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Dismal economic indicators

| Monday, Nov. 19, 2007

The bad news about Pittsburgh is that even the good news is a reflection of what's wrong.

On what's good about our region, for instance, we're told that houses are cheap, the air's cleaner, traffic isn't bad and crime is low.

In fact, each of those allegedly positive indicators is a direct consequence of our long history of political blunders and the subsequent disintegration of the local economy.

Kill off what's left of the local economy, force the young to leave the region for jobs, and we'll have no traffic, even cleaner air, really cheap houses and near-zero crime. Geezers don't do a lot of muggings.

A May 2007 report from The Wharton School at the University of Pennsylvania, "Issues Challenging Pennsylvania Small Business," provides some insight into the reason for the economic decline in Pennsylvania and our local region:

• "A study examining the liability environments of the 50 states indicates that the environment in Pennsylvania is less favorable than in neighboring states," i.e., the cost of lawsuits and liability insurance is higher. "Pennsylvania ranks 32nd in the 2007 U.S. Chamber of Commerce State Liability Systems Ranking Study. This study looks at how senior attorneys in the business community view the fairness of the court systems in all 50 states. All of Pennsylvania's neighboring states rank better than Pennsylvania in the study. Delaware ranks 1st, New Jersey ranks 26th, Ohio ranks 24th, Maryland ranks 29th and New York ranks 19th."

• On workers' compensation insurance costs, 30 states have lower premium rates per employee than Pennsylvania. On the price of health insurance, 37 states have lower costs per employee than Pennsylvania.

• "Energy costs in Pennsylvania are generally higher compared to neighboring states." On gasoline taxes, only seven states have higher taxes per gallon. With natural gas, Pennsylvania's price is higher than in the neighboring states of Ohio, Delaware, New Jersey and New York; only Maryland is higher than Pennsylvania.

• "Forbes magazine published their first 'The Best States for Business' in August 2006. Pennsylvania ranked a rather dismal 41st overall," i.e., only nine states were worse. In "Business Costs" (the cost of taxes, labor and energy), Pennsylvania ranked 38th. In "Growth Prospects," reflecting projected increases in jobs, investment and income, Pennsylvania ranked 44th.

• "On Beacon Hill's 2006 State Competitiveness Report, Pennsylvania ranked 32nd." On Expansion Management magazine's evaluation of state government (how well the state Legislature "minds the store"), Pennsylvania ranked 39th. In the Pacific Research Institute's 2004 Economic Freedom Index (measuring "the right of an individual to keep what he earns, produce what he wants, and compete in product and labor markets of his own choosing"), Pennsylvania ranked 45th.

Taken together, that's an F (or at best a D with some grade inflation) -- and stupidity has its consequences, especially in the case of our section of the state. In population, Southwestern Pennsylvania lost more residents over the past seven years than any other area of the nation outside of hurricane-ravaged New Orleans. With job creation, the rate of local employment growth since 2001 has been consistently lower than the national average and lower than most every other region in the state.

Where Pennsylvania ranks the lowest is on tort costs and reforms, on measures taken to correct the legal abuses under which individuals seek compensation for allegedly wrongful injuries or damages suffered. The Pacific Institute's "U.S. Tort Liability 2006 Index" ranks Pennsylvania 47th -- only Rhode Island, New York and Vermont are worse.

Kevin Shivers, Pennsylvania state director of the National Federation of Independent Business -- the nation's largest small-business organization -- points to the direct link between this lack of legal reform and the state's economic performance: "Small business is the backbone of Pennsylvania's economy, employing half of the state's work force. Tragically, these small employers are just one lawsuit away from bankruptcy."

Shivers notes that all of us pay the high price of lawsuit abuse, in both unemployment and inflation. "Lawsuit filings have tripled in the last 30 years and have increased costs on all fronts," he says. "Junk lawsuits and lottery-sized awards have forced insurance premiums through the roof."

Tom Donohue, president the U.S. Chamber of Commerce, concurs: "The best thing a state can do to attract business is to have a balanced legal system. An unfair legal system sucks the life out of a state's economy."

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