Yeah, that pesky tax cut impact data: the long term view from Brookings

The Brookings Institution delivered another blow to the received wisdom that tax cuts generate economic benefits the other day, with this post examining the long term impacts of the federal deals that set the ground work for similar programs nationwide.  Here’s a selection:

But the record is clear that tax cuts have not boosted growth.  When growth is (appropriately) measured from peak to peak of the business cycle, the vaunted Reagan tax cuts in the early 1980s produced a period of average growth. Indeed, research by Martin Feldstein, President Reagan’s former chief economist, and Doug Elmendorf, the former Congressional Budget Office Director, concluded that the 1981 tax cuts had virtually no net impact on growth.

Virtually no one claims the 2001 and 2003 Bush tax cuts stimulated growth. Despite cuts in tax rates on ordinary income, capital gains, dividends, and estates, economic growth remained sluggish between 2001 and the beginning of the Great Recession in late-2007.  The growth that did occur, however, is generally attributed to the Fed’s easy money policy….
Despite all of this, the zeal for lowering income tax rates, especially at the top, spread beyond Washington decades ago. Failure at the federal level does not necessarily imply that tax cuts would fail at the state level too.  Lower taxes might lure businesses from other states, even if they yield no collective increase in jobs or output.  But the stakes are higher for the states, which can’t borrow the way the Federal government can. As a result, they often end up enacting regressive tax increases or regressive spending cuts when high-income tax cuts fail to produce the promised growth.

In the 1990s, six states cut taxes by more than ten percent, mostly by enacting significant personal income tax cuts.  However, only the tax-cut states that were boosted by the financial boom rose faster than average.  Between 2001 and 2007, Arizona, Louisiana, New Mexico, Ohio, Oklahoma, and Rhode Island cut personal income taxes.  Only New Mexico and Oklahoma, which benefited from oil and gas trends, experienced net gains in their employment share over an extended period.

The most widely-reported recent state income tax cut occurred in Kansas in 2012. Gov. Sam Brownback argued it would be “like a shot of adrenaline into the heart of the Kansas economy.” The tax cuts did not produce the hoped-for growth, though, and more revenue was lost than originally anticipated. Fiscal year 2014 revenues were $700 million lower than FY 2013 — $330 million less than expected – during a period in which most of the American economy was picking up steam. Put in context, these numbers are pretty significant: $330 million represents more than 5 percent of Kansas’ government spending from general funds.   Moody’s and Standard and Poor’s reduced Kansas’ credit rating, and the state failed to keep up with the region’s pace of job growth.

Somewhere early in my entrepreneur years, I was told by someone much wiser than me that “you have to spend money to earn money.”. That doesn’t by any stretch mean that all the things we’ve spent money on in economic development over the years were necessarily the right things to spend money on, but it does mean that once again, starvation diets seem to have less than the promised impacts over the long run.

Building a Small Business Ecosystem in Montana

Two weeks ago I had the great opportunity to do an expanded version of my Small Business/Entrepreneurship ecosystem talk for the Montana Economic Development Association and for a selection of business owners and community leaders from Great Falls, Montana and surrounding communities.  With both groups, I had a chance to not only do the talk, but to also do some hands-on training (using methods oddly similar to those in Crowdfunding Wisdom: a guide to doing public meetings that actually make your community better…).

When I do sessions like this, the organization usually picks up some local press, but the quality and insight of the reporting that we received from the Great Falls Tribune was head and shoulders above what I’ve come to expect.   Not only did they do this very nice article that included this pretty good summary quote:

It may be tempting to put up some banners and flower pots, design a nifty logo and put window displays in vacant buildings, hoping economic development follows, but Rucker said that is rarely successful.

Instead, local governments can take leadership positions when community members are unable to move the needle on big challenges. Other times, government can be more of a feeder instead of a leader.

