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Who Says That Business as Usual Makes Good Business Sense?
Debunking Myths About Louisiana's Economy
Myth: Our economic development policies work.
From 1983 to 1995, Louisiana's employment growth was less than half of the U.S. average. A study by the U.S. Department of Labor showed that between 1982 and 1995 Louisiana gained 250,000 fewer jobs than it would have if the state's economy had grown at the national pace. Only 20,000 of these missing jobs were linked to oil and gas production. Louisiana lost the remaining 230,000 jobs because our other industries under performed relative to competitors elsewhere in the U.S.
Sales and income tax receipts have increased in the last two years, thanks to a robust national economy. In comparison with other states, however, Louisiana is still at the bottom of the economic barrel.
Myth: Overzealous environmentalists cost our state jobs.
The number of workers losing their jobs through mass layoffs due to environmental protection is only about 0.1% of the total number of layoffs each year. In fact, many studies have shown that states with tight environmental controls create more jobs than states with lenient regulatory systems.
Myth: Louisiana industries have eliminated all the pollution they can.
Although Louisiana industries have reduced their emissions in the last 10 years, they still pollute far more than their counterparts in other industrialized states. According to 1995 Toxics Release Inventory data, New Jersey 's manufacturing sector produced an average of 11 pounds of pollution per job, Texas's manufacturing sector produced 213 pounds, and Louisiana's produced 981 pounds. The same corporations create emissions in all three states, but the level of environmental enforcement differs. Louisiana doesn't require corporations to run clean operations here, so they don't.
Myth: Oil, gas, and chemical industries provide most of the jobs in Louisiana.
The oil, gas, and chemical industries employ about 100,000 people or 5% of the workers in Louisiana. Because their growth rates are stagnant or declining overall, these industries haven't been a steady source of new jobs in three decades.
The recent surge in offshore oil exploration is providing some new jobs in Louisiana, but experience teaches that this mini-boom is only temporary. When the boom turns into a bust, jobs and local businesses will go up in smoke, just as they did in the mid-1980s.
Myth: Industrial subsidies are the basis of sound economic development.
Business tax reductions don't deliver much bang for the buck. A 1997 study published in the New England Economic Review showed that even a large industrial tax cut of 10% only raises economic activity by 2%.
Myth: Our industrial subsidy program works. Firms that receive tax breaks pay back the people of Louisiana.
We give most of the Industrial Tax Exemption Program subsidies to petrochemical corporations that create few new jobs. According to the Louisiana Department of Economic Development, only 10% of the state's corporate tax breaks have generated permanent jobs. Under this program, the cost per permanent job in the chemical industry is approximately $64,000, and the cost per job in the oil refining industry is approximately $89,000. Louisiana's per capita income, by contrast, is approximately $22,000.
We fund these tax breaks at the expense of parish governments. Each year, approximately $350 million that would have been invested in local schools, roads, and other services is funneled into industrial tax exemptions. In 1995, for example, the exemptions removed $169 million from school programs. Louisiana is the only state that allows business tax exemptions to affect school revenues.
We also don't invest in other kinds of businesses that could create better economic opportunities for our state. Businesses focusing on research, environmental remediation, alternative energy sources, and tourism are all areas of strong potential growth. But we can't capitalize on this potential as long as we place most of our eggs in the petrochemical basket.
Myth: Without generous subsidies, industry already in Louisiana will move out of state.
Louisiana's industries have a good deal here and they know it. Besides enormous tax breaks and low pollution control standards, they have access to the Mississippi River, globally important ports, an extensive pipeline network, and the oil and gas production just off our coast. Corporate leaders also know that siting a new petrochemical facility in the U.S. is extremely expensive and a public relations nightmare.
Of course, corporations can and do move overseas, but if Louisiana wants to win bidding wars with third world countries we must act like a third world country ourselves. This means gutting our environmental and labor regulations and turning back the clock on progressive development.
Myth: But Louisiana IS a third world country.
This is the most dangerous myth of all. It prevents us from making the most of the assets that our state has in such abundance. As long as we see ourselves as an impoverished backwater, corporations and investors will see us that way too.
It doesn't have to be this way. We can apply the economic development lessons learned elsewhere and secure good jobs and a high quality of life for our citizens. The experiences of other states show it can be done. The question is, do we have the will to make it happen?
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