As Minnesota and other states grasp for ways to create jobs and boost the economy, public officials need thoughtful, responsible plans for action. However, not every form of government stimulus is appropriate, and Minnesota has headed down some misguided paths.
One proposal that passed the Senate would spend $100 million for loan guarantees to unnamed private businesses. Some legislators said they had a list of projects benefiting from the subsidy, but they refused to make the list public because of trade secrets. In other words, we would spend $100 million of tax dollars on unknown businesses for unknown purposes. One apparent beneficiary was the developer of the Mall of America. As the state cuts health care and lays off teachers, we would spend $50 million of state funds to subsidize a shopping mall!
Other proposals were even worse. Lobbyists for a handful of national investment firms were peddling a snake-oil proposal wherein Minnesota would give $150 million to these investors, who would, through a complex financing scheme, allegedly invest the money in "venture capital." Their initial proposal would have allowed the money to be invested in practically anything, including retail businesses. And, unlike other financial investments, the investment firms would get to keep the principal and the earnings. That's as if you ask a stockbroker to invest your money, and then after it has been invested for several years, the stockbroker keeps your money.
The head of Colorado's Office of Economic Development, which administered a similar program in Colorado, said, "I think this state would be hard pressed to design a program that cost the taxpayers more and delivered less." This is hardly the way Minnesota should be creating jobs.
Finally, if state government is going to stimulate the economy and create jobs, it should first do no harm. Unfortunately, rather than create jobs, Governor Pawlenty's budget and recent unallotments are making the unemployment lines even longer. In addition to thousands of teachers, police and firefighters, and many other state and local government employees, the state budget will lead to countless additional layoffs in the private sector. Just one budget cut – the governor's veto of General Assistance Medical Care – may result in as many as 7600 job losses at hospitals, according to the MN Hospital Association. Even if Pawlenty's tax breaks for business were successful in creating new jobs, it still wouldn't come close to making up for all of the lay-offs that will result from his budget.
If Minnesota wants to use tax dollars to create construction jobs, these jobs should serve a public purpose, constructing public facilities, not jobs building shopping malls and other private businesses. Certainly there is no shortage of public needs.
Consequently, I proposed Senate File 2165 which would invest $200 million in Housing Finance Agency bonding for rehabilitation and repair of public housing for seniors and low income Minnesotans. Currently, there is more than a half billion dollar backlog of maintenance work on public housing in Minnesota. The failure to properly maintain this housing infrastructure will cost much more in the future if the buildings deteriorate to the point that they need to be demolished and replaced.
This legislation would also assist local governments and non-profits in acquiring vacant and foreclosed residential property and constructing or renovating affordable rental housing. For schools and other government facilities, funding would be available to significantly boost initiatives to make energy efficiency and renewable energy investments in those facilities.
SF 2165 would put thousands of construction workers to work, addressing the needs of one of the hardest hit sectors of the economy. And these jobs would provide several additional benefits: they would be green jobs, moving us to a sustainable energy economy; they would improve neighborhoods and communities, addressing blight and the problems caused by vacant property; and they would help address the crisis-level lack of affordable housing.
Good ideas from the past should not be forgotten. During the recession in the early 1980s Minnesota created the Minnesota Emergency Employment Development (MEED) program, perhaps the only "business subsidy" program that directly created jobs through a six-month wage subsidy to employers. To qualify, employers had to add new positions, hire people who were unemployed, and retain the employees after the wage subsidy ended. The program was locally administered and did not require businesses to jump through hoops of bureaucratic red tape, which enabled even very small employers to participate. The MEED program had great success in putting people back to work and keeping them employed, including many people of color and many who were from very low-income households. Senate File 2165 incorporates an updated version of the MEED program.
Minnesota is in a deep recession. We won't solve anything by listening to snake-oil lobbyists and throwing money at the problem. Instead, we need thoughtful, effective strategies to put people back to work and help small businesses grow.