Whose Jobs Plan Works Best for Florida?
Around the State
With Florida's 11.6 percent unemployment rate among the highest in the nation, gubernatorial candidates Alex Sink and Rick Scott are under pressure to deliver what the Obama administration hasn't: private-sector jobs.
Democrat Sink and Republican Scott have each issued slick outlines of their economic programs.
Scott, campaigning under the banner, "Let's Get to Work," calls his "7-7-7 Plan" a seven-point agenda that will create 700,000 jobs in seven years.
Sink titles her agenda "A Business Plan to Revitalize Our Economy and Put Floridians Back to Work." She has not specified how many jobs her plan would create.
As Floridians celebrate Labor Day weekend and the traditional start of the fall political season, Sunshine State News asked two leading university economists to review and rate the candidates' job plans. We also asked business, labor and think-tank representatives to weigh in.
ECONOMIST, UNIVERSITY OF FLORIDA
The good news for Floridians is that the next governor will be someone who has business experience, who understands the needs of business. That’s crucial at this time because Florida must accelerate a process of diversification beyond tourism and retirees, or it may become too late.
Business experience and demonstrated ability strike me as more significant than specific policy proposals, which will evolve. I personally give Sink the edge because, besides business experience, she has learned the ropes of state government in Florida.
That means not just knowing the issues, it means knowing the people. Who can be counted on to do a great job of leading an agency? Among legislators, whose word is reliable? In Florida’s private sector, there are a number of remarkable public-spirited individuals. Who are the established ones and who are the emerging ones? The more a governor knows about that, the better.
Rick Scott's Plan
1. Accountability budgeting: On transparency, the Senate under President Jeff Atwater has already taken strong steps in that direction. Of course, they should be continued.
That’s the way to take advantage of information technology. Spending limits should be avoided, to the extent that they interfere with or weaken representative government. Returning spending to the 2004 level should take account of population growth and inflation.
Formal two-year budgeting would not bring much gain to Florida. California has that and it's a budget disaster (though mainly because of other problems, of course). In Florida, budgeting has an effective longer horizon than in most states because of the peculiarity of our one-party-dominated Legislature coupled with the fact that the Senate president and the House speaker are chosen years ahead.
That means that each chamber has a powerful leader, usually put in charge of the budget, who is concerned about the budget three or four years ahead. That gives Florida a much longer perspective than almost any other state. Economic and Demographic Research already prepares three-year projections. Formal two-year budgeting would simply add complexity to no gain.
We should not refuse temporary help from the federal government. You can always get around the long-term obligations when the long term arrives.
2. Reduce government spending: Yes, we should reduce pension contributions to match other states. The problem here is the power of public employee unions in the Legislature. I don’t see much the governor can do about it. The unions secure legislative mandates imposing strong collective bargaining (actually an accidental legacy of the 1970s) on local governments. I’d find this credible if Scott could give me a list of 21 likely state senators who will support reducing pensions.
The way to reduce spending on prisons is to reduce the number of prisoners, not the spending per prisoner. That might actually raise longrun costs by increasing recidivism. Mainly we should spend much more on our parole system, to reduce recidivism, change mandatory sentences, and eliminate incarceration for petty drug crimes.
I agree with enforcing compliance with work requirements -- citizens have to feel the system is fair. Stricter drug screening will reduce the number on welfare, but the indirect result probably would be to increase the number in prison, a greater cost.
Florida is experimenting with changes in Medicaid, as it should. But I haven’t seen convincing evidence that costs can be reduced by $2 billion.
3. Regulatory reform: Here the big issue is not the governor but the vote on Hometown Democracy, which will be an economic and political disaster if it passes.
Sure, workers’ comp reform and tort reform would be great. But I want to see the list of 21 signatures by likely senators willing to take them on. Jeb Bush was in favor of both but even he couldn’t get anything meaningful through the Legislature.
4. Job growth and retention: These are all good ideas. Florida does, in fact, underspend on development. We have to be careful not to overdo the incentives. The golden rule is that the taxes paid by an export-oriented business should equal the services it receives from government.
5. World-class universities: Won’t surprise you that I strongly agree with this. Florida has great institutions but is way behind in spending per capita on higher education.
6. Reduce property taxes: The problem here is that Save Our Homes has shifted the property tax from homeowners onto business, which discourages export-oriented businesses from locating here. But we can’t reduce the property tax and still provide a reasonable level of public services, unless you tax services, which won’t happen. We’re in a bind.
7. Phase out Florida’s business income tax over seven years: We can’t afford to do this in a state with no income tax and no taxes on services. Better would be to change the apportionment formula to 100 percent sales, with safeguards against accounting shenanigans (transfer pricing tricks).
Alex Sink's Plan
The encouragement to small businesses is a good idea in a state in which a disproportionate share of employment is by small businesses. I am not expert in the area and don’t know whether tax incentives for small businesses are effective. Even better than deferring corporate income taxes would be encouraging local governments to defer property taxes. Small businesses often have low or negative profits the first years.
Providing a corporate income tax credit for job creation rewards firms that would grow anyway, and has complications with respect to PEOs and stability of employment; 100% sales apportionment is probably better.
As would most economists, I oppose preferences to local businesses in state contracts. In some instances it’s justified, but when all states do it, government becomes less efficient. That might also violate the commerce clause. The U.S. did not become a great economy by having internal barriers to trade.
I agree that as a state we do spend too little on tourism advertising. I’m not clear what the plan is for attracting more retirees.