The difference is offering support instead of doing things local nonprofits and business owners can do themselves, she said.

barbershop

Marvin Newkirt at The Barbers Chop Shop (Photo: TRIBUNE PHOTO/AMANDA DETERMAN)

But they also accompanied it with this more in-depth article that weaves together some of my comments fron an interview with stories of local small businesses, quotes from other local leadership and statistics from the Small Business Administration.  I especially liked how the reporter, Briana Wipf, pulled this insight out of our interview:

While Rucker was in Great Falls, she heard about existing projects by residents who wanted to see revitalization in the community.

“It clearly demonstrates that this is a place that has a social fabric,” she said.

But even communities that don’t already have that tradition can build a network of individuals and business owners who want to build a town ripe for entrepreneurship.

That won’t happen overnight, but grass-roots movements are better at recognizing “what the best use we can be looks like,” she said.

 

From the Good Ideas File: Good Idea Resource Checklist

checklistI’ve written here before  about People’s Liberty, an experiment in philanthropy though individuals that launched in Cincinnati earlier this year.  I’ve found lots interesting about People’s Liberty to date, from their Fellowship program to the building that they have just finished rehabilitating, but one of the things that continues to strike me is how good they are at coming up with slap-me-on-the-head-simple solutions to common problems.

This admittedly non-Pulitzer worthy photo shows one of these small Good Ideas that has the potential for a transformative effect.  It’s a….checklist.  Of sources of help for good ideas.

This is one of those examples, I think, of needing an non-insider to identify what people who are new to community improvement actually need.  If you’re the city manager, or the city planner, or the guy who runs the local foundation, you already know at least a large part of who is doing what in your town.  And because you assume everyone else knows that, too, you…. don’t realize that they don’t.

This checklist fills a crucial teaching role, maybe more so than anything practical: if I’m a person with a Good Idea for Cincinnati, but I’m not already one of those Insiders, chances are I don’t know where to start or who might be able to help me — especially in a community like Cincinnati, with hundreds of nonprofit initiatives and community organizations and what all.

You, oh Insider, can assume that I, the Outsider, know all of that —  or assume that I could suss all that out if I Just Worked Hard Enough — but chances are that hundreds of Good Ideas will go by the wayside while Outsiders like me are trying to do things like pay my bills.  If I think that I’m a lone duck and that my Good Idea will only come to fruition though my solo effort, then chances are the city — and I — will never see that Good Idea come to pass.

But give me a sheet of paper with a simple checklist of who’s out there that might be able to work with me, and we’ve changed that equation pretty substantially for tiny bit of money.

If you haven’t already, go check out People’s Liberty.  You’ll be glad you did.

Welcome to Crowdsourcing Wisdom!

I’m delighted to announce that the book

CROWDSOURCING WISDOM

A GUIDE TO DOING PUBLIC MEETINGS THAT ACTUALLY MAKE YOUR COMMUNITY BETTER 

(and won’t make people wish they hadn’t come)

is done, published, ready and waiting for you!

This book is the culmination of over 20 years of my work with cities, regions, governments, nonprofits and developers all over the country.  It gives you a clear, no-nonsense run down on why it is exactly that our public meetings so often end up feeling so miserable — for everyone involved.  It then gives you a step-by-step process for designing and conducting public meetings that actually generate wisdom, and it concludes with tactics for managing confrontational public meeting situations in a way that’s fair to everyone involved.

If you’ve been doing public engagement for years, I think you’ll find this book both useful and refreshing.  If you’ve never run a public meeting before, you’ll find that this book gives you a set of tools for doing that better — tools you probably didn’t even know you had!  book cover

And if you’re frustrated with how your community does public engagement, or you’re looking for a way to start overcoming the build-up of frustration and apathy that’s preventing your town from finding new solutions to your tough issues, this book will give you the first steps of a new way forward.

Pretty good deal for a few bucks.

You can find this book, and other Wise Fool Press publications, in any format you want:

If you like print, you can order copies from Lulu.com right here

If you use a Kindle, you can buy it for Kindle right here

And if you want a PDF or an EPub file (the kind used by Apple products and NOOK), you can get those right here.

