To date, the talk of Gov. Bobby Jindal, and to some extent his actions, has been great on economic policy. He has said he wants to make Louisiana more business-friendly with the ultimate step being reduction, if not elimination, of income taxes both individual and corporate. He has started to back that up with the elimination of three nuisance taxes on business in the previous special session. But in all of this, he seems to have the same curious blind spot that did his predecessor in that, according to his premier budget, it’s necessary to prefer big game hunting than casting bread on the waters to achieve economic growth.
Jindal’s Secretary of Economic Development Stephen Moret is the point man on efforts to get $307.1 million of nonrecurring surplus funds dumped into a fund set aside to attract large employers which already has a $140 million balance. Both in practical and philosophical terms this allocation seems unwise and, in a related question, begs whether Moret is right for the job especially given his salary demands.
Moret claims the fund needs more money because other states are doing it, particularly large projects may need it, and the present balance could be gone after landing a project. It is possible that the increase could lure a project whose return to the state in terms of tax revenues could exceed the amount give up over the long haul, but, congruent to the theme of Jindal’s that proper priorities in spending will promote economic development, it’s hard to argue this is the right expenditure at this time.
The Jindal Administration itself forecasts budget deficits beginning next year, while any benefits from landing a project would be years down the road. It would appear much wiser to take this money and put it into the Budget Stabilization Fund to draw upon in the predicted upcoming lean times. Conversely, the money should not be spent on more capital projects as some legislators suggest; a bill to take care of that was passed during the special session that will shirt around $350 million year to transportation projects annually.
Further, as a philosophical matter, with this Jindal seems to prefer the strategy of bagging a big employer not in Louisiana as opposed to broad-based, general tax relief for all who already are here. Because of the concern for future deficits, while this money now should not be used for tax relief, saving it can set the stage for this use in three years, enabling Jindal to meet his goal of income tax cuts. Such cuts would be the single most effective economic development tool for the state.
If it’s Moret, an early and instrumental Jindal backer in the gubernatorial campaign, who is driving economic development fund strategy, he needs to come to understand there are better uses of the funds for economic development purposes. If he doesn’t grasp this, his employment must be reevaluated, as well as that of his deputy Steve Grissom. Already he is threatening to price himself out of the market with a huge salary increase request for himself and for Grissom as well, making their combined salaries $550,000. Not to offend these accomplished gentlemen, but they simply aren’t worth it to the state at those prices; nobody is.
Moret describes his new post as “a personal mission.” His salary request implies instead he focuses more on remuneration. He would be lucky to make as much as his disappointing predecessor and if that is not to his liking, we thank him for his service and wish him well in another position.
But regardless of salary, he’s not going to be much use in his job unless he advocates policies of broad-based tax relief. The point of economic development, he must understand, is not to make Louisiana look lovely to economic producers by dangling money in front of them, but to make Louisiana lovely to attract these producers without targeted gifts – and that comes by removing obstacles for wealth production for all.
By way of example, note that the business tax cuts approved in the special session could have lured a steel plant to the state that last year said it would head elsewhere – despite plums offered of amounts that even Moret would find impressive. A critical factor to the rejection was the cost of utilities because of the aged, inefficient production of energy – which the old taxes perpetuated by discouraging modernization.
Just as Moret and his deputy don’t need pay increases over their predecessors, neither does the fund need an increase in amount, nor should that money be spent on anything but measures to set up future tax cuts. Jindal needs to overcome this blind spot in his agenda.
Posted by Jeff Sadow at 10:20