Competitive States Work to Grow Economy During Recession

Stateline.org offers timely perspective on how some state governments pursue economic development even as they are cutting spending and resetting during the downturn. Read the whole piece, please, but here's the crux.

States may be losing thousands of jobs, but many states are spending millions of dollars and approving new incentives to create jobs, with some success. Economic development efforts don’t come to a halt during a downturn; they’re needed more than ever.

“Certainly there are very current and pressing budget difficulties and it makes sense to consider priorities,” said Ian Pulsipher, an economic development specialist with the National Conference of State Legislatures. “At the same time, economic development is much more long-term than fixing this year’s state budget. It’s not something you spend money on one year and neglect the next.”

Yesterday's New York Times, in a story on how states are cutting spending gives a clue to the current problem.

While state general fund spending typically increases by about 6 percent a year, it is expected to decline by 2.2 percent for this fiscal year,

That 6 percent annual spending growth was unsustainable. And not only in hindsight. Many observers and taxpayers have argued for restraint, spending limits and rainy day funds to mitigate the effects of the booms and busts of the business cycle. Although this recession has been uncommonly deep and long, the run-up in expenditures during the construction bubble clearly made it worse.

The Seattle Times argues, correctly, that by avoiding tax increases this year Washington's governor and legislature improved the state's chances in the recovery.

To get through this recession without a tax increase means that when the recovery begins, the weight of state government will be no greater than before. People will be able to use extra earnings to pay their debts, resume spending and invest in their futures.

It's a point the Columbian agrees with, saying a little more pain may be required. They contrast Washington's no-new-taxes stance with Oregon's recent tax hike.

If this recession worsens, the state's response to the nonpartisan beast should remain the same. To attempt to increase revenue, as Oregon is doing, is the worst tactic at this particular time.

As government leaders continue to pursue growth strategies in hard times - and here's hoping they do - Don Brunell offers a good reminder that some policies do more harm than good. Read his comments in Deirdre Gregg's Puget Sound Business Journal article on "buy Americcan" rules.