What's Wrong With Georgia?

http://www.theatlantic.com/business/archive/2015/01/whats-wrong-with-georgia/384101/

Alana Semuels Jan 2 2015

•••••

Georgia, home to Fortune 500 heavyweights such as Home Depot, UPS, and Coca-Cola, had the highest unemployment rate in the nation in August, September, and October. With a November rate of 7.2 percent, the state was narrowly edged out by Mississippi’s 7.3 percent (December statistics won’t come out until mid-January).

This may seem surprising, since Georgia was named the best state to do business in both 2014 and 2013 by Site Selection magazine, largely because of its workforce-training program and low tax rates. Nathan Deal, the state’s GOP governor, handily won reelection in November against Jimmy Carter’s grandson by speaking about Georgia as a job magnet.

But those who follow the state’s economy say the state’s troubling economic figures are directly related to Georgia’s attempts to paint itself as a good state for corporations.

“This is what a state looks like when you have a hands-off, laissez-faire approach to the economy,” said Michael Wald, a former Bureau of Labor Statistics economist in Atlanta. “Georgia is basically a low-wage, low-tax, low-service state, that’s the approach they’ve been taking for a very long time.”

The nation's unemployment rate in November, by contrast, was 5.8 percent, which was also the November jobless rate of Georgia's neighbor and occasional rival, North Carolina.

Governor Deal has emphasized time and again that he believes it is the role of government to get out of the way and let the private sector stimulate the economy. Georgia was among the first states to cut back the duration of unemployment benefits available to its residents to 18 weeks from 26. The state has slashed $8.3 billion from public-school funding since 2003 and passed eligibility requirements for a state financial-aid program that caused a dramatic decline in the number of students in technical colleges (some of those requirements have since been rolled back).

The state also passed a sweeping tax-reform bill in 2012 that eliminated some sales taxes and broadened exemptions for the agricultural industry that small towns and counties say have wreaked havoc on their revenues. Some counties are seeing unemployment rates that indicate the recession is far from over, including Chattahoochee, with an unemployment rate of 14.4 percent and Telfair, with a jobless rate of 13.3 percent.

Areas surrounding Atlanta are faring better, with Fulton County, where Atlanta is located, posting an unemployment rate of 7.3 percent, and DeKalb seeing joblessness drop to 6.8 percent.

•••••

Griffin residents such as Richard Joiner say they haven't seen much improvement in the economy. Joiner, 46, worked for two decades as a machine operator in the field of plastic extrusion. When he got laid off during the recession, he found a job packing ready-made salads, but then work there slowed down too. Joiner did what economists say workers like him need to do to get ahead in this economy—he went back to school for video and film production, aware that shows such as the Walking Dead were increasingly filming and producing in towns like his. But then the state changed the rules for unemployment benefits and Joiner lost his source of income, so he was forced to drop out of school and seek work.

Without any money or prospects, he was evicted from his apartment, so he was forced to move in with his mother. His grown children had to find somewhere else to live. He has no car, so he walks three miles to the Griffin Career Center to search for a job on the computers there.

Joiner still owes $13,000 in student loans, and hasn’t been able to find any sort of work.

“This may be a good place for companies, but not for people actually looking for work,” he told me, sitting in the waiting room of the Career Center. “Companies may come here for the tax breaks, but they’re not actually bringing jobs for the people who live here.”

What’s frustrating about Joiner’s situation is that he’s doing everything right—going back to school, trying a new industry, looking for work wherever he can find it. But without the resources that have long been in place for people like him, he’s struggling.

Many other students in Georgia have dropped out of school after changes to funding for higher education, according to the Georgia Budget and Policy Institute. Changes to the lottery-funded HOPE grant program in 2011 led to a decline of 38,000 students enrolled at the state’s technical schools, said Alan Essig, the institute’s director (John Oliver has recently explored the folly of using the state lotteries to pay for education). Even without scholarships, higher education in Georgia is getting more expensive. Tuition and fees at Georgia public universities have increased 67 percent since 2008; at technical colleges, they’ve increased 65 percent, according to the Georgia Budget and Policy Institute.

The decline in education funding may already be directly impacting the state's economy. In December, the state High Demand Career Initiative released a report finding that some employers, including Home Depot, weren't able to find enough high-skilled workers to fill available jobs. They were forced to hire out of state, the report found.

Only about 42 percent of Georgia's young adults have earned a college credential, although more than 60 percent of jobs in the state will require a college certificate or degree.

“It’s a misconception that these so-called business-friendly policies are closely related to stronger economic growth,” said Wesley Tharpe, an analyst with the Georgia Budget and Policy Institute. “A state’s economy depends on an educated workforce, transportation infrastructure, public safety, reliable street cleaning, and snow removal.”

Transportation is a problem in Georgia, too. The state ranks 49th in the nation in per capita transportation funding, and Atlanta’s commutes are famously terrible. The state could have borrowed funds for transportation improvements, said Wald, but instead decided in 2012 to ask voters to pass an increase in sales tax to fund transportation projects. It was defeated handily at the ballot box.

•••••

Georgia isn’t the only state to find that lowering taxes in an effort to jumpstart the economy can backfire. Indeed, one of the biggest issues dividing Democrats and Republicans during the recession was whether the Keynesian approach of increasing government spending in a recession best stimulates the economy, or whether governments should get out of the way and allow businesses to do the work.

Kansas passed sweeping tax cuts in 2012, only to see protests over its low levels of education funding and a debt downgrade to boot. Ohio did away with its estate tax and scaled back income taxes, forcing many local governments to reduce services. Tax cuts heralded by Governor Scott Walker in Wisconsin have led to budget shortfalls that have even some Republican legislators worried.

“Sometimes ideological experiments bring unintended outcomes," Oklahoma Treasurer Ken Miller told the Wall Street Journal in June, about Kansas’s experiment.

•••••

A few years back, I visited a company in Griffin that was going to benefit from a $50 billion pledge made by Walmart to buy more products manufactured in the United States. The company, 1888 Mills, had won a contract to supply their Georgia-made towels to 1,200 Walmart stores. But the factory the company showed me was mostly machines, with a few people to run them. The Walmart contract created only about 35 jobs, if that, at 1888 Mills. Even if manufacturing does come back to Georgia, and to Griffin, it won’t create many jobs.

•••••