Where is the Growth?
Pennsylvania is facing a large budget deficit, a growing multi-billion dollar pension gap, and weak job growth. The state’s fiscal condition is so severe in both the near and long term that Governor Tom Wolf and the legislature have only bad choices. Yet, the Wolf Administration’s policy is a tax hike here, a tax hike there and a scattering of cuts — in other words, no policy.
There is one alternative that could reduce, if not solve, this crisis: Growth. A growing economy means more jobs, more wealth and more tax revenue. Growth by itself has the remarkable ability to fix our economic and fiscal problems and make people’s lives better to boot.
That the Wolf Administration has no growth strategy is not surprising. After all, the left is confounded by the concept of economic growth. They cannot fathom how free market capitalism can turn One plus One into Three. In their view of the world, nothing can or should happen without government sanction. Only through carefully prescribed and managed central decision-making can or should any growth occur. New and innovative industries must quickly be brought under control by government so that they can be properly managed. The inherent chaos of private enterprise and innovation is unacceptable.
The modern-day left sees the economic pie as essentially fixed in size. Their main project is to carefully re-allocate the wealth of society fairly – with the definition of "fairness" to be decided by the left. The idea of a rising tide lifting all boats is utterly alien. In their view the only way to lift the boat is to throw people overboard.
For Pennsylvania this view is particularly damaging. The Keystone State cannot afford to focus only on re-distribution. Pennsylvania cannot afford to hobble commercial growth. States like California and New York have the ability to abuse business, due to the presence of two industry clusters that are simply impossible to move. The incredible wealth generated by Silicon Valley alone gives California a lot of room for bad policy (and Jerry Brown is taking advantage of it). As the world’s financial capital, New York has a similar buffer. Low regulation, business-friendly states like Texas, North Carolina and Virginia have a strong enough competitive position that they have leeway less competitive states, like Pennsylvania, do not have.
The bottom line is that states like Pennsylvania must vigorously compete for investment. Unfortunately the Commonwealth has consistently dismal rankings for economic growth and attractiveness for investment. The state’s brief years outperforming other states in the immediate aftermath of the Great Recession was an artifact of the fact the Pennsylvania never experienced the boom other states did before the recession. Now, 5 years into recovery, other states’ growth is re-asserting itself. Nevada, Arizona, Florida and even California are growing smartly, while Pennsylvania has returned to the doldrums.
Instead of seeking to overhaul Pennsylvania, it appears the Wolf Administration is taking the opposite approach – more regulation and more taxes. Witness its attitude toward the natural gas industry. As the most successful new industry in Pennsylvania in decades, industry has created thousands of high-paying jobs and billions in revenue in just the past 10 years.
And yet, the Wolf Administration looks at the industry alternately as a cash cow or as a plague. Governor Wolf is proposing a significant tax hike and a cornucopia of new rules and regulations.
The Wolf Administration appears to be oblivious to the fact that prices for gas are stagnant to declining, the industry is facing rising financial pressures and there is competition to extraction in Pennsylvania from new sources of gas. Could anything be more toxic the Pennsylvania’s future than attacking its biggest growth industry?
Pennsylvania’s fiscal problems are so severe that economic growth alone will not solve them. But an expanding economy will help close the gap – not to mention employ thousands of people and increase wealth in the state. For a state like Pennsylvania, economic growth can only be a good thing. If Pennsylvania fails to adopt a serious growth strategy, the costs going forward will be enormous.