Posted: 06 Mar 2010 11:08 PM PST

The goal is to diversify the state's traditional base of textile and manufacturing jobs by adding new high-tech and high-paying fields to the Palmetto State's economy.

But how do you best do that?

Is it by spending - investing, if you will - in higher education, research and incentives, as Republicans Harrell and Leatherman think?

Or can government best help grow the S.C. economy by cutting its spending and regulations, and letting free markets run wild, as the Sanford-ite wing of the state's politically dominant GOP contends?

The stakes are huge.

Historically, South Carolina has had a lower jobless rate than the rest of the nation. But that trend has reversed this decade. With 12.6 percent unemployment in December, the state now has the nation's fourth-highest jobless rate.

Harrell, R-Charleston, and Leatherman, R-Florence, defend the role of government in charting long-term charge for South Carolina.

Boeing would have landed a similar incentive package from another state if South Carolina had not offered its deal, Leatherman argues.

Harrell notes North Carolina transformed its economy by planning around its three research universities.

But others argue their approaches are the wrong approaches.

When government tries to pick economic winners, taxpayers and workers typically wind up the losers, they say. Better to broadly lower tax rates, as Gov. Mark Sanford and the S.C. Policy Council argue, and let the market determine the companies that choose South Carolina.

At times, the disagreement between the two factions is anything but academic - featuring cries of "RINO" for Republican in Name Only and the oxymoronic curse of "Big-Government Republican."

For some in the state's fiscal conservative wing and the burgeoning tea-party movement, Harrell and Leatherman represent the face and policies of South Carolina Big Government.

Leatherman - a onetime Democrat - is not apologetic.

"I believe in incentives," Leatherman said. "If you don't give incentives, you don't get the jobs. Other states are competing furiously.

"If we let the free market work," Leatherman said of eliminating company-specific incentives, "we'd be back in the 1800s."

Few people in the General Assembly can claim as many results as Leatherman can for his home county of Florence. It is evidence that Leatherman is one of the most powerful figures in S.C. politics.

Among the businesses now in Florence: a Honda ATV and personal-watercraft plant; GE Medical Systems; television shopping channel QVC; and employment Web site Monster.com.

Through his chairmanship of the Senate budget-writing committee, Leatherman has a strong say in how state infrastructure dollars are spent, how tax policy is shaped and how regulations, intended to foster job growth, are spelled out. As a member of the Joint Bond Review Committee and the S.C. Budget and Control Board, Leatherman also has a vote on land transactions, bonds and other financial issues that can cement a deal.

His legislative philosophy can be summed up in 14 words: "For this state to move forward, we've got to provide jobs for our people."

But, Leatherman adds, it takes many lawmakers to get anything done in the Legislature. "I don't consider myself as one of the ones changing our state. I see myself as part of that."

Born in North Carolina with a degree in civil engineering from N.C. State University, Leatherman moved to South Carolina in the 1950s. He was elected to the state Senate in 1980 as a Democrat, becoming a Republican in 1995. He assumed chairmanship of the Finance Committee in 2001, when Republicans took control of the Senate.

Leatherman, 78, was born in 1931, at the tail end of the Great Depression. He says he was influenced by the poverty he saw.

"I grew up when times were really tough," he said. "That makes me very, very conservative."

But Leatherman also frequently cites the need for a government safety net to protect the state's poorest residents. Improving the state's public schools is the state's toughest long-term challenge, he said.

During flush years, the Senate budget also has included money for arts centers and other projects that Leatherman has defended as improving the state's quality of life. Critics deride those same projects as pork, saying they are one reason why S.C. government spends too much.

Harrell brings big ideas and ambition to his role leading the House.

Best known for the State Farm Insurance business he started at 24, Harrell, now 54, and his wife, Cathy, have started a number of businesses.

They started the first, an assisted-living facility, in 1995 after being unsatisfied by existing facilities.

"I said to Cathy, 'Somebody needs to build one of these that does it the way we think it should be done,' " Harrell said. The facility grew to about 100 residents before the Harrells sold it in 2006.

The Harrells subsequently started a controversial business that repackages pharmaceuticals for doctors to sell to patients directly, cutting out a trip to the pharmacy.

"I bring my small-business entrepreneur attitude into everything," Harrell said, adding he knows first-hand how government decisions affect a business.

Like Leatherman, Harrell has worked his way through the legislative ranks, serving six years as chairman of the Ways and Means committee before he was elected speaker in 2005.

Like Leatherman, Harrell has drawn criticism from Democrats, fiscal conservatives and others for the number of projects in the state budget that benefit his hometown, such as funding for a college football bowl game in Charleston.

But it is Harrell who has worked hardest to recreate North Carolina's Research Triangle in South Carolina.

He has been a champion of the endowed-chairs program that spends lottery money to attract top-tier researchers to S.C. universities and the S.C. Research Authority, which partners with government, universities and the private sector.

