Gov. Scott stopped the bleeding; now the hard part

By Rob Roper

Gov. Phil Scott came into office pledging to put Vermont’s wounded economy back on the right track. After one legislative session, he gets high marks for accomplishing an important first step in saving the patient: stopping the bleeding. The new governor drew a line in the sand, threatening to veto any new taxes or fees and succeeded in getting the legislature to go along. But stopping the bleeding alone isn’t a cure. Now it’s time to start the real surgery to repair the damage.

In the future, the legislature is not likely to be as cooperative as they were on taxes, as the standoff over teachers’ healthcare contracts demonstrates. Altering the status quo, particularly where special interest groups come into play, is not something they seem willing to contemplate.

The governor is laying the groundwork, at least rhetorically, for some positive reform by reminding Vermonters relentlessly that we are losing six people from our workforce every day. Our State Domestic Product is half that of the nation as a whole at an anemic 0.8 percent.

We’re not alone in this. The Wall Street Journal recently ran an article highlighting the region’s worker shortage brought on by a full-blown demographic crisis. Employers can’t find local people to fill jobs, and they can’t convince people to move here either. Faced with this reality they leave, making the cycle worse.

To address the issue, Northeast states have taken a number of actions — or are considering them. Maine started a tax-incentive program several years ago to keep newly minted college graduates in the state. New Hampshire Gov. Chris Sununu has proposed a scholarship program to help students attend college and training programs in the state. He is also pushing for full-day kindergarten to help attract workers with young families.

Sound familiar? Giving bigger subsidies to college kids in hopes that they’ll stay in state? Expanding subsidies for early education in hopes of attracting young parents? Two lessons for our elected officials: Other states are doing these things too, and it’s not working for them either. And, because other states are doing these things too, our doing them creates zero competitive advantage for Vermont. We need to think bigger, and we also need to think outside this box.

During his campaign, Gov. Scott laid out an aspirational goal to increase Vermont’s population to 700,000 in the next decade, well over a 10 percent increase from our current level. That’s a huge undertaking. Achieving even a fraction of this, baring some natural or man-made disaster triggering a mass migration, will require major changes in the way Vermont operates, what we offer and how we are perceived. Mildly tinkering with the status quo won’t do it.

So, how do we break away from the pack? Where other states are zigging — betting more and bigger government programs are the answer — Vermont should zag — offering lower taxes and less government interference. Become an oasis of unfettered, low-cost opportunities in a sea of high taxes and bureaucratic red tape.

The major hurdles employers cite in the hiring process is the lack of affordable housing for employees, lack of job opportunities for “significant others,” and, of course, the high taxes and regulations that contribute to the overall high cost of living.

The answers to these issues are, of course, making it easier and less costly for people to build houses, making it less of a hassle and less costly to hire workers, and finding ways to dramatically lower the tax burden.

And here is where the legislature will be an obstacle to future progress. For some examples, they refused to buck the teachers’ unions to reform the bargaining process for health care benefits and save taxpayers $26 million. It doesn’t get much easier than that! They refuse to buck big labor to pass meaningful independent contractor reform. They’ll waive the Act 250 process for politically connected renewable energy producers, but not for other employers or home-builders.

Contrarily, as we look ahead to the 2018 legislative session, the House and Senate leadership’s priorities are passing a payroll tax to cover a new family leave benefit, and increasing the minimum wage to $15 an hour – two policies that will make it more cumbersome and expensive to hire new workers.

Gov. Scott has skillfully applied some clamps and bandages to the ailing patient. He’ll need a lot of political capital and support when he calls for the scalpel.

Vermont is still crashing.

Rob Roper of Stowe is president of the Ethan Allen Institute, a public policy research and education organization focused on free-market policies.