Republican Gov. Nathan Deal and  gubernatorial challenger Democrat Sen. Jason Carter pause to chat  after squaring off for their second debate during Oct. 19. The debate, sponsored by the Atlanta Press Club, was a part of the Loudermilk-Young Debate Series and was held at Georgia Public Broadcasting. 
Photo: Curtis Compton
Photo: Curtis Compton

Governors and the economy: How much credit, blame?

The incumbent says the economy is strong, his main challenger says it is not. Both say that the governor’s office is where credit or blame belongs.

When they go to the polls Tuesday, voters will make their own call on both the economy and the candidates – but despite the pivotal role of the economy in the campaign, broader questions have gone largely undiscussed:

How much effect can any governor have on the economy? And how can he or she have the most impact?

“Governors affect their economies in many ways, although the effects are hard to measure and may even take years to evidence themselves,” said Donald Boyd, senior fellow at the Rockefeller Institute of Government, which aims to improve governmental performance.

True economic improvement is a long-term slog. A strong plan pushes in three directions, he said:

— Infrastructure, such as roads, bridges, water and broadband. “That can, if done well, make the private sector more efficient,” Boyd said.

— Education and training. “That has the potential to increase the productivity of the workforce and attract businesses, and (has) the potential to raise household incomes.”

— Taxes that are fair, broadly based and low, he said.

No governor has full control.

A state in the 21st century is part of the global flow of commerce. And there are times when an economic tsunami is going to swamp the local economy, said William Galston, a senior fellow at the Brookings Institution, an ideologically moderate think tank.

“There are some national trends that governors cannot resist. It doesn’t really matter how smart their policies are.”

But smart is better than the alternative. And while every state and state government has finite resources, perhaps the governor’s prime role is to pick priorities, to look for the biggest economic bang for those bucks.

So while they may get tagged with more blame than they deserve – and take more credit than they ought – governors are not helpless, said economist Robert Lynch of Washington College.

“Unquestionably, governors can influence the economic conditions in their states. Over the long-term, we can conclude that their decisions do make a difference.”

But how much and how soon?

Some things happen quickly. For instance, the biggest financial splash comes with the state budget, which the governor’s office typically crafts and then submits for legislative approval. He gets to frame the debate and then can lobby – or bully – the legislature to spend money or not, to raise taxes or cut them, to support innovative programs or slash their funding.

The right policies means a chain of improvements that will make a state better for doing business, Brookings’ Galston said. “Those characteristics don’t emerge naturally. All require intelligent government action.”

The governor can take some action without outside approval. Like economic development policy: which trade missions to take, when to offer incentives to companies – and how much.

And a governor can shape a state’s image simply by talking.

That applies to controversial policies, like recruiting companies – or “poaching” as it is called by the states that lose the companies. Gov. Rick Perry in Texas, for example, has traveled to California and elsewhere, dangling incentives for firms who might consider moving.

But talk can also be a cheap way to support local firms, said Ross DeVol, director of regional economics at the California-based Milken Institute, a market-oriented think tank.

“A governor can use the bully pulpit to retain or attract businesses,” he said. “Companies want to feel that government is paying attention to their needs.”

When a company executive – or a recent college graduate – is looking for a new home, image matters.

And if perception is important, there is no one better positioned to sell the state than the governor, said William Collins Jr., a partner in Burr & Forman and a former city councilor in Sandy Springs who has supported Gov. Nathan Deal’s re-election bid.

“The governor is the chief executive – the CEO of the state. Just as a CEO controls the direction of a company, directly and indirectly, and the way it is perceived, a governor does too.”

These days, the luring of a footloose company generally involves a lot more than talk. Georgia spent hundreds of millions of dollars to persuade Kia to build an assembly plant near West Point. Alabama tossed huge amounts of money to get Mercedes and Honda factories. South Carolina poured millions into attracting BMW.

The recent wave of new plants started with Kentucky pouring more than $100 million in tax breaks into a package that convinced Toyota to build an auto assembly plant, said Sujit M. CanagaRetna, fiscal policy manager in the Southern Office of the Council of State Governments.

That project changed Kentucky, he said. “That had been a tobacco-dependent state and now the auto industry has spread like kudzu through the region.”

But that growth took decades – like many of the effects of a governor’s policies.

“Most of the impacts do not happen right away,” said economist Lynch. “Investment, tax cuts, all sorts of policies will take two, three, five years or longer to have an impact.”

Of course, the long wait for results makes it hard for a governor to use those policies at the polls.

It has been more than two decades since establishment of pre-kindergarten programs in Georgia. Studies show, Lynch said, that such programs reduce crime, increase graduation rates and improve worker productivity.

The governor who oversaw the start of pre-K, Zell Miller, won’t benefit at the polls this year: he left the office in 1999.

This year, Georgia’s gubernatorial campaign has hinged on a tale of two government surveys. One is bemoaned by the challenger, Democrat Jason Carter – the high unemployment rate. The other is touted by the incumbent, Republican Deal – the job creation number.

Whichever is the better measure, jobs are key to how voters feel about the economy, the experts say.

Despite that, few governors have a job-centric strategy, argued Penny Lewandowski, vice president at the Edward Lowe Foundation, a Michigan-based nonprofit research group focused on entrepreneurialism.

Most focus on giving tax breaks to companies recruited from afar, but the best – and least expensive – growth comes from within the local economy, she said.

Governors would get the largest impact by helping what the foundation calls “second stage,” or emerging companies – firms that have 10 to 99 employees and are eager to grow, she said.

Between 2009 and 2013, less than 9 percent of Georgia businesses were in that group, but they accounted for more than 34 percent of the jobs, she said.

“If I had real influence on the governor, I’d measure job growth in emerging companies all the time.”

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