Iowa Republicans still wrong on the economy and I-JOBS

The business network CNBC threw a wrench in the Republican sound bite machine yesterday by ranking Iowa the fourth best state in the country for doing business. Click the link to read Iowa’s scores for 2008 and 2009 in the ten different categories CNBC considered in compiling these rankings. (Iowa ranked ninth overall in 2008.) You can also watch the CNBC segment here.

Iowa improved in almost all of CNBC’s categories from 2008 to 2009. The biggest improvement was in the “economy” category, where Iowa went from 29th in 2008 to 4th in 2009, even as the national recession deepened. While the recession is hurting Iowa along with every other state, we are doing reasonably well under the circumstances. CNBC also moved Iowa up quite a few notches under “technology and innovation” and “transportation and infrastructure.” We have a ways to go to reach the top-ranked states in those areas, which is why the Culver administration is smart to be investing heavily in our infrastructure with the I-JOBS bonding program.

Speaking of I-JOBS, now that most of the bonds have been sold, money is starting to be awarded:

Every city and county in Iowa will receive a portion of $45 million in additional funding under I-JOBS for local street and road projects. These funds will begin being distributed to cities and counties starting next Tuesday.

In addition, $50 million in I-JOBS funds will improve 55 state highway system bridges in 29 counties across the state. Projects in the metro Des Moines area include two I-35 bridges over the Iowa Interstate Railroad, the Iowa 17 bridge over the Des Moines River, and U.S. 69 bridge over Scott Avenue.

Scroll to the bottom of this page to find links to pdf files containing a “list of I-JOBS road funding amounts for all Iowa cities and counties, as well as bridge projects.”

Meanwhile, Iowa Republicans continue to proudly oppose the I-JOBS program. Today Senate minority leader Paul McKinley and others are triumphantly Twittering about an article in the Des Moines Register: Economists question impact of I-JOBS plan. My response is after the jump.

Des Moines Register reporter Jason Clayworth’s article quotes three economists on I-JOBS:

“For the most part, what you’re probably doing here is moving projects forward, which isn’t a bad thing because this is where you have unemployed workers,” said Dean Baker, co-director for the Center for Economic Policy Research in Washington, D.C.

However, Raymond Keating, chief economist for the Small Business and Entrepreneurship Council, said the plan is likely a negative because it increases government spending. A more productive economic stimulus would be to lower taxes for businesses, said Keating, whose group has more than 70,000 members across the nation.

“The bottom line for Iowa is this: In the best-case scenario, it won’t make any difference. In the worst case, it’s going to make things worse,” Keating said.

Culver and his staff have projected various estimates of how many jobs the plan would create, largely based upon changes done to the proposal as it made its way through the legislative process. The latest projection is 22,000 jobs to be retained or created by the program.

Iowa State University economics professor Dave Swenson estimates the number would be closer to 4,050. While he agreed with Baker that the plan will likely help Iowa on some level, he doesn’t believe it’s to the extent that I-JOBS advocates have projected.

“This promises to make a dent in unemployment, but it’s an extremely small dent,” Swenson said.

Baker is only partly right. The road and bridge money from I-JOBS will move forward projects that would otherwise have been done in future years. Ask anyone in the construction industry whether it matters to them that projects are being put on a faster track. Construction employment has suffered badly because of the housing slump and the tough times for businesses that would otherwise be remodeling and expanding. If we refused to borrow to move some of these projects ahead, the employment situation would be worse.

What Baker may not realize is that a lot of the I-JOBS money will fund projects that probably wouldn’t ever happen without this borrowing. Where would we find $45 million in state, county or city budgets for flood reconstruction projects? How would we pay for installing sewer systems or securing federal funds to expand passenger rail in Iowa? If we adopted the “pay as you go” approach Republicans advocate, buildings damaged last year in Cedar Rapids and Linn County would not have the money for reconstruction. Iowa would continue to have 550 unsewered communities as well as outdated sewer systems dumping unnecessary levels of pollution into our waterways. Our extreme aversion to borrowing (Iowa ranked 48th in public debt per capita before I-JOBS, 46th after) is one reason our infrastructure is in such bad shape now.

Keating works for a conservative organization that promotes lower taxes for business as the solution for every problem. He is completely wrong to claim that lowering business taxes would be more effective economic stimulus than government spending. Don’t take my word for it; read this analysis by Mark Zandi, chief economist for Moody’s.

I greatly respect Swenson and will assume for the sake of argument that his job creation estimate for I-JOBS is in the ballpark. Focusing on the short-term job creation numbers, Clayworth’s article does not acknowledge the long-term benefits of doing some of these projects. It’s like BruceMcF wrote in this piece; good infrastructure investments can help generate economic activity many decades after the fact.

Compare I-JOBS to the Republican-approved economic development plan of Governor Tom Vilsack’s administration: the Iowa Values Fund. I doubt the hundreds of millions of state dollars we spent on that corporate welfare ever created or saved even 4,000 jobs. Nor do we have lasting improvements in infrastructure to show for the program. There’s not even much evidence that Values Fund money influenced corporate decisions on employment in Iowa. At least with I-JOBS we know what the money spent will accomplish.

It doesn’t pay to listen to the modern-day “Party of Hoover” on economic policy.

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