The Philadelphia Citizen: The War on Growth
The city is banning cashless stores while the state cuts investment in tech startups. Remember when progressives used to believe in creating jobs?
By Larry Platt
February 25, 2019
This article was originally published by The Philadelphia Citizen.
Is it me, or have we been enduring more jump the shark moments in our civic life than at any time in recent history? After all, growing a local economy that provides opportunity for all ought to be the overriding challenge in a city with the nation’s highest poverty and tax rates, not to mention anemic job creation numbers. Yet, with an election looming, it seems we’re treated to story after story wherein progressives—employing all the right buzzwords—nonetheless actually wage war on growth.
Let’s zero in on two such examples. City Council’s banning of cashless retail stores was an unwitting admission that our august legislative body fundamentally misunderstands its role. To be clear, the movement against cashless retail outlets is motivated by a well-meaning desire to level the economic playing field in a city where 6 percent of the population is unbanked and 22 percent are underbanked.
But rather than passing a law that micromanages the policies and customer relations of its city businesses, wouldn’t Council have been better served to hold thoughtful hearings and pass legislation aimed at diminishing the number of our citizens who don’t have access to credit cards or even checking accounts? Mandating that businesses accept cash does nothing to lift anyone out of poverty, after all.
“This is more of like a pause,” Councilmember Maria Quiñones-Sánchez, the bill’s sponsor, told the Inquirer. “We don’t want to stop the business model, but clearly we don’t want people to walk into certain businesses and feel like they’re not welcomed.”
I’m all for patrons feeling welcome in stores throughout our city, but is that really our biggest problem? How about coming up with some policies that empowers those customers to have enough scratch in their pockets so, in the event they don’t feel welcome, they’re free to take their business elsewhere?
Alas, it seems like Council, rather than do the hard work of real problem-solving, prefers to appeal to popular resentments and pander to public opinion. How else to explain that, in a city with 400,000 impoverished citizens and an economic growth rate that places us behind 23 of the nation’s top 25 cities, our Council has passed a resolution symbolically banning R. Kelly from the city and voted unanimously to place on the May ballot a question to amend the Home Rule Charter that would change the document’s wording, from councilman and councilwoman to councilmember, in order to insure inclusivity toward those who are nonbinary and who don’t identify as man or woman.
Now, you want to keep R. Kelly from our city streets, and you want to update the wording of a document nobody actually reads? Have at it. I’m not opposed to either move. But let’s also acknowledge that what our elected representatives choose to focus on is an announcement of our priorities. Don’t we want those we hire to manage our shared public life to be working on making it just a little bit easier for us to make ends meet at the end of every month?
Instead, our Council seems obsessed with micro-managing local businesses—thereby making it harder for them to hire and compete. Time and again, our body of electeds—most of whom haven’t worked in the private sector—has seemed to fixate on telling businesses how to operate, whether trying to prohibit employers from inquiring about the past salary history of potential hires or mandating predictive scheduling, as in the recently passed Fair Workweek legislation.
This isn’t to relitigate those issues. (Though we could; when it comes to the salary history issue, for example, according to Payscale’s Lydia Frank, women who decline to disclose their pay history have actually been offered 1.8 percent less than those who do disclose, seeming to undercut the whole premise of the pay history ban.) But it is to suggest that a city is not an island, and you need employers in order to grow jobs. Philadelphia is competing with suburban counties as well as neighboring states in trying to draw businesses here. It’s not a competition we’ve been winning, thanks to the tax and regulatory burdens we disproportionately place on business.
Two recent examples bearing this out come to mind. When Equus Capital moved its staff of 110 from Center City to Newtown Square last year, CEO Dan DiLella made it clear he was fed up being treated like the ATM machine for a poorly run city government. And how telling was it when, in 2016, Aramark decided to stay in the city, and there was Mayor Kenney and other leaders holding a celebratory press conference? Roger Federer doesn’t celebrate when he holds serve. When you’re high-fiving that you haven’t driven yet another business out of town, it’s really a telling admission that you’re not growing your tax base.
If our Mayor and Council would only borrow from the playbook of cities like Boston, Pittsburgh and even Oklahoma City and do the hard work of investing in inclusive growth, perhaps our story wouldn’t be one of retrenchment and struggling to stem decline.
