Creating jobs: What Can a Governor Do?

With unemployment stuck at stubbornly high rates in many states, it’s no surprise that governors in 2012 are talking a lot about the need to create jobs. But while some governors are outlining lofty,  sweeping promises, Maine Governor Paul LePage cut to the chase.

“As governor,” the Republican said in his state of the state address last week, “I cannot directly create private sector jobs.”

LePage’s point-blank phrasing sums up how Republicans are approaching the jobs question in the states this year — and their deep philosophical difference with how Democrats are viewing it. 

LePage, the governor from the Republican class of 2010 who is most closely associated with the Tea Party movement, went on to pitch a tax cut to go on top of another tax cut that already passed last year. Doing so would help improve the business climate, LePage said, and that, more than any direct government action, is the linchpin for creating more jobs. “We can develop policies that will encourage businesses to expand and create opportunities here in Maine,” LePage said. 

At least a dozen other Republican governors this year have proposed cutting taxes , with many of the plans directed specifically at helping businesses. Another of them is New Mexico’s Susana Martinez, who sounded a lot like LePage when she proposed to exempt nearly half of her state’s small businesses from the gross receipts tax. “I’ve long said government doesn’t create jobs,” she said in her own state of the state. “It doesn’t — small businesses do.” 

Democrats, meanwhile, are sounding confident that they can, in fact, create jobs. In particular, they’re talking about doing this by increasing spending on construction projects. Minnesota Governor Mark Dayton is a good example. Dayton is pitching a $775 million “jobs proposal” that promises to create 21,700 jobs by repairing bridges, renovating the state capitol building, expanding the Rochester Mayo Civic Center building and upgrading college facilities statewide, including the University of Minnesota. Dayton believes the bond-funded projects not only would directly put people to work but also “give Minnesota the asssets to attract business.”

The debate is a microcosm of the one that has been playing out recently in Washington, where Republicans say tax cuts would help turn around the economy and Democrats say public works spending from the economic stimulus package made the recession less deep than it could have been. At the state level, however, the question of how much influence a governor has in creating jobs is a little different. That’s because state economies are often at the mercy of the larger national economy. It’s also because governors can’t negotiate free trade deals the way a president can, or lower interest rates the way the Federal Reserve can.

Alice Kassens, an economics professor at Roanoke College in Salem, Virginia, says the governors are showing “one of the fundamental differences in how the parties view economic expansion.” Democrats contend that not all the money from tax cuts is spent to hire and expand, but is instead saved. Republicans argue that public works projects waste taxpayer money and at best offer only a short-term fix. 

Public works key for Democrats 

The idea of putting people to work by building or fixing roads and schools has factored heavily in proposals put forward by Democratic governors so far this year. 

In Maryland, Governor Martin O’Malley figures to support nearly 12,000 jobs by spending $370 million for school construction “to replace temporary learning shacks with modern classrooms.” The construction would be paid for by selling general obligation bonds. 

In Washington State, Governor Chris Gregoire says she would create 5,500 jobs by passing a 10-year transportation package. The $3.6 billion plan would replace aging bridges, repair highways and bolster ferry service, among other projects. Gregoire would pay for the plan with a $1.50 fee on every barrel of oil produced in the state of Washington. 

New York Governor Andrew Cuomo also is pushing infrastructure spending. In addition, he wants to build what would be the country’s largest convention center in the New York City borough of Queens. To pay for these projects, he wants to create “public-private partnerships” that he says would “leverage state resources to generate billions of dollars in economic growth.” 

David Primo, associate professor of political science and business administration at the University of Rochester in New York, says there’s a political calculus behind pushing public works. Often, the proposals are visible projects that voters can see, so that come election time, governors “can point to it and say, ‘See, we did that.'” 

Some Republicans are pushing public works this year, too. Republican Governor Rick Snyder of Michigan has reiterated his call for building a new bridge to Canada. “It’s not a bridge issue,” he said in his state of the state address. “It’s a jobs issue.” 

