CRI Focus Areas

Floundering in a Sea of Anecdotes


The data shows that Delawares economy is still floundering. While employment is starting to pick up, the unemployment rate is stuck at twice the historic average. And this despite the labor force dropping by more than 6,500 persons since the beginning of 2013. Transfer payments remain the driving component of slow growing personal income. The strain on Medicaid and food stamps continues to rise. When asked about the states economy, the Governor typically replies with a string of anecdotes about Delaware companies that have recently added jobs or started up in the state. Certainly such anecdotes are commendable, and it is a rightful concern for a Governor. Yet it is like talking about a new dining room set while ignoring that the house is infested with termites. According to the U.S. Department of Labor, Delaware adds 7,000 to 8,000 jobs every month. Almost 80% of these jobs come from the expansion of existing businesses and the remainder from start-ups and relocations. Simultaneously, Delaware loses over 7,000 jobs every month from existing businesses reducing their work forces or simply shutting the doors. The headline grabbing economic development initiatives pale in the face of the underlying conditions that determine whether businesses will invest and grow in Delaware. Over the past decade the Delaware Strategic Fund has given out over $200 million in grants and loans. During the same time period Delaware businesses have invested over $57 billion. In recent years the state has not sent encouraging signals to Delaware businesses. During the recession the state raised the gross receipts, personal income and franchise taxes and now refuses to roll the increases back. Delaware has one of the highest corporate income tax rates in the nation. By every measure of performance the Delaware public schools are falling short, despite record spending per pupil. Delaware continues to have industrial electric rates  which are at least 20% above the national average and more than 25% above rivals such as North and South Carolina. Yet the state is driving up these rates through large rate payer subsidies to Bloom Energy. The teachers unions and building and trade unions appear to have substantial influence in state government, and Delaware has no right to work law enforcing freedom to work. A good case in point of economic development by headline is the proposed data center and power plant project on the former Chrysler site in Newark. The initial public presentation in Newark was full of surprises. First, during the presentation it was revealed that Data Center LLC had been engaged in privately in discussions with public officials for over two and a half years before bringing in the public. Second, Data Center LLCs "intends" to capture at least 45% of the power plants harmful CO2 emissions with a technology that is "in development" and cannot be revealed because it is "proprietary." Third, Data Center LLC cannot use the Bloom boxes from its fellow tenant because it is financially unfeasible. The Governor states that opposition to the data center project is subjective and, if successful, will damage Delawares reputation as a place for economic development. Even more astounding, the Governor says that such projects should not be put to a public vote. State officials have already been told by corporate relocation professionals that Delaware does not make it past the first round for consideration because of the poor quality of its public schools and its high energy costs. Higher taxes compound the problem. Rather than putting the muscle of the state behind another chancy project, the Governor and legislators should commit to reversing the underlying conditions that constrain real economic recovery in Delaware.   Dr. John E. Stapleford Director, Center for Economic Policy and Analysis


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