We’ve been hearing a lot recently — both in Maine and nationally — about a stalling economy. Unemployment remains stubbornly high. Consumers remain reluctant to open their wallets, and businesses remain equally reluctant to add workers.

Profits and cash are growing, but investment has stalled. Confidence is low, and uncertainty is high.

Everyone seems to be waiting for someone else to go first.

We’ve also been hearing a lot about taxes and government. Raise taxes on the rich so we can extend unemployment benefits and help local governments rehire teachers and maintain police forces. Or, keep taxes where they are to encourage more investment and hiring.

Increase government regulation of health care and banking to extend insurance coverage to more people and provide greater protection for our financial institutions. Or, get government out of the way and let businesses and consumers decide what they want and can afford.

In Maine, the debate centers first on the loss of “good” jobs, meaning the manufacturing jobs we used to have — full-time, secure jobs that paid good wages and provided benefits — and second, on the growing tax burden, meaning the high percentage of our income we pay in state and local taxes and the growing deficits we seem to face with each state legislative and town council session.

The latter concern has resulted in calls for tax cuts, service cuts and consolidation of services at the regional level.

The former has resulted in a rush to create clusters of new industries– renewable energy, broadband internet connections, biotechnology, telecommuters, the creative economy.

“If we just eliminate inefficient government and cut taxes,” the first group says, “new businesses will flourish, and we’ll create a whole new set of ‘good’ jobs.”

“If we just put more public investment into higher education, energy corridors, high-tech business parks, renewable energy research,” the second says, “we’ll create a whole new set of ‘good’ jobs.”

The problem with this formulation of our problem is that it links two problems that are really quite distinct.

Maine’s inefficient government and high taxes didn’t cause our economic decline.

Over the past generation, the opening of formerly communist and third-world countries to global trade and capital flows, coupled with the digitization of information and the creation of worldwide supply chains, have radically altered the industrial economic base on which Maine has relied since the 1840s. Good-bye to those “good” jobs.

The fact that Maine has nearly 500 municipal governments, declining school enrollments combined with rising school costs, and an 8.5 percent top income tax rate didn’t cause the global forces that have destroyed so much of our economy. And sharing tax assessors, consolidating school districts and nearly passing a tax reform won’t cure the effects of those forces.

Altering global economic trends is a task far beyond the scope of any governmental reform or combination of tax cuts Maine could possibly put together, no matter how drastic or insightful or efficient.

This is not to say that we don’t have to restructure our government and reform our tax code. Failing to do so will simply accelerate the disappearance of those “good” jobs and make our tax burden even greater and our government even more inefficient.

It is, rather, to say that governmental change is a necessary but not sufficient condition for economic change.

Maine could thrive in today’s global economy. We have one of the best spots in the world to live, work and raise a family.

We’re close to the world’s center of medical research and the world’s financial center. We have easy access to Europe. Millions come each year to visit and vacation.

But state and local government alone — no matter how efficient — can’t turn these and other assets into “good” jobs. That requires private investment, lots of it.

A thriving economy is like a prosperous farm — a combination of good soil and good cultivation. The job of government is to maintain and enrich the soil — educate workers, create and enforce fair rules, build and maintain roads, ensure efficient power and communication networks. And the job of business is to imagine the products and services of the future and invest in the equipment and people to make them.

A successful economy is a partnership, not a prizefight. It requires both sides to play their parts.

That’s why neither just cutting taxes nor just spending more public money will work.

Government alone is neither the problem nor the solution. It’s just one piece of the puzzle. 

Charles Lawton is senior economist for Planning Decisions, a public policy research firm. He can be reached at: [email protected]


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