Turning the Tide, Moving Forward in 2013January 09, 2013
By Pete Gioia, Vice President and Economist
Now that we’ve backed away from the fiscal cliff, Connecticut’s economy could be in for a better overall year in 2013. For starters, what has been uncertain for so long is now a deal, and certainty in taxes is a valuable factor for businesses to be able to move forward.
The major caveat for this state, of course, is what happens with proposed and potentially devastating across-the-board cuts in the nation’s defense industry. Congress postponed making a decision on that for another two months, and the consequences could be severe for Connecticut.
Still, the deal in Congress and certainty on the federal tax front should provide more stability and perhaps encourage marginal growth this year. But it won’t be enough to deliver what’s really needed — a kick start to Connecticut’s sluggish economy.
Connecticut is one of the slowest-growing states in the nation, as reflected in the state’s November jobs report (300 gained, 11,100 leaving the workforce). Our status was also nationally noted in Forbes’ annual“Best States for Business” rankings that dropped us four places, to 39th.
We added just 1,900 jobs in 2012 (through November) and gained back about 26% of jobs lost in the Great Recession. Our gross state product (GSP) increased 2% in 2011, which was better than most in the U.S., but not enough (2012 figures not yet available).
What we need to focus on in 2013 is real growth of about 30,000-40,000 net new jobs and GSP growth of over 3% — marks that we are not yet on track to achieve. These goals would move us into a solid, sustainable recovery.
What’s holding us back?
A big impediment is that we are facing another state budget deficit for the next two fiscal years, projected at around $2 billion. This is on the heels of a smaller gap that lawmakers mostly plugged in December, and all of these deficits come after a huge, $1.5 billion tax increase in 2011.
How policymakers address the new budget gap will go a long way in determining how strong 2013 — and many years after — will be for our economy.
As the New Haven Register said, “The hopes for Connecticut’s future prosperity will be brighter if the governor and legislature follow policies that allow businesses to grow, create jobs and yield more tax revenue for the state.”
What would those policies be?
Addressing the next budget deficit without tax or fee increases that erode confidence and diminish businesses’ ability to create jobs or expand operations and products.
Turning the tide and more definitively putting Connecticut on course to long-term fiscal responsibility. We are still spending well beyond our means. Reforms, best practices of other states and ideas from groups like the Connecticut Institute for the 21st Century can help state government work better and smarter at less cost.
Scrutinizing every legislative proposal for how it could impact private-sector job creation in Connecticut. Business planning is affected by developments on Capitol Hill, and the farther harmful proposals progress through the process, the worse the damage.
Making sure that lean practices and reforms to streamline government — such as those implemented at the Department of Energy and Environmental Protection, Department of Economic and Community Development, and others — are applied wherever possible.
Enhancing or expanding the state’s effective economic development programs, and preserving state business tax policy that helps our economy grow — such as credits accessible only to businesses willing to grow, expand and take the risk here in Connecticut.
- Implementing the bold education reforms adopted last year, as well as aspects of the state’s new Comprehensive Energy Strategy that will reduce costs for Connecticut manufacturers and other businesses.
Connecticut’s economy still has tremendous potential for growth in 2013 and beyond. By taking these actions and aggressively turning the tide now, policymakers can make big inroads in securing our place as a global leader in 21st century jobs.