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Va., Md. governors pledge to create jobs but lack money and power to do so

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By Aaron C. Davis
Washington Post Staff Writer
Thursday, February 18, 2010

Even before President Obama acknowledged Wednesday that the stimulus has not done enough to create jobs and called for new federal measures, governors across the country had launched their own initiatives to increase employment.

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But the job-creating ability of governors -- who are making lofty and, at times, suspect claims -- is severely constrained by a lack of money and authority.

Maryland Gov. Martin O'Malley (D) was among more than 30 governors to use a statewide address in recent weeks to vow that tax credits and other measures would entice employers to begin widespread hiring. Virginia Gov. Robert F. McDonnell (R) has gone so far as to declare that his plans will create 29,300 jobs in the next two years, although thousands would come from initiatives that haven't worked elsewhere.

Economists and some proponents of governors' plans say those pushed by O'Malley, McDonnell and others are likely to produce fewer jobs than advertised and exaggerate what states can do to spur job growth. None, for example, appears able to significantly lower their states' unemployment rates this year. And with so many states trying similar strategies to grab a finite number of jobs, one governor's win is bound to be another's loss.

"I'll be honest with you, these things cost money. And given the fiscal situations they are in, there's not a lot they can do in terms of job creation," said Raymond C. Scheppach, executive director of the National Governors Association. He added that he has been surprised by governors' boisterous assertions.

McDonnell, for example, has predicted that with a fraction of the state's likely share of the federal stimulus money, his administration will produce six times as many jobs as the Congressional Budget Office says are likely for Virginia under the jobs package that the Senate is expected to vote on next week.

Even if their plans work as advertised, state numbers show that the tax subsidies O'Malley and McDonnell would give to businesses for hiring unemployed workers would max out after adding fewer than 13,000 workers to the 7 million-person workforce of Virginia and Maryland. That's less than one-seventh of the 99,000 jobs the two states lost over the past year.

Beyond direct tax breaks to businesses, much of the plans by O'Malley, McDonnell and other governors would do little more than recast decades-old development programs, small-business lending options and other initiatives as job-creators.

"You've got to say you get it and you're doing something, but the rhetoric is always going to exceed the reality," said Bruce Cain, director of the University of California's Washington Center.

The Maryland approach

In Maryland, as well as in more than two dozen other states with unemployment insurance systems that have gone or expect to go bankrupt, tax credits might be more about cushioning businesses from rising insurance costs than creating jobs.

O'Malley began writing the centerpiece of his plan -- a $3,000 tax credit for every worker hired off the state's unemployment rolls -- in part to offset a scheduled 300 percent increase this year in businesses' unemployment insurance premiums, administration officials said.

But the immediate incentive for businesses is limited because the payout for hiring workers won't come until April 2011. And even if businesses begin hiring workers right away, fewer than 6,700 jobs would be filled before the state reaches O'Malley's maximum proposed payout of $20 million.


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