Liberals know why corporate welfare is bad: It takes taxpayer money and gives it to fat cats. But there is a more effective conservative argument against economic development subsidies: They amount to government economic planning and, by taking resources from one company and giving them to another, they breach the Constitution's promise of equal protection under the law. Here is more of the conservative argument, as expressed by a professor at Jacksonville State in Florida and posted on the Web site of the Ludwig von Mises Institute.

Although we should always be wary whenever public officials ask for more of our money, increasing funding for state economic development programs increases the likelihood that states will waste resources competing with each other for the favor of firms...

When other states are competing for the same firms to operate in their states as well, wise firms will hold out for the best offer. This forces states to take into consideration economic development packages being made by their competitor states. An aggressive state can win the firm's favor, but the incentive package will cost much more. Is it still worth it?

Robert Lynch argues that it isn't. The Washington College economist has been studying state subsidy issues for 20 years and found that such packages rarely cause firms to expand in geographic areas that they would not have otherwise expanded to without state incentives. The implication is that many of the businesses choosing to locate in Alabama or any other state would have moved there anyway...

Indeed, these malinvestments are multiplied when carried out among a cartel of fifty states, each competing with the other for limited capital. When they do, each state development agency becomes a net negative to its state, at which time taxpayers would be better off if they all shut down. They should. As hard as it may be for the arrogant state development community to believe, the vast majority of economic growth that occurred in the United States was actually coordinated without any such such central planning boards.