Instead, ideology stands in the way of that new Philadelphia story. Under Mayor Kenney, taxes have gone up a whopping 17 percent; what return have you seen on that investment? At some point—especially when Penn and the city itself are our two biggest employers, both essentially tax-exempt—there is nothing left to redistribute. The only option is to grow the pie if citizens want more slices.
But it is not just city government that has misplaced the growth gene. When last we saw Governor Tom Wolf, he was pulling out all the stops to try and land Amazon, right? Something like $4.6 billion in incentives? As I wrote at the time, you can be offended, and we all should be, that Amazon quite legally paid no federal taxes last year despite $11 billion in profits, and, at the same time, concede that, in a commonwealth that has lagged well behind peer states in job creation, it would be political malpractice to turn your nose at an influx of 50,000 high wage jobs.
Of course, we didn’t get the nod—and one source close to the deliberations reports that, owing to our anti-business climate, Philly wasn’t even close to winning. But more troubling than that is Wolf’s subsequent about-face on investing in economic growth. In his rather visionless budget proposal, Wolf has proposed continuing a longstanding lack of funding for Benjamin Franklin Technology Partners, the program created by the General Assembly back in the early eighties—way ahead of its time—to drive growth by investing in early stage startups. Its funding has been cut by more than half in the last decade—from $28 million to $14 million, out of a budget of $34 billion. Wolf has doubled down on the trend—at exactly the moment we need more, not less, investment in innovative companies that can grow our tax base.
There are all sorts of statistics that attest to the good done by BFTP through the years, like the fact that for every state dollar invested in it, $3.90 in additional tax revenue has been generated. But forget about the dry statistics. Here at The Citizen, we often profile startups that are doing well and doing good at the same time. In some quarters in these polarized times, it’s become heresy to celebrate businesses—even ones that make a social impact.
But that critique confuses crony capitalism with what David M. Smick calls “Main Street capitalism” in his book The Great Equalizer: How Main Street Capitalism Can Create an Economy for Everyone. He cites a World Bank study showing that, between 1980 and the 2008 Great Recession, the globalized capitalist system moved a billion people out of poverty worldwide.
Yes, there are bad actors. But Philadelphia isn’t home to a slew of rapacious corporations. We do, however, have a growing cohort of companies that are rethinking the mission of business; we are, after all, the birthplace of the groundbreaking B Corp movement. And many of those companies likely wouldn’t exist without early-stage bets placed on them by BFTP, companies like LIA Diagnostics, makers of a flushable and biodegradable home pregnancy test that is the first real disruptive product in that market in fifty years. The problem is not LIA Diagnostics; the problem is we don’t have enough LIA Diagnostics to compete with other cities and states. And progressives like Tom Wolf, Jim Kenney and our City Council know this, but lack either the vision or political will—or both—to make long term investments in companies that can expand our tax base.
Last week, the Center City District released Building Out From The Core, its 2019 housing report. “Strongest Growth in Housing Production in Center City Philly Area Since 2002, New Report Finds,” read the headline on philly.com. But the report could just as easily be seen as an important warning. We could be closer to becoming Flint, Michigan than Seattle or San Francisco—if we’re not careful.
“There is a significant difference between the local redistributive capacity of cities like San Francisco which has a median income of $110,800 and has grown jobs annually at the rate of 3.4 percent since 2009, or Seattle, median income of $86,800 and which has grown at 2.6 percent, or New York City with median income of $60,900 and which has grown at 2.5 percent, and Philadelphia’s median income of $39,800 and growth rate of 1.5 percent, 23rd slowest of the country’s 25 largest cities, despite the acceleration during the last few years,” writes Center City District President and CEO Paul Levy in the study’s summary. “Faster growth, more jobs and rising incomes should be the top priority for Philadelphia’s leaders both to improve housing opportunities for lower income households and to retain our time-limited surge of Millennials in the city.”
Here’s a novel idea. We have a mayoral and council elections coming up. How cool would it be to put aside the R. Kelly resolutions and the handwringing over the mental health issues of the Republican party’s hand-picked mayoral candidate, and make this election about how we get more of our fellow citizens working every day and paying taxes? Is that asking too much?