How much can governors really help their states' economies?

From Robert Whitcomb's "Digital Diary'' column in GoLocal24.com

Rhode Island Gov. Gina Raimondo was understandably pleased when the state’s unemployment rate fell below the national average in January, to 4.7 percent, for the first time in almost 12 years. Meanwhile, some high-profile companies have moved to the state or expanded there and there’s quite a lot of newconstruction underway. To me, the best news has been that the  big projects at the Route 195 relocation land are starting to get cooking and that rapidly growingUnited NaturalFoods Inc. is now based in Providence.

How much of this was due to Ms. Raimondo’s leadership? Economics has so many variables that it’s hard to say. For that matter, the Ocean State is so tiny it’s hard to say that there’s a “Rhode Island economy.’’ It’s part of the much bigger regional, national and international economies. And note that a shrinking  state work force explains at least some of the recent jobless-rate drops.

I would say, however, that Ms. Raimondo’s knowledge of business and national connections as a former venture capitalist, her willingness to implement long-overdue reforms and her calm and intelligence have indeed inspired confidence in firms that might be candidates for moving to or expanding in the state. That she’s willing to get very able people from outside the state with fresh perspectives to join her administration rather than  automatically pick well-connected Rhode Islanders (“I know aguy…’’) has also been good, although it has, along with her fancy education, gotten her labeled an “elitist,’’ which I don’t believe this daughter of middle-class Rhode Islanders considers herself. The more new people moving into Rhode Island the better, to dilute the parochialism that is at the root of many of its political and economic problems.

As in many states, her administration has had headaches with big computer systems (e.g., public benefits and the Division of Motor Vehicles). Could she have headed these headaches off by firing people faster who were charged with getting them going but didn’t succeed? Probably.

Hire Republican Ken Block, a brilliant systems guy, to oversee state computer systems?  That would be exciting.

Ms. Raimondo has gotten a lot of flak from some people about what former Gov. Lincoln Chafee calls the “candy store’’ approach of using tax incentives to lure businesses. I share a lot of this dislike. It can create a race to the bottom as states compete to get sexy companies. As I’ve written here before, for long-term economic success, jurisdictions must focus on broad improvements, especially in education and infrastructure. The governor says she is focusing on those things but the $130 million in tax incentives so far in her term understandably get a lot of attention. And how do you make these companies stay?

Pretty much every state and large city play the tax-incentive game in varying degrees.

Of course, the governor thinks that attracting such big companiesas General Electric to set up new operations in the state signals to other companies that it’s now a good place to do business and,  they find, a beautiful place to live for many.

She has had some success in changing the perception of out-of-staters about the Ocean State so that many  have come to believe that the Rhode Island is finally, if slowly, fixing its business climate. The deeply embedded tribalism, negativity and cynicism in the state militate against her but I believe she’s making progress – two steps ahead, one step back.

Meanwhile, I’m sure that Rhode Islanders would like to see a updated list of companies that have decided to stay and grow in the state as a result of Raimondo administration policies.

On two big issues she’s been embroiled in: the car tax, about which she is less enthusiastic about cutting than some other politicians, and “free college’’ for two years:

Cutting or eliminating the car tax, as hated as it is, will have little or no effect on the state’s economy.  And rather than “free college,’’ it might make far more sense to put some of the tax revenue to be spent on subsidizing students into creating a public-private vocational education system (including apprenticeships) like that which has been so successful in Germany.  And even more important is pushing asideRhode Island special interests in order to adopt a  K-12 public-education system with the rigor of Massachusetts’s, which has helped make the Bay State so prosperous in the past couple of decades.