 

And learn more about the book and upcoming trainings, samples and other good stuff at www.crowdsourcingwisdombook.com

Of course, reading a book about how to do something isn’t anywhere near the same as trying it out yourself.  I’ll be giving workshops on how to Crowdsource Wisdom in different places over the next few months. If you’d like a workshop for your organization, staff, conference or upcoming meeting, send me a note at della.rucker@wiseeconomy.com. In-person and online video training is available.

From the Good Ideas File: Joining the Journey to True Transparency

Transparency has become a huge issue in parts of my circles lately, especially among people who are working with open data and civic technology, as well as my colleagues who are trying to build better public engagement.  It seems like everyone who has any awareness of how the world is changing understands on at least some intellectual level the need for more transparent governments and organizations… but that doesn’t mean we always want to do it.  Or that we even fully understand what our options are.

That’s why I was delighted to encounter this post from Andy White, a multi-faceted startup wizard involved with the Downtown Project in Las Vegas, who has out-and-out stated that he is on a “Journey in Radical Transparency.”  In this post, Andy works out what I think is the first typology of transparency that I have seen.  His categories:

  • Inadvertent Transparency
  • Voluntary Transparency
  • Exclusionary Transparency
  • True Transparency.

The first two probably translate pretty readily for goverment and nonprofit and social enterprise types.  Inadvertent Transparency is when something goes badly and you have to ‘fess up and make something transparent that wasn’t before.  Andy outlines this conundrum well:

…the information is forced out into the open. The source must then to react to whatever situation is created. Many times this makes them go on the defense, and it’s not pretty.

This begs the question, why was the information held so closely in the first place? Of course there’s always a reason but, are those still valid?

What if the information was readily available?

The second type, Voluntary Tranparency, is what my colleagues in open source are looking for — but Andy also identifies how such seemingly proactive transparency can also function as a spin job.  His last point should especially hit home for city managers and economic development types, who face huge pressures to always put on the happy face:

This is when information is pro-actively shared. There are significant benefits to this. First, it’s a great motivator for accountability. Second, it builds trust. Third, there are no concerns about containing information. This can be done in a variety of different ways for a variety of reasons.

Unfortunately, we’re seeing it done at times as a marketing stunt. Only releasing good news after it happens is not transparency.

As I wrote about recently for a Strengthening Brand America e-book, marketing stunts increasingly don’t work, or they backfire.

Andy’s last two categories are the ones that I think represent particularly important contributions to this topic.  The first, Exclusionary Transparency, can go a long way toward addressing the fears that talk of “transparency” often raises for city administrators and councilors:

This may seem like an oxymoron but, it’s very important to frame the conversation.

There’s an implied value around transparency that all the pertinent information is being shared.  This also creates an implied context around the data. If this is not the case it’s important to define the areas that are not being revealed.

Every organization has exclusionary policies. These range from salaries to hiring and firing, research and development to product launches. This helps build the full context around the topic by defining what you don’t know.

This is crucial on both the convincing-the-organization side and on the communicating-to-the-outside side. For the organization, this end-runs one of the common complaints against transparency: “but we have some things that can’t be public!”  Fine, exclude those from the transparency stance.

For the public side, stating clearly that certain information has to be protected and why becomes crucial to the trust-building that transparency is ultimately designed to do.  As I wrote about in my magnum opus about the Downtown Project after a bout of bad press, one of the challenges that this organization hit was that, while they wanted to be as transparent as humanly possible about what was really going on, they hit the usual legal and HR restrictions when it came to talking about actual employees.  Which meant a somewhat abrupt switch from human language to HR-talk, and I would suspect that the suddenness and unexplained-ness of that switch might have worked against their transparent intentions.  Better, probably, to state in plain English where the boundaries of transparency lie.

The final dimension of transparency that Andy describes is what he calls True Transparency, but could also be termed Consistent or Ongoing or Ingrained Transparency.   He makes a crucial and too often overlooked point here:

There’s one additional element required to have true transparency. In addition to voluntary and exclusionary there must also be a consistent flow of data. If it’s not on a consistent basis then it can’t be true transparency. The consistent flow is what reinforces the trust. It’s imperative that the information is being shared no matter what story it tells. Many times we see inconsistent timing of the information being shared. This calls into question the purpose of the data and erodes trust.

