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Partisan face-off stalls economic change

July 22, 2008 by Haviland Smith

[Originally published in the Burlington Free Press.]

The Vermont economy, like the national economy, is in trouble. We are often given vapid reassurances by politicians that things are not all that bad, but economists and real working people have rather different take on the matter.  Unfortunately, many are anticipating a further, probably fairly serious deterioration of our national economy.

Vermont does not have the kind of balanced revenue mix that mitigates economic recessions. It is a state that is inordinately dependent on tourism for its income.

Spending on tourism is almost entirely discretionary. That money is spent after the necessities of life have been secured, that is, if there is any money left over. Vermont’s visitors, who directly and indirectly provide a large amount of Vermont’s tax revenues, are squarely in that category.

Wednesday’s Burlington Free Press had an interesting front-page article on IBM’s decision to invest $l.5 billion in new production and 1,000 new “nanotech” jobs in New York rather than in Vermont (“IBM investing $1.5 billion in New York,” July 16). In it, IBM’s concerns about the negatives of conducting business in Vermont, which have been made “quite clear” to Vermont officials, are laid out once again. Listed are: “the circumferential highway, energy prices, housing costs and site permitting issues”.

In contradistinction to these issues stand the contemporary Vermont preoccupations with sprawl, opposition to the Circ, environmental laws that slow down and sometimes paralyze the permitting process as well as attitudes toward energy generation, particularly alternative approaches, and other regulatory issues.

Vermont Republicans, in the main, would like to see a more favorable business climate because it would stimulate job growth and that, in the long run, would increase state revenues. Additional revenues would then permit investment in Vermont’s infrastructure, which would also support a more favorable business climate.

Democrats, on the other hand would like to have more money for social programs, medical services, education, low income housing and support for our underprivileged citizens. Presumably this would come through increased across the board taxation.

Increased taxation and the continuation of Vermont’s current attitudes toward businesses like IBM will not provide new income sources for Vermont’s economic needs. In purely economic terms, that will not foster growth. Without growth, there will be little hope for increased revenues to support the projects favored by either Democrats or Republicans.

It is absolutely pointless take sides on these issues, even though virtually all Vermonters do so. Given the structure and current state of Vermont’s economy, which does not favor increasing state incomes, Republicans and Democrats want additional resources, albeit for different purposes.

And yet, no party seems ready to budge an inch. Talk about the softening regulatory environment or building the Circ and there is a great hue and cry from those organizations that oppose them, even though they might be part of the solutions they seek for greater revenues. Talk about increased state resources for education in support of a better-prepared work force or state sponsored health care that would ameliorate the business climate and the Republicans howl.

The key here is well-paid jobs. Right now, because of its practices, laws and policies, Vermont has not positioned itself favorably in the national inter-state competition for those jobs.

No one can have it both ways. The kind of entrenched, diametrically opposed political attitudes that exist in Vermont today are not going to solve any of the state’s problems, particularly in these difficult economic times. Vermont will continue to have to try to muddle through.

Haviland Smith lives in Williston.

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