Indy Has the Basics Right
I always like to point out that while every company tries its hardest to convince you of how much different and better it is than every other company in its industry, every city tries its hardest to convince you it is exactly the same as every other city that’s conventionally considered cool. If you watch city marketing videos, for example, they all basically look the same, full of shiny happy people on bicycles, local coffee shops, microbreweries, etc.
Many of the great things in America’s cities don’t set them apart, because they are pretty common. That doesn’t mean they aren’t important. If Indy didn’t have its local coffee shops and breweries, for example, nobody would ever take it seriously as a city. We absolutely need those things.
But unlike coffee shops, which almost everywhere has these days, there are other basics that Indy has which many other places do not have in place. That gives us an advantage.
That starts with a strong state fiscal position, low taxes, and a very business friendly regulatory climate. A lot of the very prosperous coastal cities have high costs and high taxes. Curiously, a lot of people argue that this is a sign of strength, not weakness. The high costs, it is claimed, are a sign of strong demand. There may be areas like Manhattan that are in effect luxury boutiques catering to the super-rich where you could make that argument. But unless you are one of the handful of places in the world where lots of billionaires like to hang out on a regular basis, that doesn’t apply nearly as much as people claim.
I’m not going to argue that factors like low taxes are going to create high wage employment in Indiana by themselves. Other factors like a highly skilled labor force count for more. And our product matters just as much as the price. But if Indiana were a high tax state, we could just all go home right now. If Indiana had the same sorts of unfunded liabilities and governance dysfunction of Illinois, then Indianapolis would be under a gigantic cloud of uncertainty.
This doesn’t mean that we don’t have our own problems. We know that there’s a need to address local infrastructure, for example. But these are the kinds of problems that you can actually do something about. There’s basically no prospect of any high tax state every being able to moderate their tax climate.
Indiana’s strong balance sheet and tax environment are a particular asset during this major coronavirus disruption. While federal assistance is already being delivered and more is likely to come, Indiana is in much better shape than others to weather the storm. The state’s $2 billion in reserves mean $2 billion fewer in services that need to be cut or taxes that need to be raised. By contrast, not only did Illinois only have $4 million (yes, million) in its rainy day fund in April, it also had $8 billion in unpaid bills. They’ve been forced to borrow from an emergency Federal Reserve lending program because of difficulties accessing the private market. That’s not a good sign.
Warren Buffett says that it’s only when the tied goes out that you see who’s been swimming naked. The coronavirus is going to help expose the states that have been financially foolish like Illinois, and also reveal the ones that have been fiscally prudent like Indiana.
We are certainly in for a bumpy ride in a lot of ways. We are not going to be immune from having to make painful choices. But a foundation of fiscal strength and a lack of killer regulations is a good platform to be able to not only navigate the post-coronavirus waters but also on which to build an even more attractive community for the future.
