What To Do About Jobs? (Blake Rutherford On Politics)

by Blake Rutherford  on Wednesday, Jun. 18, 2014 3:15 pm  

Blake Rutherford

In 2000, President Bill Clinton walked onto the stage at the Staples Center in Los Angeles to give his address at the Democratic National Convention. As he appeared in a corridor of the arena, a shot carried live to the audience, a number of statistics appeared on screen. One of them was, "22 million new jobs."

In the 14 years since and on the other side of the Great Recession, jobs have become a barometer for political success. It seems everyone has a plan, including both Arkansas gubernatorial candidates, Mike Ross and Asa Hutchinson.

The Ross Plan is detailed where the Hutchinson Plan is vague. Both contain serious-sounding phrases, some of them politically charged. Both plans cling to expensive tax cuts. The Ross Plan embraces education. Both plans believe in job training. Both plans make government regulation a villain.

Not to spoil the ending, but when considered holistically, neither plan is particularly compelling.

Let’s look at both and see what works — and what doesn’t.

The Mike Ross Plan

Last week, Mike Ross unveiled his "Jobs First Plan for Arkansas," which devotes its attention to four areas: education, tax reform, economic development, and government efficiency. There are two big ideas in the plan that taken alone could be transformational. But neither has much to do with short-term job creation.

Universal pre-K for all 4-year-olds by 2025

The first, to provide universal pre-kindergarten to every 4-year-old by 2025, is a popular idea and a worthwhile goal. [1] According to the plan, half of all 4-year-olds in Arkansas have access to pre-K. It will cost $37.5 million to reach all of them.  

Low-income children enter kindergarten as much as two years behind their middle class peers in oral language and pre-literacy skills. As a long-term public policy matter, there is a bevy of research that suggests that investing in pre-kindergarten will reduce such inequality. 

And over time the investment pays for itself. Children in pre-K programs are less costly to educate and less likely to repeat grades, require special education or drop out. Pre-K students earn more taxable income as adults, and they’re less likely to require welfare services or end up in prison. 

A living example of the benefits of universal pre-K is in Oklahoma where every 4-year-old receives free access for one year. There, research shows gains in pre-reading, pre-writing, and pre-arithmetic skills. William Gormley of Georgetown University predicts the benefits outweigh the costs by 3-to-1. 

In his acceptance speech for the Democratic Party’s nomination for governor, Ross said he wanted to be the "education governor." Universal pre-K is a noble way to go about that. But I thought we were talking about creating jobs to serve the needs of people and our economy today?

Don't misunderstand me. I think the long-term advantages to early childhood education are tangible, and over time will, as the data suggests, benefit Arkansas in myriad ways. Unfortunately, those advantages do not appear to have a direct correlation to those eligible for work and in need of it now.

Modernize the state income tax code

The second big idea in the Ross Plan is to modernize the state income tax code. Much like the sales tax on groceries, which Gov. Mike Beebe has drastically reduced, it may be that Arkansas’s income tax code is in need of wholesale revision. But as the Ross Plan states, it will reduce state revenue by $574.5 million and be "systemically implemented as the state experiences revenue growth." 

That’s a dramatic endeavor which, considering the 2013 tax cuts, could swallow future surpluses for years to come. And that is to say nothing of its disjointed relationship to job creation. [2]

What works

There are interesting aspects to the Ross Plan, including eliminating the manufacturing sales and use tax, something that began under Beebe and is supported by the Arkansas State Chamber of Commerce. 

There’s also an innovative, Arkansas-centric Challenge.gov program to spawn ideation and creative problem solving to community-based challenges. And there’s the "Work Ready Community" certification program that could expand on benefits already being delivered from the Career Readiness Certificate program. Both are each worth talking more about.

What doesn’t work

There are also less interesting ideas in the Ross Plan, like the creation of the Governor’s Cabinet for Economic Development. Perhaps forming another gubernatorial working group, like Beebe’s Workforce Cabinet, will promote intergovernmental collaboration and ideation in ways that will address all of the things Ross’ plan doesn’t. But it feels like a typical solution at a time when we should be thinking bigger.

