A lot has been said this election cycle about how the GOP is “business friendly” and capable of creating jobs and profits for entrepreneurs. The RNC insists that a mixture of reduced regulations and taxes will spur the greatest economic growth since the 1950s with 12 million new jobs. The GOP unfortunately is completely misguided on the true dynamics that dictate economic growth and their policies at the state level are beginning to show this weakness.
Virginia has long been promoted as a bastion of the free market with low tax rates, lax industrial regulations (outside of the Chesapeake region), and right to work laws which provide leverage for employers over employees. Proponents of these political positions point to Virginia nationally and say “It works there and it can work elsewhere”.
This is devoid of reality.
Virginia is a great state with a diverse economy. However, without the geographic position adjacent to the federal government and the significant naval presence in tidewater regions Virginia’s economy would barely eek out of the bottom 50% of states in GDP. Instead of being peers with states like Ohio, New York, and Washington it would join the ranks of states like Arizona, Missouri, and Arkansas.
Before we go down the path of arguing the presence of the Federal government and spending let me say, that is not the purpose of this article. The federal government will always be a part of Virginia, regardless of future austerity or spending cuts.
The point is to look at successful states and unsuccessful states that don’t have the benefit of a Federal presence and why these states differ. If taxes and lax regulations were all that mattered in economic growth and employment then why are the most “business friendly” states those with the worst record on the economy, and why are those on the opposite side of the spectrum the most successful?
Clearly, at a micro level, businesses see far less benefit from low taxes and lax regulations than touted by the GOP. Material costs, transportation, and employment productivity vs cost remain the biggest factors on whether a business succeeds. This is orders of magnitude more important on the bottom line than tax levels and most regulations.
The answer isn’t to promote further isolation of industries via the tax haven method, but instead to better connect businesses via better transportation options of freight, people, and information. That is what improves a business’ bottom line. We should be leveraging the unique position of government to act as a facilitator between industries to provide assets like better freight networks (through private investment but master planned to create a logical holistic concept).
Connecting employees to business with better land use policy and transportation creates a lower cost of living. A lower cost of living directly impacts the employer’s ability to attract the best workers. Attracting the best workers directly impacts productivity and revenue. Several stories have come out recently denoting the rise in the cost of housing and transportation for the average american. This is directly attributable to the continued outward sprawl of America and poor planning in some regions (many of which are GOP strongholds).
States like New York, Washington, and Ohio have in many ways focused on transportation spending to spur business. It is working, and far better than any of the tax breaks in the Southern states. Cities like Cincinnati, NYC, and Seattle have fared this downturn far better than regions which were woefully unprepared and isolated.
Here we are in Virginia. We spend $4 billion on highway spending and yet less than $100 million per year on transit and rail projects. We demonize airport authorities which historically have been one of the biggest employment centers and economic booms of our state. We promote old and dying industries via tax breaks while forgetting to support new innovative businesses which don’t rely on tax breaks to meet a market niche. We are seeing our status as a great business state fall as our biggest economic source, the federal government, faces somewhat minimal austerity.
For all of the bluster that Governor McDonnell spouts about being a business promoter, he has yet to figure out how to create any jobs. He inherited a system which has worked well, and still does, but his policies have shown no benefit in employment. What his policies have done is reduce the potential revenue the Commonwealth could bring in by giving away money that wasn’t even requested. He has doubled down on highway projects to bring coal via trucks (what a genius) to the tidewater region but barely funds rail improvements which could connect Richmond and Fairfax, or Fairfax to DC. He say’s he is business friendly, but depends on the business community to fund infrastructure in Fairfax that traditionally the state has accomplished, hurting their bottom line.
Bob McDonnell says a lot of things, but when actions are needed he has done nothing to improve Virginia’s economy.