State's next governor must reverse economic slide

Rossi or Gregoire? More than a month after the election, we still do not know who Washington's next governor will be. But while Republicans and Democrats continue to battle over the final count, it is not premature to think about where the next governor will take the state. After all, January is rapidly approaching — the business of governing cannot wait too long.

And one thing is clear: Despite reported signs of a recovery, the next governor of Washington will inherit significant and fundamental economic problems.

Consider Washington's export picture. The state, particularly the Puget Sound area, is considered to be the most trade-dependent region in the country. According to the Washington Public Ports Association, about a quarter of jobs in Washington are tied to exports, and such jobs pay 46 percent more than the state average.

Further, U.S. Commerce Department figures show that the state is the fourth-largest exporter among the 50 states, lagging only behind much larger Texas, California and New York.

Unfortunately, the same data for 1999 to 2003 indicate that Washington's exports fell badly.

Washington state Democrats like to blame the Bush administration for this economic malaise. Yet, during this period, 38 other states managed to increase their exports. Topping the list are eight "red" states led by Texas, which increased exports by nearly $17 billion, while those for Washington fell by $2.5 billion.

In fact, only the "blue" states of Illinois and California suffered greater losses in exports, placing Washington 48th among the states in export growth.

Nor were Boeing's delivery troubles to blame — even as its total aircraft deliveries fell, Boeing's exports increased thanks to more robust demand overseas. For example, Boeing exported 70 percent of its production in 2002 as opposed to 50 percent the year before, and foreign buyers also bought more-expensive aircraft.

As was reported last year, Washington's exports, when excluding strong aircraft sales overseas, declined by an appalling 8 percent over the previous year.

And export growth is not the only area where Washington trails the rest of the country. In 2003, its average annualized unemployment rate was the 48th worst in the country. The state also lagged behind the national average in small-business growth while the red states of Georgia, Florida and Texas posted the top numbers.

One answer to why Washington performed so poorly in comparison to other states can be found in its state government and regulatory policies. The Fraser Institute's "Economic Freedom of North America 2004 Annual Report" shows that Washington placed, perhaps not coincidentally, 48th among the 50 states in economic freedom as measured by low government interference. Eight of the top 10 "free" states, including Colorado, Tennessee, Texas and Georgia, are red states.

Similarly, while the Beacon Hill Institute's "Metro Area and State Competitiveness Report" last year rated Washington high in openness, technology and infrastructure, it ranked the state 38th in government regulatory and fiscal policies. (Seattle placed first in openness and infrastructure, but 49th in regulatory and fiscal policy among major metro areas.) Again, eight of the top 10 performers were red states, including Alaska, Virginia, Missouri and Texas.

	James J. Na, a senior fellow in foreign policy at Discovery Institute

In other words, the state of Washington suffers from substantial government regulations on personal economic choice and markets that, in turn, degrade business activity and exports. This lack of economic freedom discourages business and job growth and, in fact, encourages existing businesses and jobs to leave the state. Washington's recent corporate emigrants to red states include Airborne/DHL (to Florida and Arizona), Internap Network Services (to Georgia) and Penford Corporation (to Colorado).

Indeed, the real blame for this state's export troubles — and by extension, its economic problems — cannot be laid on the other Washington, the Bush administration or Boeing. The responsibility belongs with Olympia. The top priority for the next governor — whether it is Rossi or Gregoire — must be to work with the state Legislature to improve the overall economic freedom of the state by reducing government interference on economic activities.

To do otherwise is to perpetuate Washington state's regulatory quagmire. Unless there is serious statewide reform to reduce government overregulation and further improve the business climate, Washingtonians will continue to watch in frustration as more businesses and jobs relocate to economically more competitive red states.

James J. Na is a senior fellow in foreign policy at Discovery Institute in Seattle (www.discovery.org) and runs the "Guns and Butter Blog" (gunsandbutter.blogspot.com). He can be reached at jamesjna@hotmail.com