Amen.

Since Andy has written all of this so well, I’ll let him also have the last word — it’s as true for those of you who work to make communities better as it is for the start-up businesses he counsels:

Ultimately everything we do is transparent to some degree. We leave behind a trail of information that can be pieced together to form a story. The main question is how involved do you want to be in the creation of that story?

When you answer that last question, keep in mind: if you don’t create your own story, someone else will create it for you.  And, especially when it comes to communities, the story that the main stream media, or your local axe-grinders, or other sources may create from your trail of information probably won’t be the whole story.  So you might as well be transparent.

Stores for Free? From the Not Sure if It’s a Good Idea file

We all like free.  But free isn’t always good.

That was one of the two thoughts that I had when I read this article from Bizdistricts.com.  On the surface, it certainly sounds like a good idea:

The CreateHereNow program aims to offer free rent to new businesses. It allows empty storefronts to be occupied for the first three months at no charge – with hopes that these eventually will be paying leaseholders.

The program, which is featured on The Day, has been implemented at 20+ cities across the US state of Connecticut. The $500,000 program is run through the state Department of Economic and Community Development.

The groups that have passed muster to become the city’s first CreateHereNow storefronts include an independent eyeglass retailer, a cooperative boutique, bike repair shop, wellness cooperative, furniture and design store, skateboard shop and a children’s learning center.

Like I said, we all like free, and free probably beats vacant most days of the week, at least in the short term. And while I have certainly dealt with plenty of get-businesses-into-vacant-storefronts-one-way-or-another initiatives, I don’t know this one specifically.  So read the rest with that caveat in mind.

If you’re going to do a program like this, there’s several factors that I think you should be very careful to address:

  • Running a business is not a natural skill.  While we like to say that some people are natural-born for sales, or that someone has a talent for making things, almost no one is naturally gifted in the whole range of skills and tasks that it takes to run a small business.  As I’ve written elsewhere, a small business owner gets forced to become a jack of all trades, and if the small business owner doesn’t have aptitude for (or willingness to) learn one of several core skills (inventory management, accounting, display set-up, employee management, etc.), then you’re probably looking at a failed business in pretty short order. Careful vetting of businesses, like they’re doing with these programs, can help, but Stuff Happens.  If you’re going to be in the business of helping businesses get started, you have to be prepared to help them build their skill sets.  That seems to work best as a combination for formal training and peer connections, but it’s often overlooked, or poorly delivered.  And central to making an initiative like this work.  Failure that people learn from is not a bad thing, and failures are a natural part of small business life, but you have to keep in mind that a few high-visibility failures can put a program like this at significant risk.
  • Too much space is not a good thing.  Especially in districts that have a lot of vacant space, we find pretty quickly that we can get a whole lot of square footage for not a lot of money.  That’s not necessarily a good thing.  Space requires stuff to fill it — inventory, tables that will generate demand for food, etc. If the space is not filled, or filled sparsely, that makes the business look half-done, unprofessional, unsuccessful. A new business owner may be better set up for success in a very small, even tiny space, than an overly big one.
  • Free space that was vacant for a reason… will still have that reason. A commercial space can be hard to fill for a lot of reasons. Yes, it may be that the building ( or the block that it’s on) may not be living up to it’s potential simply because the market doesn’t get it yet– it’s an up and coming location, it’s newly renovated, it’s a type of building that the lenders don’t know how to work with yet (often the case for mixed-used buildings in districts that haven’t gotten much recent investment). But…there could be other reasons. Is the building poorly maintained? Poorly insulated? An out of the way location? A scary or intimidating neighborhood? Just because it was great once doesn’t automatically mean it’s a good building or location now. Failing to address issues like maintenance or getting people to come to the location could easily set a new business up for a very rocky start.
  • Small business start-up strategies should be part of nearly every community’s tool kit– we need them to seed our economies, keep our money in our community and give our public places. But just like you don’t grow a healthy vegetable garden by throwing a handful of seeds at a vacant lot, growing a successful crop of small businesses takes more than just free buildings.

