Can A Governor Really Create Jobs?
This story first appeared as Illinois Issues' State of the State column in the September 2014 edition of the magazine.
An outsider to Illinois politics could be forgiven for thinking Gov. Pat Quinn and Bruce Rauner are running for the position of job creator in chief. Quinn can’t say enough about “jobs” and how his policies are creating more of them. Rauner, the GOP challenger, naturally contends that Quinn is Illinois’ greatest impediment to job creation — and that his platform is more likely to breathe new life into the state’s ailing economy.
Both candidates have distinct views on job creation. Quinn believes government spending can help spur job growth, while Rauner argues government ought to get out of the way, allowing the free market to work its magic. Which is more likely to actually create jobs? Experts say regardless of political orientation, governors have very little power over employment in their states.
“Where they claim responsibility for jobs, or they claim that in the future they’re going to create jobs, that has to be viewed with great skepticism, at least in terms of the evidence,” says Richard Dye, an economist with the University of Illinois’ Institute of Government and Public Affairs. Like the sea, he says, “the economy rises and the economy falls. And it ain’t because of who’s riding the rowboat.”
Dye says politicians really have no proper claim on jobs created during their tenure. That hasn’t stopped Quinn from talking up what he calls Illinois’ comeback. “If you’re breathing, we want you working in Illinois,” Quinn said at an event this year. “The best way to fight poverty, the best way to fight crime, is a J-O-B.” The governor often spells out that word. J-O-B-S. It’s a point of emphasis, the way Aretha Franklin asks for respect. And like the Queen of Soul, Quinn is willing to settle for just a little bit.
Last year, the governor popped in on an East Peoria biotech company called Endotronix, celebrating the firm’s commitment to add 10 jobs. He’s also claimed credit for Wrigley’s plans to add 75 jobs manufacturing Skittles in Yorkville. These companies received either tax breaks or state investment. Because of that, the job numbers should be verifiable, which is more than can be said for some of Quinn’s other, more speculative job-creation numbers.
In June, Quinn touted the “Welcome Home Illinois” program, which helps first-time homebuyers with down payment assistance and low mortgage rates. In just over two months, he said the program’s 2,830 homebuyers helped create “an estimated 1,400 new jobs.” Quinn spokesman Dave Blanchette said the figure came from the National Association of Realtors. “They estimate that one job is created for every two home sales,” Blanchette wrote in an email. “The job creation is in related industries such as lending, selling, and home improvement. It’s an estimate aimed at showing the impact of housing transfers on the economy.”
Labor economist Darren Lubotsky, also with the Institute of Government and Public Affairs, says that’s not really how the economy works. That’s because employment is largely a zero-sum game. “If somebody didn’t buy a home, they’d spend their money on other things, and those things that they would’ve spent their money on would also have jobs associated with them,” Lubotsky says. “So I think the best thing you could say is that when people buy homes, that shifts employment away from restaurants and things like that, and toward the construction industry.”
Recent Illinois labor statistics happen to bear this out: Between May and June of this year, the construction sector gained 3,500 jobs, while the hotel and restaurant sector dropped 3,200. “You don’t want to extrapolate that, because of a certain number of home sales, there’s been a net increase in jobs,” Lubotsky says. “We think the total number of jobs is really affected by the overall state of the economy. And those big fluctuations from year-to-year — those things are really beyond the control of policymakers.”
Don’t tell that to Rauner, whose campaign slogan is “Bring Back Illinois.” The Republican has consistently blamed Illinois’ economic woes on the state’s Democratic leadership, as in a recent brochure outlining several tax proposals: “Pat Quinn’s and Mike Madigan’s track record of massive tax hikes, irresponsible spending and other job-crushing policies has pushed Illinois to near the bottom of the nation by far too many measurements: the number of people fleeing the state, jobs created, the unemployment rate and our debt rating.”
Rauner insists his proposals — including a gradual roll-back of the income tax hike, restrictions on lawsuits and an expansion of the sales tax to include some services — would spur growth in the number of jobs. Dye says it’s possible for tax policy changes to sometimes — “not generally, but sometimes” — have an effect on jobs. But there are many other factors that more directly affect a state’s employment: “the overall economic condition, the capital stock and education level of the state, the national economy, incentives by other states, and so on,” Dye says. “All things that are beyond the governor’s control.”
So why do candidates claim prowess in job creation? “The advantage to the candidate is that most people don’t read the economics literature,” Dye says. “There is this vague association [between] the time a particular politician is in power and what happens to the economy.” Lubotsky amplifies this point, acknowledging that job claims would be useful to candidates for advertising purposes: “They can’t go out and say, ‘You should vote for me, but honestly, what I do won’t have much of an effect.’ ”
He’s right. Few politicians would make such a statement. But a private citizen might.
Back in 2011, years before he declared his candidacy for governor, Rauner participated in a panel discussion at Dartmouth College on the future of the U.S. economy. After nearly an hour, conversation turned to the risky investor behavior that led to the Great Recession and the federal government’s role in regulating financial markets. Another panelist asked Rauner: “We had a giant financial crisis in which the financial sector caused a huge recession that haunts us to this day … shouldn’t we try and fix some of the problems that created the situation?”
Rauner said the government was making things worse. Then — and this is the key moment — he opined on the nature of large economies: “We’re talking about free markets. Markets are cyclical. Get over it. We’re not going to predict it. We’re not going to stop it. We’re not going to control it. That’s what it is.”
Rauner 2011 acknowledged that economic downturns are inevitable and opined that governments can do nothing to control them. Rauner 2014, however, seeks to blame Quinn for not taking the right steps to address Illinois’ economic woes. Rather than telling voters to “get over it,” he’s attempting to harness their anger to propel him into high office.
It’s clear that Quinn and Rauner have different visions for the role of government in the economy. But both men are united in their message that, by moving this lever and turning that knob, they can spur job growth across Illinois. Economists say there’s simply no evidence to support those claims — not that a lack of evidence has ever stood in the way of a good political talking point. Voters, beware.