Everyone agrees that robust, vibrant private business activity is the foundation of a healthy, successful economy. However, to compensate for the negative impact of depressed consumer spending on Maine’s economy, government must play a substantial role. It alone can provide the proper prescription for an ailing economy.
The right prescription for this economic illness is timely and targeted investment. The American Recovery and Reinvestment Act, passed in 2009 with bipartisan support, including that of the entire Maine congressional delegation, succeeded because it was both of these things. According to the Council of Economic Advisers, which is statutorily required to evaluate the efficacy of ARRA’s job creation efforts, 10,000 Maine jobs have been created or saved. Much of the funding from ARRA went to transportation and infrastructure, education, and health care investments.
This Legislature cannot pass something of ARRA proportions, and in fact, has limited options to meet both its constitutional and statutory responsibility to balance the budget even in times of declining revenues and its public duty to act to spur job creation and preservation.
One effective option open to the Legislature is the issuance of bonds. A successful bond package would create jobs now and encourage future public and private investments that can serve as the foundation of future prosperity. LD 1816, with its emphasis on transportation and other critical infrastructure projects, could create approximately 2,415 jobs.* This represents a substantial boost toward full recovery.
Now is the time for an appropriate amount of state government investment to help fuel Maine’s economy and create and preserve thousands of much needed jobs. Even with adoption of this bond package, the FY 2010 debt service ratio of general obligation debt as a percentage of general fund, highway fund, and revenue share revenues would be 3.52 percent. The ratio in FY 2011 would be 3.72 percent. Both these numbers are well below the long-established 5 percent threshold.
For the reasons stated above, the Maine Center for Economic Policy strongly encourages passage of LD 1816.
*This number is obtained using widely-accepted RIMS II Final Demand multipliers, which estimates that for every $1 million spent in construction, there will be 23 jobs created throughout the economy.