A testy exchange with a Fox Business host this week highlighted the ongoing feud between Gov. Dannel P. Malloy and all those who would criticize the economic development strategy he has championed as governor. The spat offers at least two lessons for observers of Connecticut’s political scene.
First, Malloy’s crack about “reading something that someone put on a card for you” serves notice to all who disagree with the prickly governor. Whether you are an ill-equipped TV show host on cable or a potential gubernatorial challenger, you have to be well prepared to take on Malloy.
The other lesson is that while Mr. Malloy’s assuredness may be unshakable, the facts that underpin his policies are far less certain. It is under the governor’s leadership that distributing millions of dollars in taxpayer funds to businesses became the state’s principle economic development strategy. More than a dozen companies have been awarded financial assistance to move or expand their business in Connecticut.
The past week’s news brought a mixed bag of results for the program.
Mr. Malloy was surely pleased to read that New Haven’s Downtown Crossing project is moving forward this week anchored by Alexion Pharmaceuticals, a company that will receive up to$51 million in state subsidies to move from Cheshire to New Haven.
Less inspiring was the news related to another recipient of Malloy’s largesse, Sustainable Building Systems. The joint venture between an Arizona-based company and an Australian firm, Sustainable Building Systems received a pledge of $19.1 million in incentives to manufacture steel frame buildings last year. The partnership between the two companies dissolved, however, leaving the Australia-based Weeks Group hunting for a new business partner. State officials offered their assurances that all was well with the deal. The lesson: $19.1 million dollars can bring people together, but it apparently can’t keep them together.
Neither case answers the question about whether such incentives actually work to jumpstart the economy and create jobs beyond those that are heavily-subsidized. The data available on the subject offers a hazy picture at best. In December 2012, the New York Times found that more than $80 billion was spent in 2011 on such subsidies.
That paragon of economic vitality West Virginia spends $1.5 billion annually, about 2.35 percent of its Gross Domestic Product or $847 per resident, on economic incentives for business. The state’s unemployment rate of 7.8 percent in 2011 was more than 1 percent better than Connecticut’s 8.9 percent but still gave the Mountain State only the 23rd lowest unemployment rate in the nation.
Arguably the most famous state for business incentives is Texas where taxpayers provided an incredible $19 billion in subsidies. Put another way, Texas spends on business assistance an amount nearly equal to that of Connecticut’s entire state budget.
The return for their investment was an unemployment rate, 7.9 percent, ranking them 26th in the country. Connecticut’s “paltry” spending of $860 million produced an unemployment rate of 8.9 percent.
If job growth is really just a footrace to see who can give companies the most incentives, Connecticut seems destined for failure. On the other hand, those giving the most incentives don’t seem to be doing much better than those who refrain from it. Either way, the evidence is shaky at best.
Gov. Malloy’s defense of his policies is assiduous despite the uncertainty of the facts. Opponents must be ready if they want to go toe-to-toe with him.
Heath W. Fahle is the Policy Director of the Yankee Institute for Public Policy and a former Executive Director of the Connecticut Republican Party. Contact Heath about this article by visiting www.heathwfahle.com