So...How Are We Doing?

How fares the Vermont economy? Two recent reports shed considerable light on just how well the Vermont economy did over the past decade, and how Vermont's wealth-producing businesses view their state.

The first is the U.S. Commerce Department's Bureau of Economic Analysis report on Gross State Products for the years 1993-1999. GSP is the market value of goods and services produced by the labor and property located in the state.

Nationally, BEA found that real GSP grew at a healthy average annual rate of 4.0 percent over the seven year span. The eight most economically productive states over this period were, in order, Arizona, Nevada, Oregon, Colorado, Idaho, New Hampshire, Utah and New Mexico. New Hampshire's average annual growth was 6.3 percent. Vermont ranked 41st in the nation (tied with Rhode Island and Maryland), at 3.0 percent growth.

Of the ten sectors of the economy, Vermont grew below the national average in every category save one - growth of government. In that category, Vermont came in 40 percent above the national average. One can't prove that the high growth in government caused the depressed results in the other nine sectors, but it's a good working hypothesis.

The second useful report is the one commissioned by the Vermont Department of Economic Development, grudgingly released only after considerable pressure from House Commerce Committee chair Jim Colvin (D-Bennington). This study was conducted by the O'Neal Group of Hartford.

The good news, as described by Vermont Eagle editor James Dwinnell, is that Vermont got very high marks from leisure travelers. Interviews produced such adjectives as beautiful, peaceful, natural, friendly, independent, and pro-environment.

The bad news came from the survey of businesses operating in Vermont. The O'Neal Group interviewed 100 business executives in person and 203 more by phone. Of those, 63 percent said it was difficult to do business in Vermont. The most prominent disadvantage (77%) was the regulatory environment and the permit process. Personal and property taxes were way down in second place (46%), and communications weaknesses ranked third (27%). The regulatory quagmire was cited by every sector except high-tech, whose most serious problem was finding qualified employees. Almost half (49%) of the businesses surveyed said Vermont is unfriendly to business.

"When the O'Neal Group tried to find the biggest economic advantage to operating a business in Vermont, they amazingly found none, " Dwinell writes. Said the report, "Even the most committed Vermont businesses recognize that they are putting themselves at a competitive disadvantage by being in Vermont. "

The report further concluded "What they (the businesses) object to most is the adversarial stance of the people administering the regulatory process." Many regulators appear to believe that "growth equals harm to the quality of life", and consider it their public duty to put as many obstacles as possible in its path.

Every election year the candidates for governor and legislature declare that Vermonters can have economic growth while preserving the environment and quality of life that Vermonters cherish. They are quite right about that. Once elected, however, a majority, regardless of party, becomes content with the pattern of the past decade: more state government, higher taxes, more mandates, more wage and price fixing, and zero reform of the regulatory process and its business-hostile bureaucracy.

New Hampshire, with a lot less government, had Gross State Product growth at more than twice the rate of Vermont. Only the most critical Vermonter would describe the Granite State as an environmental disaster. New Hampshire's prevailing political philosophy favors small government, low taxes, few mandates, and reasonable regulation, leaving people to earn more and keep more of what they earn. Enviros, Sanderistas, and the trust fund gentry may prefer low growth-big government Vermont, but it's a safe conclusion that business owners and working families fare better in our "freedom and opportunity" oriented neighbor to the east.

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June 2001