Creating jobs in this jobless economic recovery is the priority for every politician of either party. It was President Barack Obama’s major goal during his State of the Union speech as it was for Virginia Gov. Bob McDonnell who gave the rebuttal that was televised nationwide.
Neither man seems to have much to offer in ideas, however. Besides stimulus spending, Obama wants tax credits for businesses, especially small ones, that hire new employees.
McDonnell’s ideas are a mish-mash of corporate welfare, the old familiar economic recruiting in the old familiar areas, a couple of strange plans and demands for oil and natural gas drilling offshore of Virginia in areas where there are no known, workable fields and whose efforts in the best conditions wouldn’t yield revenue for at least another decade. (for more, read my
commentary in Style Weekly)
McDonnell plans on framing a major jobs push around an initiative led Lt. Gov. Bill Bolling with a goal of creating $311 million in new revenue streams over five years and creating more than 29,000 jobs over two years.
To get there, McDonnell plans typical meat and potatoes projects such as boosting the bennies available through the Governor’s Development Opportunity Fund to attract relocating industries, a slew of expanded tax credits, easing up on capital gains taxes, boosting small businesses and increasing the percentage of state contracting in special rural and depressed area business zones. He backs more public-private investments and more biotechnology — everyone’s panacea for economic growth.
Curiously, the governor’s fund would offer goodies to such rich firms as Northrop Grumman which is thinking about relocating from Southern California to the greater Washington area. Not only does this give big firms special benefits, the idea is hardly new. Former Govs. Tim Kaine and Mark Warner reached into the goodie bowl to get defense contractor SAIC, Hilton Hotels, Volkswagen and Rolls Royce.
Other McDonnell ideas are a bit goofier. Miffed that an upcoming Disney movie about Secretariat, the champion racehorse reared in Hanover County, is actually being filmed in Kentucky, McDonnell wants expanded tax credits for any movie companies that spend at least $250,000 for production in Virginia. And he wants some of the tax from the sale of wine used to market Virginia’s growing but small wine industry. Speaking of alcohol, McDonnell’s plan to privatize state-run ABC stores would probably cut more jobs than it would create.
It remains to be seen how helping the tinsel and Chardonnay crowds will really address business sectors where Virginia is hurting most. According to recent Virginia Employment Commission data, the most stressed sectors are construction, manufacturing and information. Other laggards are finance, professional services and transportation.
Of all the state’s metropolitan areas, Richmond was the worst, next to Winchester, according to Employment Commission Senior Economist Ann D. Lang. Among the capital area’s losses are more than 12,000 well-paying jobs following the implosion of three marquee-name companies.
Among the dead are LandAmerica, fatally hurt by the subprime mortgage lending meltdown, computer chip maker Qimonda, which got caught in a global market squeeze, and retailer Circuit City, the victim of bad internal management. It isn’t clear how any of McDonnell’s initiatives would alleviate such damage or prevent it in the future.
Curiously, however, McDonnell is making a major deal about the iffy prospect of drilling for oil and natural gas off the Virginia coast. Taking a chapter from Sarah Palin’s “Drill Here, Drill Now,” campaign playbook, McDonnell made offshore drilling a big part of his campaign.
He hadn’t even been sworn in as governor when he fired off a letter in December to Obama’s Interior Secretary Ken Salazar urging that the federal government hold a lease sale in 2011 of a triangular tract of underground ground about 100 miles off the Eastern Shore. Citing a study by Old Dominion University president James Koch in 2005, McDonnell believes that enough oil and gas could be found to create 2,578 jobs, $7.84 billion in capital investment, payrolls of $644 million and $271 million in state and local taxes.
As McDonnell put it in his address: “In Virginia, we have the opportunity to be the first state on the East Coast to explore for and produce oil and natural gas offshore. But this Administration’s policies are delaying offshore production, hindering nuclear energy expansion and seeking to impose job-killing cap and trade energy policies.”
There are a few problems with McDonnell’s statement. Obama is planning on increasing the level of federal loans guarantees for new nuclear reactors. Some form of cap and trade is inevitable whether McDonnell likes it or not. Cutting carbon emissions may kill some jobs, but it will create others in “green” technologies. Curiously, power firms Duke and Dominion back some version of cap and trade.
Most problematic is McDonnell’s lunge for offshore. First, no one really knows how much petroleum is in the area, says Karen Matusic of the American Petroleum Institute. Koch, the past ODU president, says that his data showing the jobs was actually a quickie extrapolation and more review is needed. McDonnell wants state revenue from oil production to help solve transportation issues, but even in the best case, oil wouldn’t flow until nearly 2020. And, a number of other interested parties, including environmentalists, the New Jersey seafood industry and former high-ranking naval officers, have all taken issue with drilling off Virginia.
Even though Obama pushed offshore oil and gas in his State of the Union speech as well, federal officials have postponed the lease sale past 2011, drawing McDonnell’s wrath. And, earlier attempts to explore off the Mid-Atlantic have come to nothing. In the late 1970s, for instance, oil patch construction firm Brown & Root leased large land tracts near Cape Charles to fabricate giant offshore drilling platforms. The land eventually became a luxury golf course after no oil was found and a moratorium on offshore drilling was begun in 1983.
If McDonnell wants to create jobs, he might consider playing to the state’s strengths. The fastest growing job sector, according to the employment commission, has been in federal jobs.
That has its own ironies. A staunch conservative, McDonnell says he wants “limited” government and tough curbs on spending. Yet Virginia’s economic ace in the hole is its proximity to Washington and rich mix of federal defense and security employment. Such jobs mitigated recession damage in Northern Virginia and Hampton Roads. Richmond’s woes would have been much greater had it not been for expansions at Ft. Lee in Petersburg.
That brings up another McDonnell irony. He loves to advertise his Army service and that of his daughter while lashing into the typical, right-wing bug-a-boo of the evil federal government.
It seems that the new governor has a few things to sort out. For ideas on winning jobs, he’s presenting retreads and goofballs. Nothing appears to go to the heart of Virginia’s unemployment problem.
Peter Galuszka
