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Businesses Wary Of State's Fiscal Policies

Giola, Pete

September 08, 2013

Connecticut's economy has been steadily improving. It's no wonder that other states constantly recruit our companies. We have what others want.

We're on track to add more than 10,000 net new jobs in 2013. Housing looks brighter, manufacturers are making profits, and the Connecticut Business and Industry Association's survey data show that firms are likely to continue hiring at a modest pace.

Our state has a strong foundation for an economic resurgence.

*Connecticut is home to numerous world-class economic-base industries -- advanced manufacturing, health care, financial services, biotech -- that are the envy of the world. Companies in these industries pay high wages, provide excellent benefits, support their communities and sell their products globally, which creates wealth back in our state.

*Connecticut ranks eighth in exports per-capita.

*Our workforce is top-notch in productivity and skills, and we have a superb location near major markets and transportation hubs.

*Connecticut is No. 1 in the country in private-sector research and development investment.

Despite these assets, numerous reports lately have slammed our economic performance. Most recently, a Forbes piece shouted, "How Did Rich Connecticut Morph into One of America's Worst Performing Economies?"

Such reports are not unfounded. Connecticut's economic recovery has lagged the nation's, and unemployment here is still running about 8 percent. We've reclaimed only about half the jobs lost in the recession, and state GDP in 2011 and 2012 was negative.

No one seems to feel warm and fuzzy about our recovery.

So, given Connecticut's underlying strengths, why are we in such an economic funk?

The answer is that most business leaders in Connecticut do not have confidence that state government is on their side. Indeed, several surveys over the past few years show that a super-majority of businesses have a negative opinion of Connecticut as a place to operate a business. They think the state is going in the wrong direction.

Is it possible to change that direction? Definitely, but it will require that state government adopt a laser-like focus on restoring Connecticut's economic competitiveness.

As Harvard Business School professor Michael Porter points out, that doesn't mean turning the state into the cheapest place to do business -- but the best place to do business. To do that, our government leaders must be willing to address serious issues that have gone unaddressed for too long, and they need to change their attitude toward the employer community.

When it comes to issues that need immediate attention, No. 1 is fiscal policy. If the Legislature and the executive branch would work together on fixing our short-term and long-term fiscal policy problems, it would be the best job-creation program in the state.

Connecticut Business and Industry Association surveys show that Connecticut's cycle of budget deficits and huge unfunded liabilities for state employee retiree pensions and health benefits -- and the constant threat of tax increases that those problems bring -- constitute the biggest drag on companies' willingness to make investments in this state. When asked what single action state government could take to help Connecticut's economy grow, respondents overwhelmingly cite a reduction in state spending.

A change in attitude on the part of many in state government toward the employer community is the other part of the equation.

The late Democratic U.S. senator from Massachusetts Paul Tsongas used to say that you can't be pro-employee and anti-employer. He was right.

So it's time that we get back to making good economic policy a bipartisan effort and good politics on both sides of the political aisle. But that's not going to happen unless many more voices are heard in the General Assembly.

Those who understand the recipe for economic success in this state must speak out and drown out the voices that say profits are evil, that it's all about growing the size of the bureaucracy, that it's all about growing new social programs, that government needs to solve every problem.

The best social program any person could have is a good job. Isn't it time to try a different path after 24 years of seeing subpar job growth in Connecticut?

Pete Gioia is vice president and economist for the Connecticut Business and Industry Association, a trade group in Hartford.