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Minnesota 2020 Journal: A Few Simple Suggestions

September 09, 2011 By John R. Van Hecke, Executive Director & Fellow

We’ve settled into the new normal. Most people buy what they need and not much more. The economy grows slowly as a result, leaving us with a wildly unproductive policy debate that dithers when it should decide. Everyone is frustrated. It doesn’t have to be this way.

President Obama addressed the nation, competing with the Green Bay Packers. Since I’m writing this column well before the President’s speech and kick-off, I don’t know, specifically, what the President advocates or the game’s score. But, let me make two assumptions. The Pack wins by three and President Obama champions innovation and public investment in infrastructure, training and education.

Conservative policymakers haven’t inched from their playbook. They stubbornly insist that cutting taxes will create jobs. Even as circumstances change, their solution remains the same: taxes are bad, cut taxes. It’s not a policy so much as it is an article of faith, rhetorically reinforced through repetition. It also doesn’t work because tax cuts tend to translate into an extremely inefficient job creation measures. We spend a lot and get little in return.

In Minnesota and federally, elected officials have maintained the last decade’s income tax cuts, leaving communities to slash local budgets and dramatically boost property taxes. This shift has reduced the income tax burden on the highest income earners but it hasn’t created jobs. More importantly, it’s not going to.

Personal spending certainly increases with income but it’s not a perfect, immediate, one-to-one, dollar-for-dollar translation. Most folks save more, creating personal wealth. Now, broadly, this is a good thing but it’s not a job-creation strategy. As large businesses accumulate greater cash reserves, combined with unbelievably low interest rates, capital investment should logically occur.

But, it’s not.

Businesses demonstrate an equal discomfiting uncertainty as they face the global marketplace. Investment options contain considerable risk, mostly relating to public debt and public anxiety. Doing nothing, at least for the moment, is the default option. All the corporate tax rate cuts in the world won’t change that dynamic and it’s not going to grow jobs either.

Hunkering down may be a reasonable short-term decision but it will never create prosperity. If we focus on what really matters—education, healthcare, roads and jobs—we find a path forward based on simple principles.

First, play the percentages. Spend public resources where they’ll most clearly and directly yield results. It might not be sexy but rebuilding roads fixes two problems simultaneously. We recapitalize roads falling apart from regular use while putting unemployed construction workers to work. Unless we aspire to South Dakota-style roads and a South Dakota-style state economy, we have to spend on our roads just to keep up with wear. That same spending stimulates local and state economies at the same time. I call this a two-fer.

Second, let’s use public investment to lower energy costs and drive further energy innovation. Wind, solar and geo-thermal systems can considerably lower public and private energy consumption. Cost savings are, quite literally, money back into everyone’s pockets. At the same time, use drives market innovation.

By spending fewer operating budget dollars on school energy costs, for example, we free existing funds for greater classroom investment. We begin to mitigate a decade’s worth of state educational funding cuts through smarter energy systems.

Finally, let’s educate Minnesota. Call it workforce development, lifelong learning, whatever the label, let’s invest in skill and knowledge expansion. There’s very little future in unskilled labor. Manufacturing will continue to play an important role in Minnesota’s economy but it will require specialized, skilled workers. Regular recapitalization of intellectual and work skill capacity is a permanent part of modern life. States making a policy investment decision to invest in their citizens will succeed and prosper. States that refuse will fall behind.

Minnesotans want solutions, not bickering. The conservative policy path will keep us in our downward economic spiral. Modest policy change and reliable, forward-thinking public investment in the public’s priorities will move Minnesota forward. We don’t need distraction. We don’t need greed. We need to move Minnesota from hunkered down to prosperous growth.

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