New Democrat Update - February 2002
AN ECONOMIC AGENDA FOR COLORADO
Since his election in 1998, Republican Gov. Bill Owens has never articulated any coherent, comprehensive economic policy. Instead, his administration's budget and tax proposals have only focused on the alleged need to get rid of large and apparently perpetual state budget surpluses (obviously no longer a problem).
Even the current economic slowdown did not motivate him to offer a strategy in his State of the State address last month. He and his fellow ideologues continue to say nothing about how they believe the economy grows and what state government's specific responsibilities should be in promoting growth.
Interestingly, Owens had to discard an old Republican supply-side economics favorite - cutting taxes. His earlier irresponsible budgetary policies ruled out that option. That misguided strategy also prompted Standard & Poors to put Colorado on a "negative credit watch," possibly costing state taxpayers millions of dollars in higher interest costs.
Supply-side economics has failed miserably because it focuses on the old economy factors - capital and labor quantity, not the much more important New Economy factors of capital and labor quality. Even if one were to grant that the supply of capital and labor is the key, it was never clear why reductions in personal tax rates, for example, would stimulate companies to develop or adopt technologies leading to higher productivity.
Today's tough economic times require proactive state and local strategies focused on creating jobs and boosting personal income. Tomorrow's jobs will come from fast-growing entrepreneurial firms, not from the small number of business relocations.
New Democrats believe Colorado's economic engine can be reignited with the formula that created the boom in the first place - fiscal discipline and investment in Colorado's people. As part of a fiscally responsible budget, a comprehensive economic agenda should include education (from early childhood to university research), child care, lifelong learning, "smart growth" strategies, and supports for innovation and entrepreneurship. These critical public responsibilities will give citizens the tools they need to succeed in the New Economy.
Fiscal discipline means meeting TABOR's annual spending increase limitations, after adjusting for inflation and population growth. However, population growth throughout the 1990s was significantly underestimated, preventing the state from making the investments necessary to support those new people. Voters understand and expect those funds to go into an already overburdened education and transportation infrastructure, key elements of any state's economic strategy. Growth must pay its own way.
New Democrats should support Chris Romer's detailed agenda to fix the TABOR formula, stop the legislature from playing budgetary games with taxpayer refunds, implement long-term planning, and establish a fiscally responsible rainy-day fund.
Improving the economic well-being of Coloradans also means focusing on increasing their productivity. That, in turn, requires boosting technological innovation and increasing the education and skills of the workforce to use the technology effectively. That's why it is so important to provide more key skills training and nurturing a strong research and development (R&D) infrastructure.
For example, the state can increase the number of scholarships for students attending public or private technical schools. A $300 state tax credit could cover the balance of a student's community college tuition not covered by the federal Hope Scholarship tax credit. The state tax credit should be available to all students from two-parent households with incomes under $100,000 and single-parent families with less than $50,000 in annual income.
Incentives should be provided for the creation of math and science charter high schools, specifically focused on serving disadvantaged students. K-12 education must give students the math and science skills they need to succeed in the New Economy.
To spur more innovation in the private sector, Colorado should modernize its very limited and ineffective R&D tax credit and expand it to all companies (currently only businesses in enterprise zones qualify). The credit should be an offset to insurance premiums and franchise taxes, as well as income. Royalties from high-tech products and gains from stock options should be tax-exempt.
According to a federal study, "for every dollar lost in tax revenue, the R&D tax credit produces a dollar increase in reported R&D spending, on the margin." A mere one percent increase in research investments increases productivity 0.23 percent per year. And increased productivity boosts people's personal incomes and spurs the creation of other jobs. High-tech jobs pay over 75 percent more than non-high-tech jobs.
In the long run, these and other economically sensible initiatives will boost the state's economy and government revenues, more than paying for themselves. If these measures cost revenues in the initial years, the governor and legislature can make up the difference by eliminating the hodgepodge of special-interest state tax breaks that are not in the public interest, drag on the economy, unfairly shift the tax burden to others and unnecessarily benefit people who are doing quite well without them.
Colorado needs a comprehensive and modernized New Economy agenda. Without it, the result will be low productivity, stagnant living standards, and reduced opportunity for Coloradans.
RED VS. BLUE
Anyone who watched the razor-thin 2000 presidential race will never forget an electoral map covered mostly in red with some columns of blue. The red states, largely in small towns within the heartland, went for President Bush. The blue states, predominantly in big cities along the coasts, voted for former Vice President Gore.
David Brooks, senior editor of the Weekly Standard and a PBS commentator, recently wrote an in-depth and insightful piece about the subtle but very important political differences between "Blue America" and "Red America." Here are two:
Economic differences do not explain the divide. People in so-called, less wealthier Red America do not compare their income or social status with New Yorkers - the comparison is with their own immediate neighbors. That explains why Gore's message of "The People vs. the Powerful" failed so miserably in the heartland.Red American residents are experiencing many of the same social problems as the rest of the country. However, they are not interested in waging an all-out Pat Buchanan-like culture war.Closer to home, this analysis might apply to statewide politics. A presidential electoral map of Colorado counties is also a sea of red with isolated spots of blue in some population centers (Adams, Boulder, Denver, Pueblo) and small Democratic enclaves.
Democrats can do better in the "Red" by emphasizing an economic agenda (see above) that will bring "knowledge jobs" to all parts of the state. Just as important, our party's leaders must strongly emphasize mainstream, values-based positions on cultural issues.
That agenda will result in a progressive majority coalition and make Colorado an even better place to work and live.