State Stimulus: Retaining and Attracting Jobs and Investment

As we posted yesterday, state governments, most of which are reeling from recessionary revenue downturns, are desperate to turn their economies around. Further discussion comes from the legislative analysts at StateNet. They make a strong case for a stimulus package targeted at state government.

...there are sound reasons why the next federal stimulus should give preference to the states ahead of individuals or favored industries. Traditionally, the objection to subsidizing states is that the money takes so long to work its way into the economy that mild recessions often end before the infusion has a substantial effect. This doesn't feel like a mild recession. Douglas W. Elmendorf of the Brookings Institution, a former economist with the Federal Reserve and the Clinton White House, wrote a paper last January opposing infrastructure spending because it was not fast-acting enough. Now, seeing a "prolonged downturn," Elmendorf has endorsed infrastructure spending.

And they provide report alignment between a couple of groups that don't always agree.

"Jobs are the key," said William Hauck, president of the California Business Roundtable. The U.S. economy has shed 1.2 million jobs this year, with the numbers certain to go far higher. The Economic Policy Institute, a liberal group, estimates that $75 billion in infrastructure spending will create a million jobs. That may be optimistic, but there is no question that infrastructure spending is a good economic value in a down economy.

While I'm not confident anything coming from Congress can be delivered without a larding of inefficient earmarks, the infrastructure case makes sense.

While waiting for Congress, though, we should be careful to preserve what we have here. Don Brunell's latest column looks at Boeing executive Scott Carson's speech and puts it in good perspective.

Boeing has the ability to command the attention of media and public officials. In reality, company officials are speaking on behalf of all private job-producing taxpaying employers in our state. Boeing has laid out the answer to our state?s economic dilemma. Hopefully, the right people are listening.

PowerLine reports that Congress may be considering corporate tax relief, certainly appropriate for a nation that imposes one of the highest corporate tax rates in the world.

What we're seeing is the two-prongs of competitiveness strategy: One prong uses tax revenues to spur job creation through infrastructure investment; the other allows entrepreneurs to invest more of their own money by providing tax relief and maximizing the potential return on their investment. Public spending may provide necessary short-term stimulus. Long-term, it's essential we create an environment that encourages business to invest and create jobs here.