A check on Delaware’s economy as we head into the fall

    One of the debates that continues in Delaware centers on how the private sector is faring.

    GOP candidates for governor and lieutenant governor, Jeff Cragg and Sher Valenzuela, have criticized Democratic Gov. Jack Markell, claiming current policies and government spending are to blame for keeping the lid on hiring by private employers.

    Markell remains an elusive foe, thanks to the state’s 6.8 unemployment rate, which is more than one percentage point below the national figure.

    That performance has made him a regular visitor on morning cable news shows as he states the case for a centrist approach that looks for ways to grow jobs without slashing government spending.

    He can point to a couple of A grades – the reopening of the Delaware City Refinery and the state’s biggest banks pledging to add jobs.

    He also has a couple of incompletes. Bloom Energy’s proposed plant and fuel cell farm is now in a court battle. Fisker Automotive’s proposed plant near Newport is in mothballs with the feds holding back a loan and the point man in the project moving on to other responsibilities with the California company.

    Still, a 6.8 national rate would virtually guarantee, re-election for fellow Democrats President Barack Obama and Vice President Joe Biden. The national jobless rate stayed at 8.3 percent in July.

    It has been no surprise that Republicans have been more successful on the national stage by taking on Obama, who, earlier in the year said private employers were doing fine.

    But are both the GOP and Obama right?

    A blog entry from the conservative American Enterprise Institue took note of a recent report from First Trust that separates the gross domestic product (the value of goods and services) into public and private sections.

    When the numbers are crunched, the private sector posted a 3 percent or greater increase, well above the current overall growth rate. By contrast, government posted a negative performance in buying goods and services.

    This might seem to indicate that more government spending would jump start job growth. Those in favor of that approach have cited the analysis as evidence.

    But the figures may also suggest that the spending cuts actually did what Republicans hoped for in allowing the private sector to grow at a faster pace.

    The problem lies in the number of jobs lost during the downturn.

    In the case of Delaware, more than 20,000 jobs were lost since the peak of 2008 and about 11,600 have been added, according to Bureau of Labor Statistics figures.

    That’s a big hill to climb.

    And if you buy into the need to slash government, the fastest way to accomplish that task is to eliminate jobs via attrition or layoffs. That could add to unemployment.

    Delaware government has not resorted to layoffs although a lid remains on hiring.

    Had more cuts occurred, it might have spurred private sector employment, but it is hard to imagine how the private sector could have made up for the losses.

    At this point, it is worth looking again at the First Trust report, which does not buy into the argument that added government spending is the solution.

    Instead, it suggests regulatory and fiscal reforms (perhaps fixing the deficit, Social Security etc.) as a way to jump start growth. Again, Markell seems to be ahead of the curve.

    Earlier in the year, the governor tackled the issue of regulation with an executive order that requires reviews and hearings.

    The General Assembly and governor also took action to deal with the state’s pension issues and Delaware’s system is better shape than its neighbors.

    A similar approach on the federal level is unlikely, especially in an election year and in an environment where special interests of all stripes successfully make their case for the status quo.

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