It sure would be a change if they did, and seeing as though the Bayou State is currently adrift on a stormy policy sea, a little bit of leadership might go a long way toward saving this place from what’s coming.
Because this is the end of the line for Louisiana’s Huey Long/Edwin Edwards redistributive populism. That it’s a failure hasn’t been arguable for a very long time; it’s been just about fifty years since Edwin Edwards was first elected governor, and when he took office Louisiana was a lot more competitive with its neighbors than it is now.
It wasn’t all that long ago that New Orleans was a major hub of international shipping and shipbuilding, not to mention oil and gas exploration, a decent amount of banking and even some manufacturing. Shreveport and Lafayette were boomtowns. Baton Rouge was busy calling itself America’s Next Great City. Every one of them has stagnated, and cities in neighboring states have passed us up and stolen away many of our largest employers.
Why has this happened? Because Louisiana is a lousy place to do business.
When Tennessee, Texas and Florida don’t have a state income tax and you do, it means people who make a lot of money and can choose where they want to live will live somewhere else. And guess what? That’s exactly what they’ve done.
It’s worse than that. This is a state whose geography indicates it needs to center its economy around transportation and logistics. This is where the Mississippi flows into the Gulf of Mexico, after all, and there are no less than four interstate highways (we’re going to count I-12 and I-10 as one for the purpose of this argument) crisscrossing the state.
We’ve got five of the top fifteen port facilities in North America within our borders as a result of that geography. And Louisiana’s rail transportation network, particularly with New Orleans as a hub, is top-notch.
Do we take advantage? Hell, no. We let our interstate highways become some of the worst in the country, we dither and fail to prioritize beefing up that road infrastructure so that we can build a truly first-class intermodal logistics system, and worst of all we impose an inventory tax which makes it impossible to incentivize things like warehousing and fulfillment, which are huge potential 21st-century employers, to locate here.
After Katrina New Orleans should have become the site of huge industrial parks where neighborhoods like the Lower Ninth Ward sit. That wasn’t done because of stupid politics, and the moment for it is all but gone. Nobody would agree to be a tenant in an industrial park in a city LaToya Cantrell governs even if there were any.
Yesterday, Moody’s Analytics chief economist Mark Zandi was speaking at a conference put on by the Baton Rouge Area Chamber and he said Louisiana’s economy was “80 percent back to normal.” That means we’ve lost 20 percent of our economic output. That would equate to $50 billion and 400,000 jobs.
The problem with trying to get that output back is that you no longer have it. It isn’t that COVID dragged it away and when COVID is gone, perhaps because a vaccine is distributed through the population, it’ll all just come back. When your restrictions kill those businesses and dry up those jobs, the people who are affected become free agents.
And when they move to Texas and Florida and Tennessee and other places, they’re gone. They won’t come back. They won’t come back because those other places offer a better quality of life than Louisiana does.
Oh, sure, the food is better here than it is in Florida. But the COVID restrictions have destroyed the restaurant business in Louisiana. So the food might be better, but the places where you used to eat it are gone. And if you have to close your restaurant in New Orleans, where would you want to reopen it? You can actually go anywhere. And in Florida, the state is open and there are no income taxes.
That’s an environment for a whole bunch of cajun and creole places to open up along 30A in the panhandle. Less so for the French Quarter and Warehouse District to come back to life.
You won’t have Mardi Gras next year, your tourist industry is finished, your hospitality industry has been nuked, and your public policy is ruinous to manufacturing, logistics and oil and gas. ExxonMobil is beginning to give up on its petrochemical facilities in Louisiana because of the fact it’s simply more lucrative to refine oil in Texas. Shell has closed its refinery in Convent. Tellurian was going to build a pipeline from the Permian Basin to Louisiana but recently decided not to. Sasol is selling off its properties in Lake Charles. We’re losing the petrochemical industry because we’re not competitive.
You can’t be a hub of petrochemical manufacturing, and enjoy all the jobs that creates, and whack those people with taxes on inventory, business utilities and MM&E. We’ve done all of that since John Bel Edwards was elected governor the first time, and we’re starting to see the inevitable effects. COVID coming along provided the impetus for them to accelerate decisions that were going to be made when we put in policies soaking business to pay for an outmoded, inefficient, stupid state government.
