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The basic problem underlying the Democrats general floundering on the state of the economy comes down to two things:
President Obama can rack up debt to his heart’s content – in the short term – but Ohio Democrats must balance the budget. They tried the smoke and mirrors strategy, and passed a ludicrous budget, but the numbers came in and smashed that idea it to tiny little pieces which they are still struggling to pick up. Now even the GOP led Senate changes made are not enough.
But #2 is really a problem for Ohio Democrats and I think it is a big reason why Ted Strickland seems so out of it these days (ie “It’s Not My Fault”). The traditional Democratic answers on economic development, those not already discredited by history, simply aren’t available.
Democrats argue that what drives economic growth is government “investment” in the form of infrastructure, services and government protection of consumers. So they call for increased spending in education, health care, social services, and transportation. They call for policies that protect and strengthen unions; both public and private sector. And they call for more regulation on a host of things.
So via legislation, or ballot initiative, Ohio increases the minimum wage, layers on more health insurance mandates and regulations, and spends money on a variety of government programs from tourism promotion to economic development junkets to various far flung places.
But surprisingly all of this spending and regulation (under the rule of both parties to be fair) does nothing to stop the slow erosion of Ohio’s tax base, the disappearance of manufacturing jobs, the brain drain, etc.
So what do Dems call for? More hair of the dog that bit you. They blame the economic problems on deregulation even though Ohio – and the US in general – is far from deregulated. They blame the housing crisis on unethical lenders, ignoring the role of the Federal Reserve; Fannie May and Freddie Mac; and the irresponsibility of many home buyers. They pass a stimulus that does nothing to simulate. They ratchet up funding for unemployment insurance and grants to cities hurt by the implosion of the auto industry.
Strickland proposes “education reform” that mostly means more money for teachers, staff and districts while attempting to wipe out charter schools. The Democrats in the Ohio House closes their eyes, put their finger in their ears, and shout “La, la, la I can’t hear you” to the obvious budget shortfall staring them in the face.
And what happens? The state continues to slide. Unemployment at 10% – the highest in a quarter century. 400,000 jobs gone. Ohio students assume they will leave the state despite their attachment to home towns and family.
The reason Republicans and conservatives will have a chance with voters, IMO, is that they can offer a solution that doesn’t involve more spending and more government.
Let’s skip for now, the complicated discussion of the role of the Federal Reserve in artificially low interest rates and instead, focus on economic development in general.
What conservatives have to offer is a mindset that says what sparks growth and innovation is not more government but less. There are two components to the argument they need to make.
Obviously, public infrastructure and order is a necessary component of business. Bad roads, poor schools, and high crime drive away people and investment.
But the problem is that after a certain level of spending there are diminishing returns – simply pouring money into roads won’t save us (although better roads than high speed rail). And secondly, government, particularly urban governments, are rarely focused on these basics.
Liberal Democrats have been, and remain for the most part, in control of the urban centers in Ohio and across the country. And yet how many feel that basic services have improved? How many would argue that cities focus on education, infrastructure, and public safety as their fundamental mandate?
When cities do get involved in economic development it is in counter-productive ways: raise hotel taxes to promote tourism or annex land and give developers a tax break despite not having enough money to cover infrastructure costs.
Related to this problem is the second issue. Labor unions, particularly public sector unions, do not promote economic growth and oppose a great deal of necessary reform.
The unions create bureaucracy and medicority not innovation and reform. They block accountability in education, flexibility in state government, and promote regulations that benefit themselves and hurt small businesses.
The fundamental rationale for unions is collective bargaining and worker protection. They leverage their members to get the highest pay and best benefits and they defend workers from termination and other repurcussions. Their goal is not to create jobs but to keep the ones they have at the best possible pay.
In addition, they create structure that are mean to protect workers not produce efficiency. They take job descriptions, pay levels, and overall work-flow issues and freeze them in a legal binding contract. This means that in order to change government must negotiate and litigate to keep pace. And it never does. The world moves too fast.
What Republicans need to do is find creative and effective ways to education and communicate with voters on these problems; to help voters see what government dominated by public sector unions and Non-Governmental Organizations (NGOs) do to economic growth. That a safety net is one thing European style democratic socialism is another
I will explore what this argument might look like in another post, but suffice it to say you don’t need radical libertarianism. You can work your way towards less government without scaring businesses and citizens because you are moving too fast.
But you have to make the argument when you have the chance. Now is that chance. The budget is broken. Why not use it as a reason to discuss the nature and scope of government?