Sunday, July 22, 2018
Business

Trigaux: Florida may still show some flash but nation's dynamic economy is in freefall

We need to talk.

There's a growing undercurrent of data, analysis and conversation out there that the United States economy is losing its spark, its willingness to take smart risks and its ability to rebound after failure.

An economy that once was dynamic is turning brittle. Its skills to adapt to changing times are, quite simply, not what they once were even 10 or 20 years ago.

Where we once found the grit to go to the moon, we can't even agree to fix potholes or bridges.

Signs of economic decline and poor productivity are popping up all over, if you bother to look. The well regarded Kauffman Foundation in Kansas City, which tracks and encourages entrepreneurial activity in the U.S. economy, warns that business startup activity and innovation are flagging.

In Tyler Cowen's new book, "The Complacent Class," the George Mason University economics professor criticizes Americans who, he says, have drawn inward rather than finding and facing new challenges.

"The American economy is less productive and dynamic," he writes. "Americans challenge fundamental ideas less, we move around less and change our lives less, and we are all the more determined to hold on to what we have, dig in, and hope (in vain) that, in this growing stagnation, nothing possibly can disturb our sense of calm."

Florida's economy is not immune to these trends. But as we will see shortly, Florida's economic profile cuts both ways. Yes, the Florida economy's dynamism is — like the country's — in sharp decline. But the state is still faring better than the vast majority of U.S. states.

Talk about damning with faint praise.

I realize this is not a popular topic. Florida and Tampa Bay are awash in leaders brimming with optimism and even "swagger." They don't take well to ideas we're wilting more on the vine than we might realize.

Nor is this a shot across the bow at President Trump, per se. The decline of our dynamic economy has been under way long before Trump, Obama, Bush or Clinton (or even some of their predecessors) occupied the White House.

"America's economic engine is losing steam," warns a series of new and compelling reports. One analysis called "Dynamism in Retreat" outlines the steady decline of the dynamic U.S. economy. A second analysis called the "Index of State Dynamism" was issued in May and tries to assess each state's economy based on its dynamism. The reports are the work of a Washington public policy research group called the Economic Innovation Group.

"In spite of massive changes throughout the global economy, the rate at which businesses close has remained fairly steady in the United States over the past 40 years," the reports say. "In contrast, the rate of new business formation has plummeted, falling by half since the late 1970s — including a severe decline during the Great Recession. From small mom and pop storefronts to high tech startups, new businesses are simply scarcer than ever."

As dynamism fades, the report warns, "we now have more inequality in and among our communities, lower wages for our workers, and less competition in our markets."

Where does Florida fit in this Index of State Dynamism? The good news is Florida ranks a remarkable No. 3 for its dynamic economy — behind No. 1 Nevada and No. 2 Utah. In fact, Florida is the only state east of the Mississippi to even make the Index's top ten list of dynamic states. (The economies of the West, it seems, are more together than the stodgy East.)

Florida's high ranking should be cause to celebrate. But it's an underwhelming victory. Like most states, Florida's dynamic economy scores — based on such factors as businesses opening and closing, labor participation rates and migration rates — have been dropping for decades.

Consider this: In 1994, Florida would have recorded a dynamic economy score of 71.9, ranking the state 6th in the country. In the Index released last month, Florida scored a far weaker 45, based on most recently available 2014 data. Yet the state ranks 3rd in the nation even with lower marks.

"The most dynamic state today scores like one of the least dynamic states two decades ago," the report from the Economic Innovation Group says.

"Wage stagnation? Low GDP growth? Leaders focus on these issues as things to fix but they are not going upstream enough to look at the cause," EIG co-founder John Lettieri said in an interview. "It is the decline of economic dynamism."

Among his recommendations to revive dynamism is recently re-introduced federal legislation known as the Investing in Opportunity Act. Among other things, the act would provide incentives to investors to put their capital into more distressed parts of the country that have seen little improvement since the recession.

Florida may not be perfect, but to many parts of the underperforming country, it can be a role model, Lettieri suggests. "We can learn from Florida's experience."

Economist Cowen insists it's hard to be dynamic and comfortable at the same time. Eventually, the country's headed for a major fiscal and budgetary crisis. And the results, he says, will be impossibly expensive rentals for our most attractive cities, worsening of residential segregation, and a decline in our work ethic.

These themes resonate in "Creative Class" urban economist Richard Florida's latest book. He writes that an unanticipated byproduct of his earlier call for clustering creative talent in cities is that rising prices will squeeze everybody else out of their homes. Even Gallup polls document remarkably low levels of engagement by people at work, a strong reason workplace productivity has flatlined.

To avoid this difficult future, Cowen argues, Americans must force themselves out of their comfortable slumber — and embrace their restless tradition again.

Are they right? Sure feels like something's got to change.

Contact Robert Trigaux at [email protected] Follow @venturetampabay.

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