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With All Due Respect to Alan Levin


March 28, 2013  I appreciate Delaware Director of Economic Development (DEDO) Alan Levins recent response in the News Journal to my assessment of the condition and immediate future of the Delaware economy ("Writer Misrepresents Delawares Economic Health" March 15, News Journal). I believe readers would benefit from my response. First, Alan is correct that when dealing with change the starting point chosen can make a substantial difference. While Delaware lost jobs between January, 2009 and December, 2012, it did gain 8,000 job if the starting point is from the trough of the recession in December, 2009. This means total employment in Delaware has grown 2% in three years. During the same time period total employment rose 1.6% in New Jersey, 3.1% in Pennsylvania, 3.4% in Maryland, and 4.1% across the nation. More telling, across those three years transfer payments (i.e., Social Security, Medicaid, Medicare, unemployment insurance) was the leading growth component of Delawares personal income. Delaware total transfer payments rose 16% compared to 9% throughout the U.S. During those three years Delaware was a below average performing economy. Second, Alan refers to the facts from the research literature (e.g., low taxes, especially at the margin, quality education, relative costs of energy) as representing a "particular brand of conservatism." Rather than coming from somewhere on a political spectrum, these facts are the bottom line from 30 years of research in regional economics. Third, Alan cites improved quality of life as a future driver for the economy. The research literature is mixed on this issue, and while it counts in the assessments of older migrants, young migrants move to where there is job growth. Certainly Delaware has become more bike friendly. According to the American Lung Association northern Delaware has rated "F" over the past three years with respect to ozone and particle air pollution. (Perhaps an argument for Delawares stricter environmental policies_OLD.) And the violent crime rate in Delaware has risen steadily. Fourth, winning an award for innovation in education is certainly meritorious, but achievement test scores are where the rubber meets the road for students who must eventually enter the labor market and for their parents. Finally, as with the U.S. Chamber, the respected Tax Foundation ranks Delawares business tax climate 14th among the states. This is due to Delawares high ranking (2nd) for having no sales tax and the states relatively low unemployment insurance tax. At the same time Delaware now ranks 29th in its personal income tax rate and at the top of the high corporate income tax rate bracket. And neither the Chamber nor the Tax Foundation take into account Delawares gross receipts tax, supposedly equivalent to a 6% sales tax. The Delaware Department of Labor projects 1% annual growth in total jobs while CRI projects 0.5%. Even with 1% growth per annum it will take Delaware almost five years to return to the pre-recession peak. Put whatever label you wish on it, but raising taxes during a recession, thwarting parental choice in education, and pursuing ambitious alternative energy goals when electric rates are already high, will not light a fire under the Delaware economy.   Dr. John E. Stapleford Director, Center for Economic Policy & Analysis Caesar Rodney Institute


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