Most recently, Harrell pushed a bill that packages a number of state and local changes to encourage economic development.

Why?

To improve S.C. wages, Harrell says.

S.C. workers earn 81 percent of the national income, Harrell said, while neighboring Georgia and North Carolina workers earn in the mid-90 percent of the national average.

"Our task is to help the private sector to bring jobs into the state or expand the existing industries," Harrell said, "with the ultimate goal of raising the average income of South Carolina citizens."

Leatherman and Harrell say they have a strong working relationship - evidenced by the months of quiet work to secure Boeing and a dinner meeting that settled a dispute over property tax relief in 2006.

Still, the two disagree about how to cut income taxes - Harrell wanted to cut the highest rate; Leatherman, the lowest - and the Senate has declined to approve a number of House Republican agenda items, most notably government restructuring.

Both have extensive relationships with legislative members of both parties. A by-product of their budget-writing backgrounds is a talent for building consensus.

Both were dissatisfied enough with state job-recruitment efforts in 2008 that they called a press conference to criticize the state Department of Commerce, which answers to fellow Republican Sanford. (However, both Harrell and Leatherman have praised Commerce's efforts over the past two years.)

"To support the quantum leap forward, we've got to get good jobs," said Senate President Pro Tem Glenn McConnell, R-Charleston. "They love this state, and they feel a responsibility to it."

Not everyone believes in their plans.

The S.C. Policy Council, a non-profit think tank that says it promotes free-market policies, has been one of the most outspoken critics, arguing policies that cut taxes and regulations work better for businesses.

"The role of government is to manage core functions of government and provide for the common welfare of the citizens," said Ashley Landess, president of the Policy Council. "The economy was never intended to be one of them."

The Policy Council points to Innovista, a $250 million research campus built at the University of South Carolina and championed by Harrell, as an example of Big Government's ability to expensively fail. The campus was designed to draw private research money and jobs, partially to study hydrogen fuel cells as alternative energy sources. But its buildings still sit mostly vacant, its jobs in the future.

As for Leatherman's job-creation incentives?

Landess noted that, in an interview last week, Boeing chief executive Jim Albaugh credited S.C. labor relations - not incentives - as a reason his company selected the Palmetto State. Good policies - not politically negotiated tax breaks or incentives - make for good business, she said.

"We're all being asked to invest in this vision of three or four politicians," Landess said. "It's hard to point to a success story right now.

"The public is against this," she said of incentives. "They know it's a bad idea, and they're not for it."

Democrats argue Republicans have focused on tax cuts and business interests at the expense of the state's welfare.

During House debate last week, for example, state Rep. Gilda Cobb-Hunter, D-Orangeburg, criticized offering "tax relief for those who don't need it."

But can it work?

Michael Walden, an economist at North Carolina State University, said recreating his state's Research Triangle - as Harrell advocates for South Carolina - will be more difficult today.

Why?

Everyone is trying to do it. Charlotte and Winston-Salem have similar efforts, Walden said, citing competition just in the Carolinas.

Walden said what N.C. state government did well - in laying the park's groundwork in the 1950s - was pull together the land and court every business leader that state leaders could meet. The big breakthrough, Walden said, came when IBM decided to ignore stereotypes about the South and locate a facility in the Raleigh area.

State government should focus on education, training workers, taxes and other basics, Walden said, serving as a "catalyst, not really directing things."

But Don Herriott, the retired Roche pharmaceutical executive who recently was appointed director of Innovista, said creating infrastructure for a knowledge-based economy - bringing like-minded people and industries to a town with amenities that appeal to highly-educated, well-paid researchers - requires more than South Carolina's traditional approach to business.

"South Carolina has done a tremendous amount to build that infrastructure," Herriott said, citing key legislation. "You have to differentiate yourself, you have to do something special.

"We may be seeding some areas, but we're not trying to pick winners."

South Carolina has built on its assets, Harrell said, capitalizing on BMW in the Upstate to develop the Clemson University International Center for Automotive Research and the Medical University of South Carolina for heart research and other biomedical projects.

Innovista seeks to capitalize on another state asset: the Savannah River Site, which has been studying hydrogen fuel technology for decades, he says.

But both Harrell and Leatherman say the state has to think long-term.

"We've created the nucleus and what needs to happen - over the next few years as success happen, as they have at ICAR already - the public needs to see that," Harrell said. "We've got to create something here, that over time the public will support, just like they support the Research Triangle today."

But as in business, not every idea will work.

"We'll have some failures as we go along," Leatherman said.

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Targeted spending or tax cuts: Republicans debate right way to grow ... - Greenville News

Posted: 06 Mar 2010 10:54 PM PST

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Leatherman, 78, was born in 1931, during the Great Depression. He says he was influenced by the poverty he saw.

"I grew up when times were really tough," he said. "That makes me very, very conservative."

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