A difference between Snyder’s plan and that of most of the Democrats’ is that Snyder says he can build a bridge “without any Michigan taxpayer dollars.” Canada has offered to spot Michigan its cash share of the project upfront, to be paid back with toll revenues. The governor figures the state could use the Canadian money to capture billions of dollars in matching funds from the U.S. government for other highway projects. But Michigan lawmakers are still skittish that their cash-strapped state will be on the hook if revenues do not match expectations. 

Tax cuts a mantra for GOP 

To many Republicans, people and businesses move where taxes are lower, and that’s something they can control. Among this year’s more sweeping plans to test that idea comes from Kansas Governor Sam Brownback who wants to lower the individual income tax and eliminate many income tax credits, deductions and exemptions. Another sweeping plan comes from New Jersey, where Governor Chris Christie wants an across-the-board 10 percent cut in the state income tax. 

Iowa Governor Terry Branstad wants to reduce commercial and industrial property taxes by 40 percent. “These taxes must be reduced,” Branstad told the legislature in his state of the state address. “Not because they cost businesses money, but because they cost Iowans jobs.” 

In South Carolina, Governor Nikki Haley says she wants to eliminate the corporate income tax   and flatten the state’s six income tax brackets down to three. She also touts the state’s lack of unions also as a plus. “I love that we are one of the least unionized states in the country,” Haley said in her state of the state speech. “It is an economic development tool unlike any other.” 

Indiana Governor Mitch Daniels likewise made the same argument for his push for ” right-to-work ” legislation that had prompted some Democrats to boycott his state of the state speech. The legislation would make it illegal for businesses and unions to negotiate contracts that require all employees — even those who do not wish to be union members — to pay union fees as a condition of their employment. “The benefits in new jobs would be large,” Daniels said. “A third or more of growing or relocating businesses will not consider a state that does not provide workers this protection.”

Gambling for jobs

Aside from public projects, bringing in commercial gambling is another big visible way governors say they can bring jobs to their states. And while gambling is very controversial, governors of both parties have looked to lotteries, casinos and blackjack for revenue. 

“For us, this is not about chips and cards,” Cuomo said in his state of the state speech. “This is about the jobs that the casino industry generates.” The governor figures allowing commercial gaming casinos will create $1 billion of “economic activity” in the state. 

New York already has five Native American casinos and slots at nine racetracks, but no commercial casinos. Kentucky has neither and has debated the issue for years. Kentucky Governor Steve Beshear, a Democrat, wants voters to decide whether to bring in gaming. With thousands of Kentuckians driving to nearby Illinois, Indiana, Ohio, West Virginia to gamble, “We might as well be backing trucks filled with cash up to the Ohio River and dumping that money into the water,” Beshear said. 

One issue that gets a bipartisan push is connecting workers with businesses who need workers. Republican Governor Nathan Deal’s ” Go Build Georgia ” hopes to help fill the many trade positions that he says the business community can’t fill because they can’t find workers with the right skills. Mike Rowe, host of Discovery Channel’s “Dirty Jobs,” has agreed to appear in the initial advertisements for the campaign just as he did for the neighboring “Go Build Alabama” program launched in 2010. Both programs aim to encourage job seekers to consider the trades and how to find training. 

Missouri Governor Jay Nixon, a Democrat, is calling for a “record investment in worker training” as part of his “Missouri Works” plan. Nixon also says he wants to open a trade office in China to promote Missouri-made products. 

And in Kentucky, Beshear touted that his state was recently selected with three others to launch “Work Ready Communities” that ultimately hopes to certify that the workers are trained for the skills that employers need. The venture is sponsored by ACT Inc., the same organization that offers the college entrance exam of the same name. 

Joseph Henchman, who supervises the Tax Foundation’s state policy program, says governors’ proposals can indeed create jobs in the short-term, like the recent spate of tax credits to lure filming companies to their states, but don’t work in the long term. “Laying the groundwork for a growing economy is different” and takes more time, he says.