As Massachusetts governor, Romney’s record on jobs was unremarkable

February 7, 2012

An overheated industry has gone bust. A tepid economy is not producing enough jobs. And a successful businessman promises he can use his private-sector experience to jump-start the economy.

This is presidential candidate Mitt Romney now, but it was also Romney nearly a decade ago when he ran for governor of Massachusetts, a state that was still reeling from the tech bubble’s burst.

A core argument of Romney’s presidential campaign is that he knows how to create jobs based on his career in finance. As governor, Romney faced his first test in applying his business background to a slow-growing economy — and data show that the results were unremarkable.

Massachusetts was one of just four states that by the time of the financial crisis still had not recovered all the jobs they had lost during the 2001 recession. And, as Romney’s opponents have pointed out, the state ranked 47th in job creation during his term.

The parallels between Massachusetts then and the country as a whole now point to the same central problem that has dogged the U.S. economy the last three times it’s climbed out of a recession: The recovery hasn’t created enough jobs.

Many state policymakers and economists say Romney struggled to apply his business expertise to Massachusetts’s problems during his tenure.

“There was this tremendous sense of a lost opportunity. Nobody questioned this was an incredibly capable man,” said Stephen Crosby, who was secretary of administration and finance for the two Republican administrations before Romney’s. “If he put his skills to work, in a really dedicated and thoughtful and appropriate way, there was a sense that he could’ve had a much greater positive impact.”

Romney’s campaign says he curbed the state’s unemployment problem.

“As governor he confronted an economy very similar to Obama’s economy: high unemployment and no job creation,” Romney spokeswoman Andrea Saul said in a statement. “Under his leadership and economic reforms the Massachusetts unemployment rate went from 5.6 percent to 4.7 percent and the state had a positive record of nearly 50,000 new jobs created.”

But Andrew Sum, a professor of economics at Northeastern University, says the unemployment rate fell only because people were leaving the workforce in droves during Romney’s term. Just one state had a bigger drop in its labor force during the same period, according to Sum — that was Louisiana, which was hit by Hurricane Katrina in 2005.

“There was not one measure where the state did well under his term in office. We were below average and often near the bottom,” said Sum, who is also the director of Northeastern’s Center for Labor Market Studies.

A dot-com bust

When Romney entered office in January 2003, Massachusetts was shedding jobs at a faster rate than the country as a whole. The state had ridden the dot-com boom to greater riches, but when the bubble burst, it struggled to stem the losses.

The state had lost about 158,000 jobs, or 4.7 percent of its workforce, from the first quarter of 2001 to the month Romney took office, according to data from the Bureau of Labor Statistics.

Romney ran for governor vowing to attract new jobs to the state, but there were limits to what he could do. Massachusetts by law had to balance its budget every year, and revenue had taken a dive after the recession, hindering the state’s ability to use public money to stimulate the economy.

In November 2003, Romney signed a modest stimulus, chiefly designed by the state legislature, that included a one-day sales tax holiday and a tax rebate for companies that created manufacturing jobs in the tech sector.

“He thought it was too big. He was doing what the Republicans usually do, and we were doing what the Democrats usually do,” said a Democratic lawmaker who was in the legislature at the time.

The package, costing about $131 million, was tiny compared with the state’s total budget then of more than $20 billion. Today, few involved in Massachusetts’s economic policy even remember it.

Instead, the most pressing issue for Romney was finding money to fill a yawning budget gap of about $3 billion. He avoided raising income or sales taxes, but he targeted what his administration called corporate tax “loopholes.” To pro-business groups, Romney was raising taxes on businesses just when these firms were needed to help grow the state’s economy.

“The fact that he let his commissioner of revenue go on a rampage to raise corporate taxes suggests to me he wasn’t being very energetic about translating his pro-business viewpoint into action,” said David Tuerck, executive director of the Beacon Hill Institute, a pro-business research group.

Michael Widmer, president of the Massachusetts Taxpayers Foundation, remembers a meeting with Romney’s staff in which business groups expressed their displeasure with the tax changes.

“From a pro-business governor . . . it was one, surprising, and two, it had the effect of exacerbating our competitive disadvantages,” Widmer said.

Romney, however, also worked to prevent the shutdown of a major Air Force base and helped win a new facility built by Bristol-
Myers Squibb in Devens.

“Mitt Romney spent 25 years as an entrepreneur and businessman in the real world economy and understands what it takes to create good jobs,” said Saul, the campaign spokeswoman.

Stemming the losses

In early 2004, a year into Romney’s term, Massachusetts began to stop losing jobs. The state then added jobs every year until Romney stepped down in early 2007. But it was still more than 100,000 jobs below the peak of early 2001. By mid-2008, another recession had hit, and the number of jobs began falling again.

Other states that never fully recovered from the 2001 downturn were Illinois, Michigan and Ohio, all industrial states that had lost scores of manufacturing jobs. Like those states, Massachusetts has been losing manufacturing jobs for more than a decade. And Romney was unable to stem the tide. At the end of 2002, just before he entered office, there were 338,000 manufacturing jobs in the state. By the time he left, there were 298,000, a drop of 12 percent, according to federal data.

“Under his administration, Massachusetts lost a huge number of blue-collar jobs that provided an opportunity for the middle class,” said Sum, the Northeastern economist.

Widmer noted that it’s often hard to pin a state’s economic performance on a governor.

“The job-creation record was weak. I don’t fault Romney for that. . . . There were larger economic conditions,” Widmer said. “On the other hand, he’s campaigning as a job creator.”

Jia Lynn Yang is a staff writer at The Washington Post who covers policy and business. Before joining the Post, she worked at Fortune magazine.
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