As election day approaches, we’re looking at issues in the governor’s race. What are Tom Wolf and Tom Corbett’s plans for jobs, and how much influence does a governor actually have over the economy?
Listening to ads by the Tom Corbett and Tom Wolf campaigns, you get the sense that the two candidates are living in different realities. Take this ad, from Governor Corbett:
Tom Wolf’s ad paints a different picture.
If you can believe it, both candidates’ claims are technically accurate. Corbett has resisted tax hikes. And there have been about 127,000 public and private sector jobs created during his administration.
And Wolf is right that you can find statistics showing Pennsylvania slipped from 9th to 47th in job creation. But the state usually ranks between 30th and 40th in job creation, compared to other states. The ranking of 9th was something of an anomaly.
The candidates also spar over the state unemployment rate, which has fallen by more than two points during Governor Corbett’s administration. Corbett takes credit for that decline. But the state jobless rate has basically tracked national unemployment.
The candidates could debate these numbers all day. But economists across the political spectrum say these debates are misleading, because governors don’t have that much influence over the economy in the short term. Nathan Benefield is vice president of policy analysis at the right-leaning Commonwealth Foundation.
“The state economy is tied to the national economy, and just the business cycle that is happening nationally and even globally,” Benefield said. “A lot of it is outside of the hands of the governor.”
Mark Price agrees. He’s a labor economist at the left-leaning Keystone Research Center. Price says the governor’s powers to create jobs are generally limited to decisions over two things: education and infrastructure spending. “In the short run, it’s pretty hard for any of the decisions they might make in those areas to influence how the economy is doing,” he said. Policy changes will be more likely to have an effect in the long-term, “when infrastructure pays off and when the investments you’re making in education begin to pay off as workers enter the labor force,” Price said.
Price says there is a recent exception. He argues that because of a perfect storm of factors, Governor Corbett’s cuts to education spending in 2011 slowed job growth in the short-term.
Both Corbett and Wolf say educating Pennsylvania’s workforce is important to them.
Corbett’s campaign says the governor gave incentives to career and technical centers, supported adult literacy programs, and enacted a $1 million training program to match unemployed residents to jobs.
Wolf talks about education as an engine for economic development. He says he would give scholarships to high school students who go to college in Pennsylvania, grant tax credits to college grads who stay in the state, and create partnerships between colleges and companies.
The Future of Corporate Incentives
No conversation about job creation would be complete without talking about corporate subsidies, like tax breaks and cash grants. Many economists say that if subsidies are at all effective, they can only nudge the jobless rate. And they’re often not worth the investment.
But the candidates both say they’d use corporate tax incentives to create jobs. During Corbett’s administration, the state has given millions of dollars to companies every year, hoping for new jobs and increased tax revenue.
Corbett says his administration makes sure each incentive offers a return on investment. He says the governor’s team analyzes how long it will take the state to recover the incentive money from personal income taxes of the company’s employees.
The state sometimes uses incentives to keep existing jobs, not just to create new ones.
One company that just got a state incentive is the deli meat manufacturer Dietz and Watson. The company has its headquarters in Philadelphia with nearly 700 employees, and it had a distribution center in New Jersey that burned down last year. About 110 employees from the New Jersey facility have been working from the Philadelphia plant since the fire.
Now, Dietz and Watson is getting more than $14 million in cash grants and other financial assistance to rebuild its New Jersey facility in Philly. The company says it will create fewer than 50 additional jobs as a result of the deal.
Corbett says the state gave the incentive to keep Dietz and Watson from taking its Philadelphia headquarters and existing jobs to New Jersey. “I don’t think the people of Philadelphia would like to see Dietz and Watson leave Philadelphia,” Corbett said.
Tom Wolf says he would get rid of any state tax incentive programs that don’t create jobs in Pennsylvania.
That would be difficult for a governor to do, because many programs could only be cut using legislation. Wolf says he would work with the legislature to phase out any problematic programs. He wouldn’t simply stop funding those programs in the budget.
Wolf says companies that currently have agreements to receive incentives from the state would get the money promised in their contracts, even if their programs are cut. “If we’ve made a deal I think contractually you’re obligated anyway, but I think morally you have an obligation to follow through on the agreements you’ve made,” Wolf said. “I’m just saying looking forward, I would just look to make sure that what we’re doing makes sense.”
Wolf says he would introduce a new program offering cash incentives to certain companies that create middle-income jobs with benefits. Under that proposal, the state would take the money back if companies don’t keep those jobs for five years.
Many of the state’s current incentive programs have such clawback provisions, but they’re not always enforced.
But if the economists are right, voters shouldn’t expect either candidate’s policies to move the needle on the jobless rate or job growth anytime soon.