Tuesday, July 17, 2012

Smart economic policies push states to top of business-friendly list

 “Regulation and litigation are the bane of business,” according to CNBC in its 2012 America’s Top State for Business survey. “Sure, some of each is inevitable. But we graded the states on the perceived ‘friendliness’ of their legal and regulatory frameworks to business.”

While some states, counties and municipalities are friendly to businesses, others employ policies that drive them away. Among states, Texas and California epitomize these two extremes. With its free-market economic reforms of the last several years Texas has created more than 410,000 jobs since the recession began in 2007, while California has lost nearly 900,000 over that same period. Once again, Texas tops the CNBC list, the third time in five years, besting last year’s winner, Virginia, which dropped to third place.

If a state wants to create jobs, what should its governor and legislature do? Well, they could seek the wisdom of a professor of sociology, a police officer, or a pathologist, an NBA star, or a Nobel Laureate in physics, all knowledgeable people in their field. But to find out how to encourage job creation, you might get the most useful information from employers about what they look for in choosing a suitable environment in which to operate, and then make the state’s environment as close to what they told you as possible.

This common sense prescription desperately needs to be applied at the federal level, where anti-business policies that have kept the United States in recession-like conditions for the last 41 months thrive. Perhaps someone in a position of power in Washington will take notice of how states work to attract or repel business and it will serve as a wake-up call, although recent history argues strongly against that happening.

In answer to the question of how to create jobs, one CEO told Chief Executive Magazine the following: “Do not overtax business. Make sure your tax scheme does not drive business to another state,” he said. “Have a regulatory environment and regulators that encourage good business—not one that punishes businesses for minor infractions. Good employment laws help too. Let companies decide what benefits and terms will attract and keep the quality of employee they need. Rules that make it hard, if not impossible, to separate from a non-productive employee make companies fearful to hire or locate in a state.”

Businesses also seek an environment with consistent policies and regulations that allow them to plan for a significant period into the future, as well as an overall positive attitude toward business and a productive work ethic among its population.

None of that seems particularly radical, and in fact seems very logical. It just makes sense to keep taxes and regulations from impeding job creation, and during times of high unemployment to at least relax those that get in the way. Destructive federal policies have been in effect and stifling job creation throughout President Barack Obama’s term. In February 2009 the unemployment rate shot through the 8.0 percent barrier that the president assured us would never be breached, and it remains above that mark today.

The top five business friendly states in the CNBC survey are: Texas, Utah, Virginia, North Carolina, and North Dakota, while the bottom five are: Mississippi, Alaska, West Virginia, Hawaii, and finishing last, Rhode Island.

Most of the highest ranking states share features like lower tax burdens, governments more amenable to allowing economic growth, little or no union labor, and, as it turns out, state governments dominated by Republicans.

Of the top 10 states in the survey, seven have both Republican governors and legislatures, and of the bottom 10 states, six have Democrat governors and legislatures. Of the top ten states, only two have Democrat governors and in the top 20 there are only five Democrat governors.

It is also worth noting that Republican leaders in the high ranking states support economic policies that mirror the national Republican platform.

Obviously, facts illustrating which political party has policies that generally foster a better job creating environment will not please Democrats, but it is what it is. Of course, policies that promote a positive business environment are not necessarily restricted to Republicans, and Colorado’s business-friendly Democrat Governor John Hickenlooper proves the point: His state sits eighth among CNBC’s top states. It just happens that Republicans generally promote policies that encourage job creation, economic growth, and wealth creation, whereas Democrats, who adhere to liberal, or so-called “progressive,” values generally promote policies that obstruct these things.

It is not difficult to find the answer to the question, “in times of high unemployment and economic stress, which political party will be most likely to create an atmosphere that will allow the private sector to correct these problems?”

And once that answer is found, everyone who cares about creating jobs and improving the economy must vote for candidates that support policies like those adopted by the states at the top of the CNBC survey that will make it possible to improve the economy and create jobs, and finally turn Mr. Obama’s stagnated economy into a recovering economy.

Comments are invited


Faultline USA said...

Great article James. It is uncanny about the Republican govs, isn't it? Thought you might enjoy this little tale that fits nicely with your article.

James Shott said...

Thanks, Barb. I'm pleased that you liked the column.

I'll check the link.