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Industrial Fumes

Gov. Bob McDonnell's job-creation plan may be little more than an illusion.



Just 11 days into his governorship, Republican Bob McDonnell used a national television platform of rebutting President Barack Obama's State of the Union address last week to issue calls for more job creation and limiting big government.

Obama delivered essentially the same message. Like McDonnell, he urged new programs to create jobs. And like Obama's ideas, McDonnell's are modest, fringe efforts that probably won't do much to shrink Virginia's December unemployment rate of 6.7 percent, a full three points less than the national average.

McDonnell is framing a major jobs push around an initiative led by Lt. Gov. Bill Bolling, with a goal of creating $311 million in new revenue streams over five years and creating more than 29,000 jobs in the next two years.

To get there, McDonnell plans typical meat-and-potatoes projects such as boosting the benefits available through the Governor's Opportunity Fund to attract relocating companies, a slew of expanded tax credits, easing up on capital gains taxes, boosting small businesses and increasing the percentage of state contracting in special rural and depressed-area business zones.

He backs more public-private investments and more biotechnology — everyone's panacea for economic growth.

Other ideas are a bit goofier. Miffed that an upcoming Walt Disney Co. movie about Secretariat, the champion racehorse reared in Hanover County, is actually being filmed in Kentucky, McDonnell wants expanded tax credits for filmmakers and production companies that spend at least $250,000 to produce films in Virginia. And he wants some of the tax from the sale of wine used to market Virginia's growing but small wine industry.

It remains to be seen how helping the tinsel and Chardonnay crowds really will address business sectors where Virginia hurts most. According to recent Virginia Employment Commission data, the most stressed sectors are construction, manufacturing and information technology. Other laggards are finance, professional services and transportation.

Of all the state's metropolitan areas, Richmond has been hit the hardest, next to Winchester, according to Employment Commission Senior Economist Ann D. Lang. Among the capital area's losses are more than 12,000 well-paying jobs following the implosion of three marquee companies.

Among the dead are LandAmerica, fatally hurt by the subprime mortgage lending meltdown, computer chip maker Qimonda, which got caught in a global market squeeze, and retailer Circuit City Stores, the victim of poor internal management. It's unclear how any of McDonnell's initiatives would alleviate such damage or prevent it in the future.

Curiously, however, McDonnell is making a major deal about the iffy prospect of drilling for oil and natural gas off the Virginia coast. Taking a chapter from Sarah Palin's “Drill Here, Drill Now,” playbook, McDonnell made offshore drilling a big part of his campaign.

He hadn't even been sworn in as governor when he fired off a letter in December to Obama's Interior Secretary Ken Salazar, urging that the federal government hold a lease sale in 2011 of a triangular tract of underwater land about 100 miles off the Eastern Shore. Citing a study by Old Dominion University president James Koch in 2005, McDonnell says that enough oil and gas could be found to create 2,578 jobs, $7.84 billion in capital investment, payrolls of $644 million and $271 million in state and local taxes.

As McDonnell put it in his address: “In Virginia, we have the opportunity to be the first state on the East Coast to explore for and produce oil and natural gas offshore. But [the Obama] Administration's policies are delaying offshore production, hindering nuclear energy expansion and seeking to impose job-killing cap and trade energy policies.”

There are a few problems with McDonnell's plan. First, no one really knows how much petroleum is in the area, says Karen Matusic of the American Petroleum Institute. Koch, the past ODU president, says that his study was actually a quickie extrapolation and more review is needed. McDonnell wants state revenue from oil production to help solve transportation issues, but even in the best case, oil wouldn't flow until nearly 2020. And a number of other interested parties, including environmentalists, the New Jersey seafood industry and former high-ranking naval officers, all have taken issue with drilling off Virginia's shores.

Even though Obama pushed offshore oil and gas in his State of the Union speech as well, federal officials have postponed the lease sale later than 2011, drawing McDonnell's wrath. Earlier attempts to explore off the mid-Atlantic coast have turned up nothing. In the late 1970s, for instance, oil patch construction company Brown & Root leased large land tracts near Cape Charles to fabricate giant offshore drilling platforms. The land eventually became a luxury golf course after no oil was found, and a moratorium on offshore drilling was begun in 1983.

If  McDonnell wants to create jobs, he might consider playing to the state's strengths. The fastest-growing job sector, according to the employment commission, has been the federal government.

That has its own ironies. A staunch conservative, McDonnell says he wants limited government and tough curbs on spending. Yet Virginia's economic ace in the hole is its proximity to Washington and its rich mix of federal defense and security employment. Such jobs mitigated recession damage in Northern Virginia and Hampton Roads. Metro Richmond's woes would have been much greater had it not been for military expansions at Fort Lee in Hopewell.

That brings up another McDonnell irony. He loves to advertise his Army service and that of his daughter while lashing into the typical, right-wing bug-a-boo of the evil federal government. The conundrum, of course, is that an expansion of government may hold the state's best chance at generating significant job growth during the next few years. Reducing taxes and offering incentives to relocating businesses have long been the GOP's answer to building the economy, but the most recent recession has exposed something more troubling: Without a healthy manufacturing base and regional industry, where will the jobs come from?

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