Maine and the rest of the nation are still reeling from the worst recession since the 1930s. As we think about how to create jobs and to restore and expand prosperity, it is important to understand what caused the recession.
We create the economy we have through the policy choices we make.
We create it through our investment choices. Educational attainment in the workforce is the most important driver of economic growth and average incomes, and we decide whether to make vital public investments in our people’s knowledge and skills. Research and development is also essential to promote innovation and to create the jobs of the future, and we decide whether to make those public investments. We decide whether to invest in energy, transportation and other infrastructure to lower business costs and improve quality of life. We decide whether to invest in the other public structures and services that are the foundation of our prosperity and of a secure middle class.
We also create our economy through the rules we set for economic activity, our decisions about enforcement, and the system of incentives we create.
Maine is suffering because of poor choices made at the federal level. Three decades of financial deregulation paved the way for the reckless behavior of the Wall Street banks and financial institutions that melted down our economy. For years, the federal government refused to oversee the financial industry’s activities or to protect the public. Instead of fostering investment in real job creation, the federal government allowed Wall Street to make its profits on rampant financial speculation. The federal government effectively chose an economy based on the roulette wheel, rather than one based on the manufacturing plant and the laboratory.
Unfortunately, Wall Street crashed the national economy at a time when our country had fallen far behind on investments in education, research and development, infrastructure and so many other vital public priorities. The recession’s severity resulted directly from this combination of poor regulatory choices and underinvestment in our people, communities and infrastructure.
Maine’s budget crisis in recent years has in turn been a direct result of these unfortunate national policy choices. State governments across the country are experiencing similar shortfalls, many of them much worse than Maine’s, because the recession caused all of their revenue sources to fall simultaneously. This happened a time when family and community needs rose substantially.
States are experiencing revenue crises because the recession caused all of their sources of income to plummet simultaneously ”“ at the very time when families and communities most needed help.
Maine needs to use every tool at its disposal to maintain investment in the public structures that are the foundation of our economy. In the short term, public investment is needed to create jobs and get the economy moving again. In the long term, we can never have a prosperous future if we make short-sighted cuts to education, research and development, infrastructure and other vital public goods.
It is unlikely, however, that Maine or any other state can make needed investments without help from the federal government. Much more than individual states, the federal government can borrow or raise revenue in the short term to stimulate the economy and build a foundation for long-term economic growth.
The American Recovery and Reinvestment Act took a step in the right direction. Maine lost 30,000 jobs in the recession, but without ARRA we would have lost 43,000. A number of the jobs ARRA preserved were in vital public services like education, and in public programs that create high-paying jobs and lower energy costs by promoting energy efficiency.
ARRA funds are about to run out however, and in a few months states will again be facing revenue shortfalls and the temptation to make short-sighted cuts. The federal government needs to continue robust investment in the public structures that make our communities and economy strong.
Most of us weren’t alive for the Great Depression, so few of us have ever experienced an economic crisis like this one. As Congress considers everything from tax policy to energy policy in the coming months, it should be mindful of the lessons of the past and of the magnitude of the current crisis. Robust public investment in vital public services and the key engines of our economy has always allowed our country to weather recessions and emerge stronger. While Maine is a victim of forces beyond its borders or control, our two U.S. Senators ”“ Olympia Snowe and Susan Collins, have an opportunity to ensure that the federal government repairs the damage it has done, and builds a strong foundation for the future.
”“ Clifford Ginn is Co-director of Opportunity Maine, a policy and advocacy organization promoting innovative investments in education, workforce development, clean energy and other promising sectors of Maine’s economy.
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