Will Cutting Back on Government Help the American People?
It's time for us to cut back on government and help the American people. -- Mitt Romney
Chief Executive Magazine annually surveys CEOs about the best and worst American states for doing business. America's CEOs consider: Texas, Florida, North Carolina, Tennessee and Indiana the Five Best for Business States (BfB); and Michigan, Massachusetts, Illinois, New York and California the Five Worst for Business States (WfB). The survey's rankings have been stable over long periods. Massachusetts, for example, has been known as a high tax, heavily-regulated state for at least the last forty years.
According to the survey, America's BfB have what America's CEOs want -- smaller government, low taxes and business-friendly regulations. The BfB clearly have lower taxes and smaller government with an average per capita state tax of $1,843, compared to the WfB at $2,520. So, let's examine whether smaller government is better for Americans.
CEOs, paradoxically, prefer to live and work in the high tax, heavily-regulated WfB. Of the Fortune 500 companies, 165 are headquartered in the WfB, while only about 100 are headquartered in the BfB. Among America's 50 fastest growing corporations, about twice as many have headquarters in the WfB, as in the BfB. Even CEO Romney selected Massachusetts (ranked 47th on the survey) for Bain Capital's headquarters, and it's where he's lived (on and off) for the last 30ish years.
The State Human Development Index ranks American states on well-being and opportunity for their residents (rank 1 is best). On this Index, the WfB are better places to live (average rank 13) compared to the BfB (average rank 36). Metrics such as: household income, life expectancy, infant mortality, and educational opportunity demonstrate that the BfB -- are worse for people.
WfB median household incomes are much higher ($57,000 in the WfB vs. $47,000 in the BfB). Further, people live longer and have lower infant mortality rates in the WfB, compared to the BfB. The WfB average rank (rank 1 is best) is 14 for life expectancy and 15 for infant mortality, while comparable BfB ranks are respectively 31 and 36. In highway fatalities, WfB are safer (average rank 8) compared to BfB (average rank 31).
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In higher education, the WfB (as a percent of their college-age population) graduate 50 percent more students with advanced degrees than the BfB. Also, the WfB have 23 of our nation's top universities, compared to the BfB's four.
No wonder CEOs choose to live, and establish growth companies in, the so-called Worst for Business states.
Mitt Romney's shibboleth that shrinking government helps the American people -- isn't based on any rational analysis of costs and benefits. Government isn't a parasite destroying the American economy. Government is the provider of public goods (infrastructure, education, police, safety standards, etc.) that the private sector can't or won't provide. If citizens select lower taxes, smaller government and less regulation, they'll get: less infrastructure, fewer police, teachers and inspectors, resulting in worse outcomes.
This isn't a universal defense of every government employee or program. Nor am I claiming that bigger government is always better government. Government programs should be evaluated, and terminated (or restructured), if they aren't efficiently serving taxpayer needs.
Throughout my career (in the Bloomberg administration, at the World Economic Forum and its Davos conferences, and at McKinsey), I've had the honor of working with some of the world's leading CEOs, venture capitalists and entrepreneurs (such as, my co-judges for NYCBigApps).
I found these business leaders incredibly talented at what they did. However, business expertise conveyed no automatic insights on public policy.
My old boss, NYC Mayor Michael R. Bloomberg (who made a highly successful transition from private to public sector), emphasized that the public sector must make investments the private sector won't risk making. Consider President Obama's successful public sector rescue of the auto industry vs. the private sector approach, which would have left millions more unemployed.
Another smart public sector investment is Applied Sciences NYC (Mayor Bloomberg's plan to bring a major new engineering campus to NYC). The mayor's team did all the work to develop Applied Sciences NYC, but won't reap any tangible benefits -- the benefits are for future generations of New Yorkers. But that's what the public sector must do, to benefit the governed: make major, long-term investments in education, infrastructure, health and other public services.
CEO Romney's actions, in selecting Massachusetts as his base, suggest he understands the importance of government in making America a better place. But, Politician Romney's statements suggest otherwise.
Which Romney are we supposed to evaluate for president?
Disclosure: As the Bloomberg administration's head of policy and strategy for economic development, I was an architect of Applied Sciences NYC.
About the Author: Steven Strauss was founding Managing Director of the Center for Economic Transformation at the New York City Economic Development Corporation (NYCEDC). He is an Advanced Leadership Fellow at Harvard University for 2012. He has a Ph.D. in Management from Yale University and over 20 years' private sector work experience.