AÂ sense of general optimism permeated the Economic Outlook and State Budget Review on Wednesday at Norwalk”™s DoubleTree Hotel, although there were still plenty of political fireworks between state legislative leaders from both sides of the aisle.
The event, presented by the Norwalk Chamber of Commerce, found Connecticut Business & Industry Association Vice President and Economist Pete Gioia opening the session with “I have some good news” ”” something that state Senate Majority Leader Bob Duff later remarked was Gioia”™s “version of The Happy Dance.”
Indeed, Gioia said that he believed, in the wake of the recently passed Tax Cuts and Jobs Act, that the nation as a whole is “probably on the cusp of what might be one of its best years in the last 50 years” in terms of economic growth.
“Companies are buying, and buying internationally,” he said, noting that Germany recently posted its lowest unemployment rate in some 20 years and Japan, India, China, “and even Brazil” are doing well to varying degrees.
Gioia said he also expected strong results in the U.S. in the wake of the new law”™s cutting the corporate tax rate from 35 percent to 21 percent something he has long advocated.
He also praised corporations such as event sponsor Webster Bank, Comcast “and company after company” for using their tax cuts to reward employees or reinvest in their firms, rather than being given to executives or shareholders.
In addition, he predicted that without a foreseeable energy price spike on the horizon, the chances of another recession are extremely low. He told the roughly 120 people in attendance that he expected the law to help stimulate the U.S. economy over at least the next couple of years.
Gioia repeated his oft-stated theory that Brexit could benefit the New York City metro area, including Fairfield County, as London-based corporations looking for an international base of operations consider either this area or Singapore.
However, Gioia”™s mood was generally less rosy
when it came to Connecticut. “The state has huge problems,” he said, as it continues to lag much of the country and New England in economic performance and employment.
Of the latter, he said the state is facing “a jobs crisis,” in that 25,000 jobs that pay at least $15 an hour with benefit are going unfilled, due to the general impression that the costs of living and working here are too high. “That”™s not good,” he said. “If we had 25,000 more taxpayers, the state budget would look a lot better than it does now.”
Gioia also called for Connecticut”™s congressional delegation to reach out to its brethren in neighboring states and fight for immigrants”™ rights. “Foreigners are 80 percent more likely than natural-born citizens to start companies here and to be net hirers of natural-born citizens,” he declared, noting that a disproportionate number of immigrants settle in Fairfield County. “We have got to have immigration reform.”
As for housing, Gioia said that while certain pockets like West Hartford and eastern Connecticut “are doing really well,” the majority of the state, including Fairfield County, “is still sucking wind.”
Gioia also expressed enthusiasm for the recently convened state Commission on Fiscal Stability Growth and Economic Growth, which is required to submit a report on its findings and recommendations to the governor and the General Assembly by March 1.
The event then shifted to a panel discussion between Duff, a Democrat, and Republican state House Minority Leader Themis Klarides, who while professing admiration for each other laid out vastly different visions of the state.
Moderator Michael Devine, the president of Earth Energy Alliance who is on the chamber”™s board of directors, had difficulty keeping the politicians
on point.
Asked why Connecticut has recovered just 70 percent of the jobs lost during the Great Recession, Duff sidestepped the question, instead speaking of the need for a truly balanced budget, the fact that 80 percent of in-state and 40 percent of out-of-state University of Connecticut students remain here after graduation and that the pension debt the state faces was a number of years in the making.
“I”™m bullish on the state of Connecticut,” Duff concluded.
Klarides also dodged the question, saying that a lot of Connecticut”™s woes are due to extravagant spending by Gov. Dannel Malloy and Democrats in the legislature. This was most evident during last year”™s lengthy debate over the state budget, she said, arguing that the original GOP-authored budget passed by the General Assembly by Republicans and a handful of Democrats ”” and vetoed by Malloy ”” was superior to the one that the governor ultimately signed.
Not addressed were continued reports that Klarides is considering a gubernatorial run of her own this year.
The two lawmakers also clashed over the state”™s arrangements in the current budget with the State Employees Bargaining Agent Coalition and the teachers”™ pension fund. The former was of particular irritation to Klarides, who noted that it awards salary and benefit increases to state workers after three years and continues state employee labor contracts to 2027. The end result, she said, is more wasteful spending.
“I don”™t know what we can do about that,” she said, suggesting that hiring a lawyer to redraw the contract could be one option.
As opposed to Duff”™s “bullish” declaration, Klarides said that she was not necessarily being negative, but realistic, about the state”™s business environment.
“We face tough decisions, and there is a difference between what we say and what we do,” she said.
Why is Gioia sugar coating the situation in CT? NY and MA are doing quite well; even RI has recovered. CT has fewer jobs now than in February 1989–nearly 30 years with ZERO job growth–and real output is below the level of 2004. CT has been in recession since 2008–and looks likely to continue to contract. The reality is that CT is an anomaly–the nation is doing well, the region is doing well–but NOT CT.
The drivers of this dismal performance go back at least to the 1990s, to CT’s failure to respond to the tectonic shift in global competition, to the emergence of the internet as a major driver, and to develop a coherent economic development policy. And I fear the reality is that CT is still not responding to the realities of the competitive environment, with the weakest IT infrastructure of any state in the northeast (e.g., a near absence of data centers), weak transportation infrastructure, poorly integrated labor markets, and still lacking a overarching vision for economic development.
CT is unlikely to change the trajectory when its business and political leaders seem unwilling and perhaps unable to talk about the situation, acknowledge its deep roots (no, Malloy didn’t create this mess), and point to the policies and initiatives that will shape a better, more promising future.