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OP-ED | Sustainability: Invest in People

by Brian O'Shaughnessy | May 20, 2014 9:17am
(5) Comments | Commenting has expired
Posted to: Economics, Opinion, Poverty, Taxes, Transparency

It is easy to talk about the economy, or should I say criticize.

The factors that influence the economy are many. One area of focus that has become a fan favorite is whether our economy is “sustainable.” I admit, I have been seduced by the catch phrase that is a darling of both the fiscally conservative and the socially progressive. The concept is broad enough to encompass renewable energy and the need to invest in transportation.

I have seen presentations about whether our economy is sustainable. They seem similar to presentations about the deficit or the budget. They talk about the bad news under a new label. We have an unstable tax base, very high per capita debt or sinister unfunded liabilities. 

What is lost in the conversation about what makes an economy sustainable is an analysis of the engine — the means of producing revenue that supports everything. True, we often talk about jobs. How could you not?  This gets us close to the core, but we can — and should — go deeper. What keeps the economy churning? What pays for everything?

People.

Approximately 50 percent of our annual budget is derived from the income tax. People.

Approximately 20 percent comes from our sales and use tax. People.

More detail results in similar insights. Capital gains, property or corporate taxes? At the core, human activity drives revenues. 

If people are not productive, an economy is not sustainable.

If we cannot increase the productivity of all of our state citizens — both public and private - our economy will not be sustainable. Revenue will continue to decrease and service needs will increase.  This is the core concept of sustainability. The Economics of People

All citizens means just that.  The long term unemployed — in Fairfield County and in our cities. The underemployed.  Folks recently released from prison.  Young adults — especially in cities.

The most important infrastructure investment is in people. Not to worry. Our nation’s history has shown that when we invested heavily in human capital, we led the world in productivity, academic achievement and standard of living. The returns are real.

This is not simple stuff.  There are several moving parts. There is a continuum of investments that lead to a productive citizen.  They are not always present.  If there is a break in our strategy, we risk investing in people that leave, as is presently the case when we provide an excellent high school education to many young adults that will never work in Connecticut.  The jobs aren’t here and they leave.

The front end starts with caring about the environment in which our youngest are raised. When needed, start early with programming designed to address specific needs.  Research has established that our cities contain a demographic that needs skills, but also that jobs don’t exist. These problems don’t fix themselves. If we invest in early childhood education, ask “What, where, why” and later “Did it work?”

When appropriate, our young adults should be matched with skills that lead to employment within Connecticut. Engage the private sector early.  Incentivize employers in ways that are meaningful, and they will hire folks.  They want to grow and they need good employees.

Measurement is critical because revenues are at a premium and they cannot be spent in a frivolous manner.  Also, we are in the midst of a hyper-partisan crisis where government credibility is nil.  Rightly or wrongly, one of the results of an extended national recession is that taxpayers need to be shown results to establish trust in government.  This is not a bad thing.

I attended the CBIA 2014 Economic Update several weeks ago. The President of Stop & Shop New England, Joe Kelly, told a story that struck me as uniquely applicable to our state’s situation.  Joe is a great guy.  A former neighbor of mine when he lived in Connecticut, he literally worked his way up from the deli counter to the boardroom in classic Horatio Alger style. 

Joe relayed a management conversation where the debate centered on whether the company invested too much in employee development.  A cost-conscious manager said “What if we invest in employees and they leave?” To which the President responded:

“What if we don’t invest and they stay?”

Brian O’Shaughnessy of New Haven is a principal in the firm Community Impact Strategies Ltd.  The mission of CIS is to facilitate the investment of public and private capital for the purpose of creating measureable improvements in human productivity and living conditions.

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(5) Comments

posted by: art vandelay | May 21, 2014  7:28am

art vandelay

Mr. O’Shaughnessy makes an interesting point about People keeping the economy churning. In 1990 ZERO percent of our annual budget was derived from the income tax. ONE HUNDRED percent was derived from the sales & use tax. People churned the economy and Connecticut prospered.  Twenty four years later we are millions in debt with no end in sight. Connecticut’s economy has tanked. People are not churning, they are leaving, under or unemployed. The income tax killed this state, just like it did to this country in 1913 when Wilson signed it into law.

posted by: Matt W. | May 21, 2014  9:33am

Matt W.

Brian, I think you hit the nail on the head with, “Incentivize employers in ways that are meaningful, and they will hire folks.”  The question is how we do it.  The current approach is to tap the treasury and bribe a handful of companies to stay. If you offered me enough money I would probably move into a slum in Detroit but that doesn’t make it an attractive option for relocating my family.  The process of becoming an attractive state for biz isn’t easy but its not brain surgery.  Create a business friendly and politically stable environment and business will do what business does.  The simple fact is that the politicians here want to have their cake and eat it too when what is really needed is a balance and as we’ve seen, there hasn’t been balance in this state in 30yrs.

posted by: ASTANVET | May 21, 2014  2:50pm

“Incentivize employers in ways that are meaningful, and they will hire folks” - ummm… why are people in business.  Not be be “incentivized” to hire people.  They are in it to do something, produce something and when adding a person increased productivity more than it costs, they hire that person at a wage that keeps that profit margin in place.  You cannot subsidize business into creating more business.  You want to get CT back on it’s feet?  Get government out of the way!  It isn’t a social experiment!

posted by: shinningstars122 | May 22, 2014  5:26am

shinningstars122

@MattW >>>The current approach is to tap the treasury and bribe a handful of companies to stay.

Lets not forget the endless tax loopholes as well.

I think when you consider that 80% of revenue is from ” people” you have to do more than just hire people.

They have to be paid a good middle class wage that will assist them in doing all the things that keep our economy afloat.

It s clear when you ignore this fact, as the last thirty years have demonstrated you end up with the situation we are all in today.

Stagnation.

The irony is that when you also have endless profiteering by companies, it is both shorted sited and will ultimately lead to a tipping point when the 80% won’t be able to carry the burden of all government services.

Plus they continually fight tooth and nail to reduce their legal tax burdens even more.

Then all these ” worst” case scenarios could play out or the more like case…the biggest fire sale in U.S. history and the taxpayer will get pennies on the dollar for it.

One huge fire sale that will privatize the people’s wealth as corporate America exploits the American worker even more.

Clearly this mentality is not sustainable… as it is actually quite barbaric.

posted by: RJEastHartford | May 24, 2014  8:52am

Business friendly, Incentive business, both small and large, improve the business climate etc. Less regulation and taxation for business, usually is how these terms are defined. If the business climate improved substantially according to this definition, investing in workers would still be at the bottom of the list. With this new paradigm post 2008, workers are viewed as a cost and have been stripped of any power by the use of offshoring, H1B Visas or “insourcing”, independent contractor status, employment law, accounting rules (FASB) etc. etc. Improving the business climate substantially would have to be accompanied by some improvement in worker leverage, collective bargaining for wages, benefits and training etc With the DJIA at record levels (equity up, earnings, asset values up, rates down etc) most employees, independent contractors, whatever your status do not have any money to invest.