Gov. Bob McDonnell made a few big promises when he ran for governor. One of those promises, raising more money for transportation, was a bust. Privatizing the state’s ABC stores, collecting royalties from offshore oil drilling and slapping tolls on Interstate highways have crumbled like the asphalt on Interstate 95. But another of his promises, to promote job creation, has panned out pretty well. So far, McDonnell has lived up to his campaign slogan, “Bob’s for Jobs.”
Virginia’s economic development success garnered attention in today’s Wall Street Journal, which noted that the state’s unemployment fell to 6.8% in October, down from 7.2% in February thanks to the net creation of 55,000 new jobs. That was the third best job-creation rate of any state, noted reporter Jennifer Levitz. And it represented a big improvement from 2009, when Gov. Tim Kaine presided over a performance that ranked 35th.
Clearly, Virginia benefited from the surge in federal spending last year, but only 2,600 of the new jobs came from additions to the federal payroll, the WSJ noted. (The article offered no numbers for expanded employment by federal contractors, which probably exceeded the number of direct federal jobs.) On the other hand, Virginia benefited relatively little from soaring energy and agricultural prices, as several other top-performing states have. Instead, the Old Dominion has enjoyed a slew of traditional economic development coups in a year when big new corporate expansion announcements were far and few between. The Governor’s office has announced 215 deals so far this year.
The article points to two differences between Virginia and other states. Even as it was cutting spending by hundreds of millions of dollars, the General Assembly gave McDonnell $57 million in economic development funds to entice new investment to the state. McDonnell also appointed Lt. Gov. Bill Bolling, as “chief job creation officer,” transforming a largely ceremonial position into a high-profile economic development czar.
Philosophically, I’m opposed to the use of government “incentives” to buy jobs. Business subsidies do not create new jobs, they only transfer them from one state to another. I believe in low corporate tax rates for everyone — and no special deductions, credits, exemptions or subsidies for anyone. Our economic development strategy should be to focus on creating a favorable business climate that helps everyone, not a favored few. That said, as a Virginian, I’d much rather have the jobs here in Virginia. I’d rather live in a state that promotes job creation rather than a state like, say, California, where state policy destroys jobs.
McDonnell deserves to bask in his job-creation success. And I’m not opposed to his request for an additional $54 million to continue the program. But I would hate for Virginia to get stuck on the idea that buying jobs through incentives is a good long-term formula for prosperity. It’s an economic development philosophy that dates to the 1960s, if not earlier. In the long run, we need to improve K-12 educational performance, achieve productivity breakthroughs in healthcare, patch our crumbling infrastructure, develop more energy-efficient human settlement patterns and build world-class research universities — not by doing things the same old way, as in throwing around money at every desiderata, but by adopting new paradigms for how we deliver and pay for government services.