Do Business Recruitment and Retention Right: a guide from Sara Dunnigan

My friend Sara Dunnigan just announced that she is leaving the world of consulting to become the Executive Director of the Virginia Board of Workforce Development, a job that perfectly fits the most enthusiastic Make Our Existing Businesses More Successful professional in the economic development profession.

Thankfully, before she moved on, she wrote up her research on best practices in state-level business retention and expansion (BRE) programs. And that’s fantastically good stuff for you, no matter how you are or are not actually involved in BRE.  That’s partly because business retention/recruitment is so crucially imporant, but so often overlooked in favor of the big game hunt, but also because there’s good advice in there for making any initiative work.

You should go read the whole thing, but here’s a few of her key findings.  The most effective programs Sara studied had the following:

 

1) An integrated, statewide strategic plan for economic development. Ok, this sounds simple. Your state has a plan, right? I was amazed how strong the planning efforts were in the exemplary states. And BRE was front and center, on par with business attraction and situated right alongside workforce development. That gets me excited. So dust off that plan and tell me where it leads you.

2) Clear, measurable outcomes and program objectives. Economic developers all over are catching some heat for a lack of accountability, but the best BRE programs I reviewed charged in straight away with stated goals and very specific programs of work. Even better, they reported regularly with their results. And when they didn’t hit the mark, they weren’t afraid to change course and say why. I think outcomes say a lot about an organization. They shed a light on what an organization values and they should elicit some sort of emotional response. I could tell people were excited about what they were tasked to achieve when I talked to them. This creates momentum.

3) Dedicated leadership and outreach teams with appropriately matched resources. BRE is often the most understaffed area in economic development. Forced to do a lot with a little, most programs languish, never reaching their full potential. The best programs I found had staff and had them deployed in a way that made a big impact. That’s not to say every state had a huge stable of developers combing the countryside. They leveraged regional and local partners. Think matrix organization.

4) Strategic research and sophisticated firm targeting methods. Good news – no more random samples and mindless business surveys. The best programs I found are using business intelligence and predictive models to find and support high-impact, growth-oriented firms. This is probably one of the most underutilized approaches, despite the availability of both industry and firm-level data, but I am hopeful the places investing here will see big yields.

5) Coordinated outreach and business intelligence gathering. Ask any BRE program manager what their biggest constraint is, and they’ll likely tell youtime. It’s the time needed to talk to firms and do that critical needs assessment PLUS respond PLUS ongoing monitoring. The most creative programs have figured out how to leverage partnerships to get more people in the field and use technology to monitor firm-level activity in a more real-time way. They have also figured out how to open up more continuous conversations and pull in business intel from disparate sources. And then they share it with the team so people can act on it. Yep, you read it here first.

6) A comprehensive, value-added service delivery system. This is where the magic happens. I was blown away by some of the tactics being used to link companies to resources in new and different ways. The siloed case management approach is falling by the wayside and new network models are emerging. Sometimes it’s simply combining existing assets in novel new ways. It requires a framework and common goals, but it can be done. It’s all about leadership. There’s also a fair amount of investment in industry-led consortia models where businesses organize their own service array. It’s ok. Buy the coffee and get out of the way.

7) Emphasis on capacity building and professional development for the economic development community. You know I’m a big fan of leveling up the profession and almost every manager I spoke with quickly and enthusiastically acknowledged the importance of professional development. National and state associations made the list, but training that supported this new way of doing business, developed specific industry knowledge, and supported the unique work of BRE program managers was also mentioned. Think everything from CEcD to PMP.

8) A supporting technology platform or CRM. Last but not least was the enthusiastic endorsement (and actually utilization) of a robust client relationship management system. The best ones let people put information IN but also lets you get in OUT in an organized fashion, not just to track activity, but also analyze trends and extract very specific data on firm characteristics. Again, the most progressive organization weren’t using their CRM to cover their collective asses, but were actually working to build a strategic project management and business intelligence system. (Sorry, I said asses.)

 

You can read more and grab Sara’s white paper here.

Thanks, congratulations, and knock em dead, Sara!