[I]n July, 314,800 Vermonters were employed.
That was about 4,800 more than a year earlier, as determined by the Bureau of Labor Statistics, an increase of 1.5 percent.
How does that compare with the rest of the country?
Not all that well. In 27 states and the District of Columbia, employment grew faster – 2 percent in neighboring Massachusetts, 3.5 percent in Florida and a whopping 4.4 percent in Utah.
But Vermont’s employment growth wasn’t all that bad, either. In 22 states, employment grew more slowly. Employment increased at a slower rate in neighboring New Hampshire and nearby Maine, as well as in other Northeastern states, such as New Jersey and Pennsylvania. In West Virginia, it actually fell by 2.5 percent.
And if Vermont has been lagging behind most other states in employment growth, it has been outpacing them in income growth. From 2010 through 2014, it had the 10th-highest rate of growth in per capita personal income, according to the Regional Economic Analysis Project.
Here a partisan Democrat might argue that 2010 through 2014 comes pretty close to Peter Shumlin’s tenure as governor. Shumlin’s economic policies, the Democrat could argue, must be working.
A weak argument. Per capita income grew almost as quickly in relation to the rest of the country under Shumlin’s predecessor, Republican Gov. Jim Douglas.
More important, any effort to link any state’s economic policies with its general prosperity is tenuous at best. The richest, fastest-growing states do not all follow the same policies. Neither do the poorest. Liberal and relatively high-taxed California, with some of the nation’s toughest environmental regulations, prospers and grows. So does conservative, low-tax Texas, as unregulated as federal law allows.
State policies may not be entirely irrelevant, but they are dwarfed by other factors: technological developments (the rapid growth of natural gas extraction has savaged the economies of coal-producing states); global developments (a Newport factory is about to hire 90 more people to produce military helmets for the United Kingdom); U.S. fiscal and monetary behavior; the weather; luck. Whatever a single state does comes close to being meaningless.
A point worth keeping in mind now that Vermont enters a gubernatorial campaign in which some of the candidates seem intent on claiming that they can do something to perk up the state’s economy.
Maybe they can. But it’s hard to see just what that would be.
“Too many families and employers are on the economic edge,” said Lt. Gov. Phil Scott, one of the Republican candidates, suggesting that he can get them off that edge as well as ease what he called “a crisis of affordability.” The other Republican, retired financial executive Bruce Lisman, said, “the state is at a crossroads,” implying that he is the fellow who can head it in the right direction.
As to the Democrats, Sue Minter talks of “growing our economy;” Shap Smith wants to “reinvigorate” it; and Matt Dunne said he wants to be governor because “we are seeing the economy not bounce back evenly.”
All true. The state is at a crossroads because it always is. Too many Vermonters are on the economic edge, the economy is not bouncing back evenly. It lacks sufficient growth and vigor. Many people find that after they have paid all their bills – if they can pay all their bills – they have little or nothing left over.
But the whole country is on economic edge. It’s the U.S. economy that is not “bouncing back evenly,” that lacks vigor. There is no conclusive – or even persuasive – evidence that Vermonters face a greater “affordability crisis” than New Yorkers, Ohioans, Coloradans or Oregonians. Even in faster-growing states like California and Texas, millions of people are earning less money (adjusted for inflation) than their parents did a few decades ago.
Since 2010, inflation-adjusted wages for almost all workers have declined. According to a study by the national Employment Law Project, the decline has been greatest among lower-income workers.
That explains why the economy lacks vigor. Lower income earners spend almost all their money. These days, they are not spending much because they don’t earn much. In the jargon of economists, that’s called insufficient aggregate demand.
Put more simply, too many folks are broke. Either way, there’s not much that the governor of Vermont can do about it.
Vermont’s economy may have some weaknesses other states do not. Its growth in gross domestic product for 2014 was among the 10 worst in the country. But it’s dangerous to read great significance into one year’s statistics. Two years earlier, Vermont’s GDP growth was 22nd highest. It could pop back up again.
Nor can Vermont do anything about its major weakness: it’s a rural state. Rural areas are in economic trouble all over the country. In fact, Vermont might just be the most prosperous rural state which does not have fossil fuel under its soil. Since 2010, more than 1,300 “non-metro” counties have lost population. Some of them have lost a lot. All over the South, the Midwest and the Great Plains, rural counties are almost being hollowed out. In the past five years, 58 rural hospitals have closed.
No Vermont county has suffered comparable population losses, and according to a 2013 study by state scholars, only Essex and Rutland counties are projected to see noticeable population declines by 2030. No Vermont hospital has closed.
None of this means that there’s nothing at all a state can do to make its economy better. But almost everything that does some economic good can just as easily do some harm.
Take one of the most common suggestions, at least in some circles: cut taxes. Now put aside (just for the nonce) the reams of scholarly studies that conclude that cutting state and local taxes is not an effective means of expanding a state’s economy. Just consider the obvious fact that cutting taxes means cutting spending (indeed, Vermont may have to cut spending just to avoid raising taxes) and cutting spending does economic damage.
In addition to their intrinsic values, well-maintained roads and parks, good schools, clean air and water, protected wild land, clean streets, law enforcement, interesting museums and a lively arts scene are good for the economy. There is probably no greater drag on Vermont’s economy right now than all that blue-green algae in the bays of Lake Champlain. Getting rid of it costs money.
“Taxes matter,” in the words of a report on encouraging entrepreneurship by the Kauffman Foundation, “but what entrepreneurs are most concerned about is tax complexity.” Simplifying the tax codes, the report suggests, may be more effective than simply cutting.
The American economy is an extraordinarily complex and dynamic instrument. It will grow – or not – depending on national policy and global events. Whatever Vermont’s state government does is likely to have little if any impact, even in Vermont. A candidate for governor who claims he or she can fix the economy is probably promising more than he or she can deliver.