With respect to housing, one problem that Sink would understand as a banker is that the banks are not extending credit for buying a house to anyone who owns a business, largely because of the fear that that entrepreneur would sink everything into the business, if necessary, and default on the house.
We need to change that. That discourages entrepreneurs from moving here and they’re precisely the people we need. If the state government can do anything to encourage mortgage home loans to small-business people, to entrepreneurs, it should.
Our need for more infrastructure has been clear for decades, at least since the Zwick commission. We should pay for it through tolls and a higher gasoline tax.
Applause (as with Scott) for the emphasis on education and economic diversification.
In sum, both candidates appear to have their hearts and minds in the right place with respect to building a diversified economy, though I quibble about details.
BOTTOM LINE: Applause to both, with an edge to Sink for having experience in government as well as in business.
ECONOMIST, FLORIDA STATE UNIVERSITY
We have to recognize that the platforms these candidates are running on are designed to win votes, not to lay out the details of a plan for generating jobs and income growth in Florida. As such, both candidates' ideas are vague. While they sound good, they lack specifics on which they can be judged.
For example, Rick Scott says he wants to "make economic development plans more flexible," and he wants to "nurture new cutting-edge technology clusters." Easy to say, but what specific changes would make plans more flexible? What specific changes would nurture technology clusters? He doesn't say.
Alex Sink says she "will institute a new Florida Performance Score Card to which she will hold state government accountable." She lists some items on the score card as job creation, fiscal accountability, educational achievement and improvements in health and safety. But she doesn't give specific metrics that will be scored, nor does she indicate what would constitute high vs. low scores.
She wants to boost partnerships between universities and the private sector. That sounds good, but how does one do this? She doesn't say.
She wants to expand Florida's agricultural industry into new value-added activities. Again, that sounds good -- but how, specifically, would one do this? She doesn't say.
I'm not going to be too critical of either candidate on the vagueness of their plans, because that's how you run a successful campaign. Tell people we could do better, and then make some nonspecific suggestions that will sound good to almost everybody. Once you get to specifics, some people won't like those specific solutions, and the candidates will lose support. Smart campaigning means not offering specific policy proposals.
The best way to boost jobs and income in Florida is to create a good business climate in which every business, whether we are talking about attracting new ones or supporting existing ones, has minimum impediments from government. That means a good business climate for everyone, and no special favors for anyone.
Scott's proposals sound good, but they, too, are vague. He wants to "review state development regulations and expedite permits," but doesn't say, specifically, what could be done to expedite them.
He wants to "lower workers' compensation costs," but doesn't say how they could be lowered.
BOTTOM LINE: I might give a slight edge to Scott, but only because of his emphasis on cutting taxes and government spending, and regulatory reform.
OTHER VOICES ...
Dominic Calabro, president and CEO of Florida TaxWatch, says the key to any job-creation plan is to encourage capital formation in Florida.
"We have been discouraging that, whether we're talking about property/casualty insurance, utility companies or sales and use taxes," he said.
Citing the state's tax structure, Calabro notes, "Companies can do business here and not have one employee in our state. We need to change our tax and regulatory structure. Capital only flows where it's welcome."
In an undisguised slap at Gov. Charlie Crist, Calabro said Florida's chief executive "must be an ambassador for business, calling on prospects and following up." Both Sink and Scott have said they would be more hands-on than the current governor in this regard.
That said, Calabro declared, "Government does not create jobs. It creates an environment. We have to reverse our current course of resting on our laurels."
Nancy Stephens, president of the Florida Manufacturers Association, says the Sink and Scott job plans appear similar.
"What I would like to see added specifically is a mention of growing the international markets for Florida products. We must have more markets to sell more products. More markets lead to more sales which lead to more jobs which lead to a healthy economy."
Doug Martin, a director of the 100,000-member Florida chapter of American Federation of State, County and Municipal Employees (AFSCME), discounts Scott's plan for 700,000 new jobs.
"600,000 jobs have been lost, so in seven years, we'll be where we were," Martin said from his Tallahassee office. "Taking a meat ax to revenues won't necessarily create jobs in and of itself."
Tweaking Scott's proposal to cut property taxes across the board, Martin said targeted reforms could help to retain and attract more businesses, which would increase hiring.
"Property-based businesses are taxed like crazy," he said.
Martin said Sink's proposals have more credibility by "creating a way for small businesses to get access to capital and by tying investments to job creation."
J. Robert McClure, president of the James Madison Institute, a nonpartisan, conservative think-tank in Tallahassee, says, “Floridians are fortunate that both major parties’ candidates for governor have had some real-world experience in business. Judging from their economic platforms, each seems to realize that government doesn’t create jobs -- a fact that ought to be obvious in the abject failure of the federal government’s so-called stimulus legislation.
“Indeed, sustainable job creation occurs in the private sector, especially at the small-business level. So even though there are some constructive steps that the government can take, the best job-creation strategy is for government to ease some of the job-stifling burdens that state and local governments have imposed on Florida’s private sector.
“These burdens -- high business taxes and fees, excessive red tape, and costly, frivolous lawsuits -- have seriously damaged Florida’s business climate and left the state less competitive with other states than its location and other natural advantages suggest that it ought to be.
“Although each candidate appears to recognize these imperatives, taking the steps necessary to restore Florida’s business climate in the current economy will require a real knack for leadership. In the end, voters will decide which of the candidates is better suited to provide that kind of leadership.”
Contact Kenric Ward at email@example.com or at (772) 801-5341.