February 18, 2009
Maine's economic fate is in our hands

by Rep. Susan Austin

Over the next few months, money from the federal stimulus package will start flowing into Maine. We’re on tap to receive approximately $900 million. Those funds come with strings attached, of course. About one-third of the total will go for Medicaid, with the rest dedicated mostly to food stamps, education and highway and bridge projects. A big piece of Maine’s allotment reportedly will go to rebuild the northbound side of I-295 between Topsham and Gardiner. The southbound side was redone last summer.

In the State House, there is a newfound optimism among some legislators who see the stimulus funds as the solution to the state’s big budget deficit. The Legislature is now at work on the $6-billion budget for the next biennium – fiscal years 2010 and 2011. The deficit is running about $830 million. Tax revenues are expected to fall some $330 million below expectations, and the agencies and departments of state government say they need an increase of $500 million to maintain operations at current levels.

Clearly, the stimulus money will relieve some of the budget pressure that has cast a pall over this legislative session, especially in regard to Medicaid (MaineCare). But there are a few critical points to keep in mind. First, the state’s flexibility in using the money is extremely limited. As much as 95 percent of it will arrive with specific instruction about how it must be spent. Any money used in violation of the guidelines will have to be returned to the federal government.

Second, you will remember that the $787-billion federal stimulus bill – the largest single expenditure in American history – was advertised as a job-creation machine to pull the nation out of recession. We have since discovered that much of the money has nothing to do with economic recovery. And we may be disappointed by the number of jobs that the cash infusion will create in Maine.

A prominent economist told the Legislature’s Appropriations Committee last week that Maine has already lost about 15,000 jobs in this deep recession. He said we will lose another 15,000 or so before the economy stirs back to life. But the stimulus money, he added, is expected to generate between 10,000 and 15,000 jobs. In other words, we will sustain a net loss of at least 15,000 jobs – even after all the stimulus money has been doled out.

This brings me to another critical point. The stimulus is one-time money. It will be spread over two or three years, but once it is spent it is gone. Will the 15,000 Maine jobs created by the stimulus disappear along with the stimulus money? Once southbound I-295 has been rebuilt, will those road construction workers have other projects to tackle? In short, will the stimulus lead to lasting improvements to the Maine economy?

There are solutions to our job situation, and they don’t require borrowing money from future generations to create an artificial economy. Within Maine, we have the talent, the work ethic and the entrepreneurial drive to build a stronger and more sustainable economy. Getting to that better future will require changing or eliminating the factors that have suffocated our growth for years. If Maine is to have a financially viable future, we can no longer afford our well-deserved reputation as a state that is hostile to business.

Last year, the nonpartisan Maine Economic Research Institute asked 413 senior business leaders to list factors that are holding back Maine’s economy and stifling job creation. Here are their 11 top negative economic influences, starting with the worst: energy costs; level of state and local taxes; health insurance costs; healthcare costs; transportation costs; Maine House of Representatives; state regulatory climate; Maine Senate; Dirigo Health; environmental regulations; and workers’ compensation costs.

For too long, we have thrown one burden after another on Maine business owners. While other states roll out the red carpet for new companies, we roll out a bed of nails. If the political leaders of our state want an economy that can generate jobs – and in turn the tax revenues to support our huge social welfare system – they should take a hard look at that list and then get to work. The stimulus won’t do the trick. Maine’s economic fate is in our hands.

State Rep. Susan Austin (R-Gray) serves on the Legislature’s Joint Standing Committee on Business, Research and Economic Development.

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