Posted 1 year ago on April 23, 2013, 4:31 p.m. EST by Cvacca
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Laugh all you want about Texas Gov. Rick Perry's campaign to recruit businesses from Illinois to the Lone Star State. We don't know whether Perry will succeed in prompting a commercial exodus from the Land of Lincoln to the land of droughts, fire ants and deadly fertilizer-plant explosions. Yet Perry's stunt is another serious wake-up call for Illinois politicians and the inhospitable business climate they've created.
Perry can boast to Illinois business leaders of a Texas unemployment rate that has fallen to 6.4 percent. That's an excellent barometer of his state's economic health. By contrast, the unemployment rate in Illinois is at 9.5 percent and, as the latest report from the federal Bureau of Labor Statistics indicates, it has been rising over the past year. In March, this state lost 17,800 jobs from the previous month.
That is no laughing matter.
The economic recovery in Illinois remains terribly weak. Our state has failed to make a strong comeback from the Great Recession that ended four years ago, in June 2009. We are falling further behind not just Texas, but practically every other state — including states such as Indiana that can make stronger arguments for luring Illinois businesses relatively short distances.
Only Nevada has a higher unemployment rate than Illinois. But even that Nevada rate, 9.7 percent, has fallen almost 2 percentage points in the last year. Nationwide, the jobless rate is 7.6 percent.
The Illinois jobs crisis reflects a widespread lack of confidence in the ability of this state's leaders to manage public finances. The failure to address out-of-control public pension costs is the biggest single factor. But the reasons for business to be skeptical about the future of Illinois go beyond that elephant in the room:
State government is insolvent, unable to pay bills as they come due. It has no viable plan for fixing its biggest financial problems. A 2011 income tax increase, including a 67-percent rise in the rate individuals pay, betrayed that lawmakers would rather raise revenue than slash spending. And some legislators are plotting to make that supposedly temporary tax increase permanent. Disintegrating credit ratings mean that Illinoisans pay high interest rates — a waste of hundreds of millions of dollars every year — to buyers of state bonds.
Any employer who stays in Illinois can reasonably expect to be soaked through excessive future taxes for whatever fixes belatedly arrive. Any employer who considers moving here has to include the potential for more tax hikes in his or her calculation. And no one can be confident that public services will continue in their current form as public-pension obligations at every level of government continue to consume ever-more tax dollars.
Not all of Illinois' problems are unique. Nationally, the anemic recovery confounds many economists: When a central bank injects more than $2 trillion into the economy, as the U.S. Federal Reserve has done, economic activity is supposed to skyrocket — at least according to the mainstream theories about monetary policy. The big concerns under such a scenario are runaway inflation and the creation of asset bubbles, not years of sluggish growth. Yet incredible amounts of monetary stimulus have left many Americans feeling as if the recession never ended. Businesses aren't investing and hiring at the pace that was expected, given rock-bottom interest rates and ample cash. Uncertainty about government policies, tax burdens high on that list, has undermined business confidence.
The uncertainty in Illinois is greater than in any other state because our leaders have failed to take action that would halt the downward spiral. In rough terms: Had Illinois reformed its pension system after Rod Blagojevich left the governorship four years ago, lawmakers arguably could already have saved enough in pension costs to pay off the state' backlog of bills. Going forward, the prospects for state spending on schools and other priorities wouldn't be as bleak.
The failure of Illinois pols to confront their problems more with lip service than with solutions helps to explain why Illinois has underperformed the Midwest in job creation. Example: Michigan suffered as much as any nearby state during the recession, but the revival of the domestic auto industry has whittled down its unemployment rate to 8.5 percent. The Midwest generally is doing better than the country as a whole: Unemployment across this region — even factoring in Illinois' high jobless rate — stands at 7.4 percent.
With Illinois lagging so badly, it's no wonder Perry is on the growing list of governors intent on poaching employers here. His $80,000 ad campaign is hard to miss, and its boast that Texas is more pro-business than is Illinois unfortunately rings true. On Tuesday, he's slated to speak at the BIO International Convention in Chicago — a big biotechnology gathering that draws thousands of business-savvy participants from around the world.
Wake up, Springfield. In the competition for job creation, many states are winning. Illinois? Illinois is losing.