Can Governors Create Jobs?

At Stateline, Pamela Prah asks a good question with respect to what voters will be hearing from gubernatorial candidates this year and in 2014: can they create jobs?

The general, bipartisan answer is “not as much as they would often have you think,” insofar as governors and aspirants to that position (and for that matter, state legislators) often pretend to have leverage over national and global macroeconomic trends they do not actually possess. Thus, when the economy is booming, they take credit for it as much as possible, and when it’s in the tank, they offer often-symbolic, sometimes-magical proposals to do something about it.

But as on so many topics, the idea that all gubernatorial “job-creating” ideas are equally questionable can quickly become an exercise in false equivalency. Conservatives often propose public subsidies to “attract businesses” or simply assert that state-level tax cuts will stimulate the private-sector economy in a particular place. At best, corporate subsidies, particularly if they are offered as inducements to individual “investors,” run a very high risk of simply offering windfalls to companies who would make such investments in any case for other, more fundamental reasons (i.e., proximity to markets or suppliers, or the availability of a work-force with suitable skills). And even if they “work” in attracting capital to a particular location, from a national point of view they represent a zero-sum game and encourage race-to-the-bottom gaming of state policymakers. Meanwhile, there is little or no evidence that lowering state taxes can have a stimulative effect that is anything more than a drop in the bucket in terms of overall economic conditions. The one sure thing is that to the extent that subsidies reduce public revenues, they will require offsetting reductions in expenditures that really do have a negative impact on jobs, not to mention the social goods that state spending on education, health care, environmental protection, etc., are aimed at producing.

On the flip side of the equation, proposals to provide jobs by direct state spending (e.g, for public works) may be a bad idea for one reason or another, but they do in fact provide jobs. More importantly in terms of the decisions actually being made by state policymakers in the current budgetary climate, reductions in state spending that involve layoffs of public employees have become a major drag on the national economy. You can argue (as many conservative politicians do) that public-sector jobs, or private-sector jobs directly created by government spending, are not as “good” or even as “real” as private-sector jobs generated without public investments, but you cannot pretend they don’t exist.

So in practice, state policymakers who deliberately cut public-sector employment or other forms of public investment in order to pursue vague notions of supply-side stimulus, or poorly targeted race-to-the-bottom corporate subsidies, are usually trading tangible jobs (not to mention public services) for fairy dust. Bad as federal-level conservative economic policies often look to progressives, they make vastly greater sense than their mini-me equivalents in state capitals.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.