National Economic Impact

The subsidies used in what has become an interstate arms race slow national economic growth. This occurs even in the small number of situations when a subsidy does sway a corporation's location or expansion decision. When the subsidy "works," it motivates a suboptimal economic decision that will result in an inefficient use of resources[38].

While Idaho may view its subsidy programs as a way to compete with other states for businesses, the Mercatus research suggests that this competition is ultimately harmful not just to Idaho, but to the nation as a whole. By participating in this "race to the bottom," Idaho is contributing to a system that reduces overall economic efficiency and growth.

Interstate Compacts as a Solution

An interstate compact offers a way for states to credibly commit to work together to end the subsidy war. A well-structured compact can allow policymakers to escape the economic race to the bottom without having to be the first to disarm. The idea has momentum—nearly one-third of states have already introduced interstate compact legislation to move toward multilateral disarmament[58].