Ohio’s economy is languishing. We lagged the rest of the nation’s growth in every year over the last decade except one. Job growth averages half the national rate since 1990, and our unemployment has exceeded the national average every year since 2003.
Recently, Gov. Ted Strickland offered up a $1.7 billion bond sale as an antidote. This self-described “stimulus package” would supposedly prime the state’s economy by adding to our debt.
While the governor offered his initiative as a forward-looking economic solution, many economists had backward visions of a 1930s-style big government endeavor.
The program would dump hundreds of millions of dollars into, among other things, risky alternative energy investments, “bioproducts” that would potentially replace oil, an already thriving biomedical industry, and an FDR-era public works commission to repair roads.
This smorgasbord of economic development programs is a recipe for economic disaster. It ignores important lessons about Ohio’s past attempts to promote growth through similarly targeted business subsidies. It also pushes aside academic research on what, if anything, state government can actively do to jump-start sustained economic growth.
And, the bond issuance carries an estimated $1.4 billion in interest payments alone – bringing the true cost to taxpayers to about $3.1 billion.
Strickland can’t be faulted for lack of leadership. He envisions this program as “a major new financial investment in our state” with the goal of creating 80,000 “high-paying jobs” while “also investing in the infrastructure and industries that will light our path to the future.”
Unfortunately, Strickland’s words promise more than can be delivered.
For almost two decades, Ohio governors have depended on targeted business subsidies to promote economic growth to no avail. While these deals created ribbon-cutting opportunities, they represented little more than a veneer of job creation. The state continued to wallow in a deteriorating business climate and sank even further into an abyss of bad policy, high taxes and onerous regulations.
In 1990, Ohio’s state and local tax burden was in the middle of the pack compared to other states according to the nonpartisan Tax Foundation in Washington. Seventeen years later, our tax burden is the fifth most onerous in the nation. Moreover, our state business tax climate was the 46th worst in the U.S. last year, driven by punishing income taxes and high property taxes.
An aggressive policy of subsidizing politically favored businesses will not overcome the broad erosion of Ohio’s business and investment climate.
Restoring Ohio’s economic vitality will be difficult. But the solution is not in having state government pick winners and losers by rewarding favored, politically correct businesses over others not on their political radar screen. On the contrary, the key will be in creating a policy environment where broad-based entrepreneurship and business investment is welcomed and nurtured.
Ohioans already spend nearly four months working off the cost of local, state, and federal government services. With the new debt the governor wants to heap on, taxpayers are destined to add another month working for the government. This leaves fewer and fewer dollars to fuel economic growth in the private economy. That’s a recipe for driving away entrepreneurship and private investment, not keeping or nurturing it.