ployee insurance costs (New Jersey)nand even oflFers free child care (Kansas).nIt’s easy to see how these subsidies willn”reduce unemployment.”nNearly all states with an EZ plannoffer business loans at below-marketninterest rates. Some grant 15-year interest-freenloans (Florida), and some offerna “guarantee” against business failure sonthat businesses can operate in the rednindefinitely (Maryland). That’s a quicknway to boost “investment.”nNearly all guarantee businesses “prioritynstatus” in receiving all availablengrants from state, local, and federalngovernment. And most states offer outrightngrants to new businesses operatingnout of the ghetto, whether they startnthere or just move there. “Infrastructurenassistance” is offered by many states tonrebuild roads and housing, or even tonfinance construction of the building innwhich a business operates. (Massachusetts,nConnecticut, Vermont, and Pennsylvanianoffer such support, and Indiananis especially generous.)nMany states offer rebates on anynmoney spent on “pollution abatement”nand “water supply projects.” Some,nincluding Texas and New York, offernutility rates lower than regular businessesnpay, and New York offers relocationnfunds. Oregon offers extended publicneducation for employees and Tennesseenpromises guaranteed student loans insidenthe EZ. California even offersn”marketing assistance.”nIf we held a contest for the mostnstunning package of largess, the winnernwould be Maine. Its EZ program offers:nthe Maine Job Development ProgramnFund for “assistance to businesses”;ngrants of up to $1,250 “for each newnfull time quality job”; grants for infrastructurendevelopment (from the “InfrastructurenDevelopment Program”);nplanning, marketing, technical assistance,n”and other types of capacitynbuilding”; “assistance for education, jobntraining, work incentive programs andndependent care”; and a promise thatnthe Finance Authority of Maine andnthe Maine State Housing Authority willn”assist Zones.” A bureaucratic mess?nDon’t worry: the “Opportunity ZonenService Delivery System” will “coordinatendevelopment resources and services,nincluding the programs and servicesnof the State Planning Office.”nThis welfare component is not only anreversal of Stuart Butler’s original EZnplan; it completely changes the naturenof EZs. Far from offering free-marketnincentives, they simply add another layernof the welfare muck that alreadyncovers the inner city. It is no longernenough to subsidize individuals; businessesnhave now joined the welfare line.nA study by Miles Friedman, executivendirector of the National Associationnof State Development Agencies, documentsna recent explosion in the redistributionistncomponent of EZs. Thentransfers, he says, address “an everwidernrange of business needs.” Businessnshould “pay attention” to thengrowth in “diversity of incentives” beyondntax and regulatory changes becausenthey can alter the “investmentnequation.”nInstead of creating a new class ofninner-city entrepreneurs, EZs have attractedndevelopment fat cats with thenpromise of government spoils. InnEvansville, Indiana, an EZ attracted anbig retailer, T.J. Maxx, to set up andistribution center and warehouse. Thencompany received tax breaks, but thencity also spent four million dollars onnupgrading water mains and setting up anfirehouse in the area. In addition, thenstate built a daycare center for all employees.nThis program is consideredn”model” by National Journal magazine.nEZs are also used to keep companiesnfrom going out of business when thenmarket dictates that they should. Inn1985 Chrysler threatened to close anplant in Illinois that employed 4,200nworkers. Then-Governor JamesnThompson declared it an EZ, with thentraditional combination of tax breaks,njob training funds, and revenue bonds.nNew Jersey uses EZs to keep businessesnfrom defecting to New York, withneven shopping malls benefiting. Justnthe threat of moving can help a businessnextract bribes from local officialsnin the name of creating an EZ.nThe incentives also serve as usefulntools in the bidding war to attractnbusinesses to a new area. Parks SausagenCo., for example, opened a new thirteennmillion dollar plant in Baltimorenafter the city declared the company’snchosen site an EZ. To clinch the deal,nthe feds threw in a federal urbanndevelopment action grant (UDAC)nworth 2.3 million dollars. But movingnbusinesses out of prosperous areas intonthe ghetto results in no net wealthnnngains for the larger community. Unlikenregulatory and tax cuts, these outrightntransfers cost the taxpayer a bundle.nIt’s not surprising that EZs createnlocal economic boomlets. Oldfashionednredistribution can work temporarynwonders. But how many jobsnwere lost for all the channeling ofnresources out of the productive economynto make these boomlets possible?nHow much of this “new investment” isnsubsidized by transfer payments andnwouldn’t otherwise be undertaken?nMoreover, the examples cited herenprobably don’t cover the full array ofnsubsidies, but only what state governmentsnadmit to handing out in theirnofficial publications. Not included arenthe sweeteners that bureaucrats andnpoliticians can add to the pot duringnthe daily grind of politics.nTo make matters worse, • even thenpromised regulatory changes in staterunnEZs have not panned out, despitenwhat official propaganda-says. “Innpractice, there has been little, if any,nelimination of red tape,” concludesnMichael Allan Wolf (University ofnRichmond) in his 1990 study of EZs.nInstead, EZ businesses are jijst givennspecial consideration in cuttingnthrough: the city will assign a bureaucraticnspecialist to work with the companynin racing through the, complexnsystem of zoning and safety standards.nBut this doesn’t help the upstart businessnwith no connections to the government.nAs Stuart Butler says, these statenprograms are “not fundamentally differentnfrom traditional economic developmentnpolicies of special tax breaksnand assistance and earmarking of money.”nJack Kemp’s office is working to passnnew federal EZ legislation. The billnmost favored by Mr. Kemp’s large EZnpromotion staff is sponsored bynChades B. Rangel (D-NY). This isnsuspicious on its face, since Rangel isnMr. Welfare of the U.S. Congress.nBesides tax breaks, the Rangel billnforces state and local governments tondish out taxpayer money as a qualificationnfor EZ status. “No nominatednarea shall be designated as an enterprisenzone,” says the bill, “unless thenState and local government” agree “innwriting” to link tax benefits to “jobntraining, transportation, education, dayncare, health care, and other social serv-nJUNE 1991/47n