The Governor's race is heating up. As we approach the October 12 primary, the three major candidates vying to become the state's chief executive, and their supporters, have flooded the airwaves with their pitches to Louisiana voters.
And claims about the economy are front-and-center.
With candidates referencing their own economic statistics and offering conflicting outlooks, it can be hard for voters to know what to think.
On this week's Capitol Access, Greg Albrecht, chief economist of Louisiana's Legislative Fiscal Office, provides some non-partisan context.
Q: First, what are some of the problems with making bold claims about the economy in the context of a governor's race.
Well in those races, and just in general, we that think that adminstrations-- governors and legislators combined have real power or capability to increase or decrease the size of the macro economy. And really they do not. It doesn't matter whether we're in a campaign or not, or whether we're talking about any particular candidate or level. State and local governments just don't have the capability to change the size of their state or local economies through their taxing or spending policies.
Q: State governments don't have nearly as many economic tools at their disposal as the federal government does. What are some of the things the feds can do?
Most economic policy is carried out by the Federal Reserve through monetary policy, manipulation of interest rates and the money supply. Obviously, at the state and local level we have no monetary policy power at all. The federal government also has a trade policy. We have no trade policy at the state level. The federal goverment increases or decreases spending and taxation, and that fiscal policy has signifcant power at the federal level, but not at the state and local level. And the primary reason is we have to run balanced budgets at the state and local level. It's both constitutionally required and the markets just won't finance the kind of deficit spending that they'll finance for the federal government. And our taxes and our spending are also very small, relative to the economy.
Q: What are some of the things state governments can do to promote economic growth over a longer term?
It's at the state an local level where a whole lot of infrastructure-- human capital to physical capital-- infrastructure facilitates economic activity. You know, roads and bridges, court systems, education more than anything thing else. But those are ll the kinds of things that are crucial to facilitating business activitie that are carried out at the state and local level.
Q: I would imagine changes like that take quite a while to make their mark on the state's economy.
You can't really think about that over a short run, or even an intermediate run-- periods of a few years. In the year-t0-year budget horizon there is no real net economic activity or gains to the state, but over time there is. And these horizons can be pretty significant. It's 10 years or more when you're talking about probably the most important thing, which is education and the human capital of your community and your state and your society.
Q: Right. That context is hard to capture in a 30-second TV spot and is often absent from the politically charged messaging common in election season. That's something for voters to keep in mind as they take in campaign ads this fall.
Greg Albrecht, chief economist for the Legislative Fiscal Office, thanks for taking the time to talk.
Alright, alright. No problem.