The Asa Hutchinson Plan

The same night Ross proclaimed his desire to be the education governor, Asa Hutchinson, the Republican nominee for governor, said, "I want to be the jobs governor." To achieve that, he released "Making Arkansas Competitive: A New Jobs Plan for 2015 and Beyond."

Gradual reduction in the state income tax

The centerpiece of the Hutchinson Plan is a 1 percent reduction of the state income tax for middle income earners (those making between $20,400 and $75,000) with reductions for those making more than that based on "surpluses and growth." "Why is this important?" Hutchinson asked. "It impacts the recruitment of industry." 

But it doesn’t work that way. Consider, for example, that the Ewing Marion Kauffman Foundation found that there was no correlation between the new firm creation and innovation and lower tax climates. In 2006, the Cato Institute, a conservative think tank, released findings of a study in which they disclosed a "failure to find a relationship between the rate of personal income tax and state-level entrepreneurship." So, the benefit to recruiting companies this way is, in a word, illusory.

In 2013, the Center for Budget and Policy Priorities concluded that state income tax cuts don't spur small-business hiring. It also doesn't encourage more spending so that suppliers of goods and services will hire more workers, nor does it reduce a barrier to hiring. Alternatively, state income tax cuts don't create additional demand for products, an important consideration in hiring.

Yesterday, Hutchinson said, "I think my plan is more fair and will create jobs." But in 2012, the U.S. Small Business Administration found "no evidence of an economically significant effect of state tax portfolios on entrepreneurial activity." 

What ultimately exists is the hollow notion that lowering income tax rates drives entrepreneurship and job creation that sounds compelling in an election year.

What works

The Hutchinson Plan embraces the importance of technology in the classroom. Perhaps that, along with the continued commitment to workforce education and promoting government efficiency, are its redeeming qualities. Hutchinson also hopes to create Workforce Education Councils that will coordinate training programs to meet the needs of Arkansas businesses, which is either interesting or duplicative depending on the specifics.

What doesn’t work

The Hutchinson Plan also calls for school choice, protecting the 2nd Amendment, and the sanctity of life. How those will have any effect on job creation in Arkansas, the plan doesn’t say, and I am not sure that is the point of it. 

What I believe it might do is help conservatives to feel more alike and secure in their communities, which, as a recent study from the Pew Research Center for People and the Press found, is attractive to conservatives.

Consider the findings of that study. Two-thirds of consistent conservatives said most of their close friends share their political views and that half of conservatives said it was important to live in a place where people share those same views. So, in that regard, the idea that these things have some correlation to job creation is merely ready-made deception for an ideologically aligned audience, or, as they say, political red meat.

Both Plans Leave Much to be Desired

Much is absent from both plans. Neither mentions driving business innovation; advancing research and technology, including nano, bio, information, and medical technologies as well as broadband access; promoting small business growth as well as foreign direct investment; investing in energy or the environment; or doing anything at all to anything to harness the changes taking place in the world economy. And fidelity to income tax cuts as a job creation strategy really could make matters worse.

Today, these plans mean a great deal to both campaigns. In a dialogue about jobs, however, what remains to be seen is whether they’ll mean all that much to those in need of work.  

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[1] When President Barak Obama unveiled his own plan for universal pre-K, for example, 70 percent of respondents supported it. In New York, 59 percent of Republicans and 73 percent of Independents viewed Gov. Andrew Cuomo’s pre-K plan favorably.

[2] Last November, Ross spokesperson Brad Howard said, “Since launching his campaign, Mike Ross has said he would implement income tax cuts that target working families who need it the most, and we are pleased to see Asa Hutchinson has come around to Mike Ross’ position.” 

(Blake Rutherford is vice president of The McLarty Companies and previously was chief of staff to the Arkansas attorney general. You can follow him on Twitter at BlakeRutherford. His column appears every other Wednesday in the weekly Government & Politics e-newsletter. You can subscribe for free here.)

 

 

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