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ECONOMIC WARS ARE DRAINING U.S. CITIES

The California beach town where I live is at war. But not with Japan or Iraq or even the federal government. We are at war with two neighboring cities, each less than 10 miles away.

For decades, these cities were intimidated by our Maginot Line of retail establishments - a regional mall, a half-dozen significant shopping centers and hundreds of small, locally owned businesses selling everything from running shoes to darts.Recently, however, the neighboring cities have figured out how to slip around our Maginot Line. They have spent the past several years providing tax abatements and other incentives to various businesses, and as a result they have amassed impressive weaponry along the freeway near our border: auto dealerships, outlet malls, movie theaters and, most devastating, that nuclear bomb of retailers, a Wal-Mart.

The result? Our town has lost its once-impressive lead in sales-tax revenues, and our regional mall has been decimated. Now our city manager is busy devising a counterattack. But, as in all arms races, the winners are losing as well. The neighboring cities are teetering on the brink of insolvency because of all the subsidies they have proferred to the retailers. So while our mayor gets hammered for not doling out enough goodies to lure the retailers, the other two mayors get hammered for literally giving away the store.

In short, we are engaged in a classic economic development war. These wars are fought constantly all over the country. Governors line up to pay tribute to visiting Asian auto manufacturers who might build a plant in their state. Otherwise-proud mayors bow down in front of wealthy oafs who happen to own sports teams. Armies of bureaucrats struggle to show how much prospective tax revenue they can yield to the captains of industry in order to keep them or lure them.

It is a sordid and depressing war, one decried on a regular basis by everyone from the president on down. We are impoverishing our communities through foolish tax giveaways, the argument goes. The library has no money because of the tax abatements we gave to the big chain bookstore. Tax abatements are shifting the load from businesses to average homeowners who can ill afford this added burden. Wouldn't it be better if we all just worked together and left this petty bickering behind?

All this is true enough. But it ignores one important fact. Competition for economic growth is undeniably, irrevocably American - and therefore unavoidable.

In many ways, the whole history of the United States is the history of communities competing with each other. In the 19th century, the federal government encouraged the willy-nilly creation of communities in the Midwest and West as a means of dispersing the population from the crowded East and South. And the results were wonderfully American. Western towns were platted on paper and sold to unwitting customers in the East even before they were built. Every aspiring Midwestern town started a college - not for culture or education, but to attract people and businesses - and in the process they changed the very nature of higher education. Civic boosters created cities such as Houston, Dallas and Los Angeles out of little more than dirt and dreams. The driving force behind the growth of American communities - and America itself - was not theology or vision or culture or even commerce, but salesmanship.

There is a difference, however, between building a port and subsidizing a Wal-Mart. And therein lies the sadness of today's economic development efforts.

A port - or a college or an airport - enriches a community. Such pieces of economic infrastructure are often financially stupid decisions, at least in the short run. But their tide of red ink often leaves a wake of energy and momentum that eventually pays off. Denver International Airport may seem troubled and expensive and remote today, but 50 years from now it will be viewed as visionary.

A tax giveaway, however, enriches only the corporation that receives it. Tax abatements may keep a plant or a store open for a few years. But business is business, and local governments can't control all the forces - markets, pricing, competition, even currency fluctuation - that affect a company's decision to close a store or a plant.

A half-century from now, the state university currently being built in our county will be a well-established part of our landscape. So will the commercial airport people are beginning to think must be created after our local military base closes.

Some people think these institutions aren't a good idea - that they might create a cycle of growth that will spiral out of control. That may be. But they're probably a better foundation for our future than the Wal-Mart, the auto dealerships and the outlet malls - all of which will likely be gone, leaving only political divisiveness and economic ruin in their wake.