More evidence that Washington state won’t lead the nation’s recovery comes in a new report from the Brookings Institution’s Metropolitan Policy Program. Their latest quarterly report, MetroMonitor, looks at the economic performance of the nation’s 100 largest metropolitan areas. We don’t do well. On overall performance, the Seattle metro area — King, Snohomish and Pierce counties — ranks in the bottom 40; on performance in the recovery, we fall squarely in the middle.
Granted, like most of these things, the benchmark looks backward, focusing on changes in employment, the unemployment rate, gross metropolitan product and the housing market. As a rear-view mirror look at economic performance, it’s not necessarily predictive. That’s a good thing. When uncertainty rules, as it does now, the surest way to lose credibility is to claim to know the future. That said, these are good days for pessimists.
Nonetheless, the Brookings report documents how far we’ve fallen, how far we have yet to go, and why it’s important that legislators make economic vitality their top priority as they struggle with the state budget deficit.
More confirmation than revelation, the MetroMonitor shows Seattle about average in employment growth, with better than average economic growth in the last quarter. Housing prices are lousy and foreclosures are up.
The study also reports slow job growth across the country. As a sign of worse things to come, the researchers note that most of the “metropolitan areas whose economies suffered the least since the start of the Great Recession rely substantially on government, education, or energy production and had increases in government employment since the start of the recession.” The District of Columbia and some state capitals are among the top performers. As the soft patch spreads, government employment will doubtless drop, pulling down some of the metros currently on top.
That’s not an argument for increased government hiring. Debt, deficits and tax hikes can only carry you so far. The private sector will have to lead from here.
Still, a Sept. 23 Elway Poll found a slight majority of voters in the state willing “to pay a higher sales tax — say a fraction of a cent — to balance the state budget without further deep cuts to programs and services.” The 54 percent approval is far from an overwhelming endorsement. Tax hikes generally look better in public opinion surveys than they do on the ballot, which is why we’ll see a lot more polling to find a package that tops the 60 percent threshold that might give some comfort to the tax backers.
Pollster Stuart Elway observes, “As there has been for years, there was widespread support in this survey for emphasizing cuts over tax increases…”
Cuts are inevitable and it’s likely we’ll see a tax package on the ballot.
Long-term, the only way out of this mess is a return to sustained economic growth. Much of that depends on events outside Olympia. Lawmakers have little control of the federal government’s uncertain monetary and fiscal policy, global instability or Eurozone debt.
Yet, state policies — taxes and regulation — matter at the margins, where much interstate competition takes place. When times are tough, jobs and investment migrate to business-friendly states. Decisions made by Washington legislators in the next six months will have long-term consequences.
Despite some clear strengths in technology and innovation, Washington starts at a reputational deficit. Development Counsellors International just released its latest triennial survey of corporate executives. Texas, North Carolina, South Carolina and Tennessee topped the rankings of states with the most favorable business climates. Washington appeared as an also-ran, picked by just 1.3 percent of the 322 survey participants. Though the top picks are right-to-work states, DCI reports that respondents cited costs, taxes and incentives as deciding factors.
That puts us at a disadvantage. Business taxes here are high, exacerbated by high unemployment insurance taxes and workers’ compensation costs. Yet, recent protests around the state featured formulaic screeds against corporate greed, Wall Street banks and the under-taxed rich. We’re seeing a faux populist tantrum, not a serious fiscal plan.
Even as they address the short-term budget crisis, lawmakers must remain focused on the long-term objective: a return to economic vitality. That means making business costs more competitive.
Richard S. Davis, president of the Washington Research Council, writes on public policy, economics and politics. His email address is rsdavis@simeonpartners.com.
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