Treasurer's Blog: What's Wrong with the Economy?

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Dear Friend,

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Below is my most recent TREASURER'S BLOGPlease share it with your family, friends, and associates.  My speaking schedule and FINANCIAL NEW$ UPDATES are posted on the Treasury website, where there is also a place to invite me to speak to your group.  Thank you.

 

What's Wrong with the Economy?

No confidence.

No confidence that Washington will stop spending more than it takes it -- the root of our haunting fiscal problems.

No confidence that Washington will responsibly reform the incredibly expensive entitlement programs that are bankrupting the federal budget: Medicare (health care for the elderly), Medicaid (health care for the disadvantaged), and Social Security (retirement benefits).

No confidence that Washington will address the crushing $14 TRILLION national debt that is draining life from our economy.  By the end of the decade, we’re projected to spend 20% of our federal tax revenues for interest on this national disgrace – and that’s according to optimistic projections.

Consumers are uneasy.  Gasoline, groceries, and monthly heating oil and electric bills consume more and more of family income.  Health insurance is becoming too expensive.  Taxes and fees of all shapes and sizes greet us at every corner to fund Washington’s reckless spending.

Companies are uneasy.  Washington doesn’t allow complete development of our domestic energy resources to lower the cost of gas, heating oil, rubber, electricity, and everything else produced with petroleum.  Companies are forced to jump through costly regulatory hoops which limit or stop the growth of their businesses.  So, they save their resources that could be invested to expand and hire more workers.

Back to the U.S. consumers, 14 million of whom don’t have jobs.  Many millions more are underemployed.  They hesitate before going out to dinner and a movie, or to buy a new pair of shoes.  Many don’t even consider a second car or a new home.  The economic wheel has slowed to a crawl.  The private sector is not creating new jobs, new income, and new wealth.  Our standard of living is eroding.  Pretty grim, but definitely fixable.

Public officials make the rules by which our economy operates. If rules are predictable and costs are reasonable, consumers and businesses buy and invest.  Businesses grow and hire more workers, and the economic wheel rolls along.  If our elected officials spend too much, individuals and businesses pay the bills via higher taxes and fees. If they regulate too much, individuals and businesses pay the bills via higher prices for the goods and services they consume.  At some point companies toss in the towel and move away, and take their jobs with them.  The economic wheel slows -- or grinds to a halt.

In the midst of this mess, the U.S. Bureau of Labor Statistics shows that 37% of all new private sector jobs in America during the past two years were created in Texas.  That’s 265,300 net new jobs.  During those two years since June 2009, when the recession technically “ended,” Maine created fewer than 1,000 new jobs.  Wow.

Over the past decade, more jobs have been created in the Lone Star State than any other.  Maine is not Texas; we don’t want it to be.  But, we can learn lots about how Texas fosters a business-friendly climate to attract capital investment, jobs, and more prosperous lives for its citizens.

Public officials in Texas claim that four key conditions have fostered this job growth: no state income tax; predictable business regulations; limited settlements for law suits; and union membership is not imposed on employers or workers.  Texas is also fiscally conservative, and supports a small state government relative to its population.

Simply put, Texas is a place where the voters have chosen public officials to establish rules to attract companies.  Costs are low and regulations are predictable.  Companies know that they have a better chance to succeed in Texas than, say, in Maine.  

We CAN fix this. In fact, we’ve already started. The new biennial budget was approved last night by the Legislature.  If it passes scrutiny by Governor LePage, there will be a number of new policies governing our state economy.  Many lower the cost and complexity of doing business here.  There will be more and greater incentives for entrepreneurs to invest their capital in Maine, to start or expand a business, and to create jobs so we can keep our kids here.  The new leadership in Augusta is dramatically changing state government’s attitude toward business.  We’re here to help, not get in the way.  Quality of life must include a paycheck.

The budget reduces the top state personal income tax rate to 7.95% from 8.50%.  Approximately 460,000 fellow Mainers will get a tax cut.  70,000 who paid income tax before will no longer. Businesses will get a tax break when they invest in new equipment.  Workers and their employers will keep more of the money they earned, allowing them to decide how best to spend and invest it -- not government.

New common sense laws already passed simplify regulations for businesses large and small.  For example, double notification for pesticide spraying has been eliminated.  Lobster fishermen can store their traps on the dock when not in use.  This will save them time, effort, and money.  That’s good for workers, good for businesses, and good for consumers.  These reforms and many more will help keep the economic wheel turning, and generate more income for our citizens.

The budget document places a lifetime limit of 5 years on some welfare benefits, and requires a waiting period for others.  Employers are attracted to workers who are self-reliant, independent, and hard-working.

Another new law signed by the Governor will allow Mainers to shop across state lines to buy health insurance.  This will create more competition within our health insurance market, and reduce premiums paid by our citizens.  Again, that’s good for our workers, businesses, and consumers.

After 25 years of trying, Maine students may soon have the choice of charter schools focusing on math, science, the languages, or art.  This proposed bill would better enable our kids to follow their passions.  Currently, Maine is one of only 10 states that do not allow the charter school choice.  Companies are attracted to states that provide educational choices for their employees’ kids.

The new leaders in state government, many of whom are from the private sector, are steadily putting the pieces in place to improve the lives of our fellow Mainers.  This long-term strategy is based on building a business-friendly climate to attract private sector jobs, while protecting our cherished natural environment.  It will take some time, but the past six months has been a great start.  Let’s all have the courage to continue down this path to greater prosperity.

 

Thank you,

Signature

Bruce Poliquin

Maine State Treasurer