the [Department of Commerce] website, the agency boasts about the specific industries that it targets for special consideration, including tourism, film, sports development, telecommunications, biotechnologies, health care, and financial services. This is a model of state central planning of the economy, and it should be abandoned.”

Why? Because the state should be pursuing a policy of economic growth, rather than economic “development.” “Unlike economic development policy, economic growth policy would not focus on one business, industry, or region of the state over another but would adopt policies to maximize economic growth rates for the state,” the Agenda 2012 document continues. “It is overall economic growth that creates employment opportunities, drives down unemployment rates, creates real prosperity, and lifts people out of poverty.”

“A well-known saying is that a rising tide lifts all boats. Creating the conditions for economic growth will create such a rising tide. Targeting favored businesses and industries, in the pursuit of economic development, sloshes water around, lifting some and sinking others. By replacing the decisions of entrepreneurs and investors in private markets with the decisions of politicians and bureaucrats, resources are misallocated, inefficiencies are created, and the state’s economic growth potential is reduced.”

The first recommendation in Agenda 2012 related to economic growth calls for the repeal of all economic development policies “granting special favors to particular businesses or industries, including the One North Carolina Fund, Job Development Investment Grants (JDIG), and the Golden LEAF Foundation.”

The McCrory administration has chosen MetLife as a winner in the economic game. There’s no telling how much the rest of us will lose as other entrepreneurs and investors are saddled with part of the burden of paying MetLife’s bills.

Editor’s note: Mitch Kokai is director of communications for the John Locke Foundation.