And now it’s over. You’re losing all your major employers and you’re turning into an economic backwater with cities in various states of declining into a Detroit or a Jackson. You need radical change, and you need leadership with balls and brains.
So far Clay Schexnayder and Page Cortez look like anything but the guys who provide Louisiana with balls and brains. So far, other than one brief shining moment when the Legislature trumped Edwards with a reasonably decent tort reform bill, the leadership of the Legislature has been an unmitigated joke. They’re more interested in scolding taxpayers for demanding the state reopen than they are doing something about its decline.
But if the moment can make the man, now is the time that these guys step up. Schexnayder and Cortez went along yesterday with Edwards’ man Jay Dardenne as he pushed for the Revenue Estimating Committee not to offer a December forecast. What was likely to happen if the REC had actually followed the law was a billion dollar deficit or more, and worse, the REC would have had to report the state’s unemployment insurance fund is completely insolvent. That would have triggered an automatic unemployment tax increase which would have finished off a great many Louisiana employers, and likely lead to a huge wave of layoffs that would crater the economy.
Given all of that, Dardenne, Cortez and Schexnayder decided to hold up the forecast and pray that there is some federal bailout agreed upon which pumps a billion dollars or more into Louisiana’s coffers and allows them to kick the can down the road a little longer. Remember, the CARES Act dropped $3 billion on the state, and they took all of that one-time money and plugged ongoing budget holes with it. Louisiana will be able to do that maybe one more time, and then the end will come. It’s literally in the realm of possibility that the state might go bankrupt, taking many of its local governments with it.
Leadership with balls and brains would see this crisis as an opportunity and start working toward right-sizing state government.
For example, get rid of that inventory tax. The state reimburses the businesses paying it for most of their costs anyway; essentially what it amounts to is a demand that the private sector provides state and local governments in Louisiana a bridge loan. If the state has to appropriate money directly to the locals for a time, do that, but get that stupid tax off the books.
Ditto for business utilities and MM&E. Right now, with the economy down the tubes, the revenues from those taxes are going to be lower, so now is the time to learn to live without them.
That goes for income taxes. Maybe Louisiana can’t afford to give up the income tax revenue right now, but this is certainly the right time to kill off the corporate income tax. That’s going to bring in less revenue this year than ever, so why not dump it and see if it makes your private-sector economy more competitive with states who don’t have it?
Severance taxes? Why not take a chunk of that money and put it toward roads? Or better yet, why not give the locals a share of that money so that they don’t need the idiotic inventory taxes?
And while you would hear that it’s absolutely suicidal to cut health-care spending in the middle of a pandemic, it’s time for a massive haircut at the Louisiana Department of Health to pay for these tax cuts. The Medicaid budget for FY 2021 in Louisiana is nearly $16 billion, which is absurd. That’s almost $4,000 for every man, woman and child in the state. We know that a catastrophic amount of that money is wasted and stolen, and Louisiana is just about bankrupt, so it’s time to clean up that mess and put that money to good use.
And the state needs to start a major re-examination of its education spending. Louisiana can’t afford 14 four-year colleges, especially when those are basically offering online education now. The money being spent on K-12 schools which don’t appear interested in holding live classes ought to be looked into as well, and there ought to be, in the words of Franklin Delano Roosevelt, “bold, persistent experimentation” to find more efficient models of education in a state which has long been among the worst performers in that sector.
Every area of state government needs a shakedown. Every one of the departments needs an audit, and every one needs best practices from around the world brought in for reform. The entire structure of how this state does business has to be re-examined. And it’s on Cortez and Schexnayder to lead it, because Edwards will not.
And sorry guys, it’s not good enough to say you’re not up to the job. If you aren’t, then you shouldn’t have run for House Speaker and Senate President. It’s a lot safer on the back bench. And it’s patently obvious that Edwards and what’s left of the Louisiana Democratic Party are completely incapable of visionary, disciplined leadership. Just look at the cities in this state for proof if you need it.
This can has been kicked down the road over and over again. There is no more kicking that can be done. The rest of this winter needs to be spent coming up with a plan to modernize this state and a consensus to override Edwards’ veto.
It’s either that, or going down in history as the fellas who fiddled while everything in Louisiana burned but those bonfires on the river in St. James Parish. Because in case you haven’t heard, we’ve lost those, too.