Wrong political message won’t help economy

By Michael J. Hicks

Listening to the election, inaugurations and the speeches that come with them, I am struck by how elected officials poorly portray the deep changes our economy has experienced over the past half century.

This is not an affliction of the few, but of the many. It strikes both parties and strikes candidates for town council along with those contending for governor and president.

Nearly all candidate remarks about the economy turns immediately to job creation. A few might dress up the discussion with more sophisticated bits about investment, infrastructure projects or even workforce training. In the end, the talk always devolves to comments about all the new businesses that a particular policy will bring to town.

Nearly all the political speeches I hear could come right out of a 1925 political playbook, and we are only one step removed from promising a chicken in every pot.

The problem with talking this way about the economy isn’t just that it is mistaken, but that it is misleading in ways that promote many ineffective policies. While talk of government attracting or creating jobs is popular with voters, it is past time for real leadership to set the matter straight. Let me explain.

Over the next half century, the U.S. is likely to see the growth of another 100 million jobs. That is close to our national experience of the past 50 years. Indiana’s share of that growth should be about 2 million jobs. But we didn’t do nearly that well during the past half century, and without better focus we’ll do worse in the next half century.

Since the 1960s the U.S. has created nearly 100 million jobs, and Indiana just about 1.4 million. But none of those jobs have been in industries that are really sensitive to the business climate of a region. Even Texas, with arguably the most business friendly state in the union, has fewer ‘footloose’ jobs than it had in the 1970s.

Instead, nearly all the national employment growth since the 1970s has come to places that have above average taxes, high land costs and inconvenient urban government regulations. In short, places that aren’t too ‘business friendly.’

Here in Indiana, more than 100 percent of the population and employment growth statewide during the past 50 years has occurred in little more than a dozen and a half counties. This trend is accelerating. During the past five years, only eight Hoosier counties can account for more than all the population growth in the state, while 56 counties actually shrank.

So to be clear, the average property tax bills, income tax bills, impact fees and home prices are a lot higher in those growing places than in the declining ones.

Now, a terrible business climate can dampen economic growth, as the fine people of Illinois are so painfully learning. But, it is probably best to view a business-friendly environment as a necessary, but not sufficient, condition for prosperity.

As it turns out, all the employment growth of the past half century and all the growth in the next 50 years will be concentrated around the places people live. And people care a lot about quality schools, safe neighborhoods, honest local governance, parks and recreational opportunities.

All this matters in political discourse. The nearly single-minded attention on the needs of a few businesses comes at the expense of the real job creation engine: the attraction of new households. The silver lining is that here in Indiana, the biggest policy innovations, such as Regional Cities, acknowledges the problem.

But even here it has become too easy to focus on the local investments rather than the important goal of improving neighborhoods. That is because our political rhetoric has not kept pace with the reality of the 21st century economy.

Unless Indiana politicians can change the tone of the debate, I am afraid we’ll spend the next 50 years pining for jobs that won’t come, while ignoring those that could relocate to Indiana if only we could make more places in the state attractive to more households.

Michael J. Hicks is the director of the Center for Business and Economic Research and an associate professor of economics in the Miller College of Business at Ball State University. Send comments to awoods@tribtown.com.