Connecticut's Economic Trend Worst in U.S.
Within a week after the Department of Commerce’s Bureau of Economic Analysis reported that Connecticut’s GDP has decreased for the second year in a row, the same agency has declared that the state’s high cost of living has slashed personal income.
The Associated Press reports that, while real personal income in the United States increased an average of 2.7 percent in 2011, personal income for Connecticut residents rose only 2.2 percent in that year, lower than the rest of the nation. The Bureau blamed the state’s high cost of living, which reduces purchasing power.
Last week, the Hartford Courant reported that Connecticut was the only state in the country in which the combined value of goods and services produced in 2012 shrank compared with 2011. GDP decreased by 0.1 percent both in 2012 and in 2011. GDP is measured as the combined value of spending by residents, businesses, and government, plus investments and net exports.
Daniel Kennedy, an economist at Connecticut’s Department of Labor, said he was not surprised by the federal statistics because job growth in the state has been slowing.
“Connecticut is the laggard,” he said.
According to Kennedy, the state’s weak spots are the finance sector and government. Connecticut also is dependent on federal stimulus and those funds have slowed.
“Finance and government seem to be what’s driving Connecticut down,” Kennedy said.
Don Klepper-Smith, an economist in New Haven, said, “Our economic development policies and tax policies, while well-intentioned, are not serving us well.”
Klepper-Smith believes corporate executives of Connecticut’s hedge funds, banks and insurance companies, who have decided to relocate work to other states with lower salaries, insurance costs, and taxes, are the cause of the state’s failings. He said executives believe state officials’ approach to businesses is “borderline antagonistic.”
In Connecticut, in addition to big declines in finance, insurance, real estate, and government, utilities, nondurable goods manufacturing, transportation, professional services, health care, social assistance, and other services all saw drops in economic activity.
As an example, in May, Medscape rated Connecticut one of the worst states in which to practice medicine.
According to the Courant, Andrew Doba, spokesman for Gov. Dannel Malloy (D), said that Klepper-Smith is wrong for characterizing the state’s approach to business as “borderline antagonistic.”
Malloy said that while the economic news is not good, he pointed to 8,600 jobs added in 2012 and 14,300 jobs added in 2011 as reason to trust his economic policies.
Klepper-Smith, however, responded that Malloy’s aggressive wage subsidies, grants, and subsidized loans to companies were misguided.
“Economic development at its best is not about picking winners and losers,” he said. These approaches, he added, “have put us behind the eight ball to the point where we have to rethink those economic policies. If this isn’t a call for that, I don’t know what is.”
With Connecticut in economic decline, other states are eager to lure Connecticut’s businesses and thereby increase jobs for their states. CT News Junkie reports that Gov. Rick Perry (R-TX) will tour Connecticut, along with New York, between June 16th and June 20th. Perry, whose trip will be funded by TexasOne, a public-private marketing corporation governed by a board of directors that is appointed by the governor, plans to meet with leaders from the firearm, pharmaceutical, and financial industries. He will host receptions for business owners who contact his office through a website called www.TexasWideOpenForBusiness.com.
TexasOne has been running 30-second ads in New York and Connecticut featuring Texas residents praising their state’s economy, courts, and regulatory system.
Speaking for Malloy, Doba referred to Perry’s visit to Connecticut as “a lame publicity stunt.”
According to the Tax Foundation, Texas is ranked 9th for its business climate while Connecticut is ranked 40th.
In addition to Perry, Gov. Rick Scott (R-FL) has sent letters to more than 100 Connecticut firms, hoping to lure them to Florida, according to the CT Post.
Scott contacted some of the giants of Connecticut industry, including General Electric, Electric Boat, Sikorsky Aircraft, and Starwood Hotels & Resorts.
In his letter to Connecticut companies, Scott boasted the creation in Florida of more than 300,000 private sector jobs and a decline in the unemployment rate to 7.2 percent since he took office two years ago. The Florida governor also touted a cut in business regulations, low taxes on businesses, and--perhaps the biggest draw of all--no income tax.