Delaware's house of cards can fall from lack of fiscal diversity

by HOWARD M. BERLIN

11/16/2003

Despite the usual political naysayers and some signs to the contrary, the economy has picked up quite a bit this year. The stock market is up and some of my retirement funds are up 24 percent.

Congress probably also felt that the economy was good that they gave itself a $3,400 pay raise along with a 4.1 percent hike for its federal employees and the military. In fact congressional salaries have risen about $21,000 in the last five years, with a livable wage of only $158,000 to get by on next year. This latest increase amounts to 2.2 percent and is slightly less than the average wage increase in private business.

According to the Bureau of Labor Statistics, wages among all non-government workers rose an average 2.7 percent from July 2002 through June 2003. Even social security benefits are scheduled to rise 2.1 percent next year.

Conspicuous consumption has also increased. Have you noticed how many radio ads there are for the Hummer H2 at more than $50,000 a pop? Even this newspaper recently had a story about sales of $5,000 handbags and $1,200 boots.

With all this economic boom in the country, what then happened to Delaware? The labor market here stinks. I mean there are virtually no real jobs-the full-time manufacturing jobs, not the grunt near minimum-wage types with no upward mobility for college grads. To no one's surprise, Delawareans were recently told that on Gov. Minner's watch, it lost 10,000 jobs in the last three years. Two of my three children who recently graduated from college in the last two years (one with a master's degree) are actively pursuing job opportunities outside Delaware. Not a good sign.

DuPont is only a shell of its former dominance in the state, having downsized and outsourced jobs. Unlike more than a generation ago when virtually entire families worked for Uncle DuPee, very few Delaware families can now claim that "The Company" employs more than one member of their family.

So what's left? The state's two largest employment sectors are government and credit cards. The state also derives a good chunk of its annual income from corporate franchise fees but this has taken a hit since 9/11.

Simply put, the Delaware has no economic diversity. If either the GM or Chrysler plants, both of whom are barely limping along, closes or one major credit card issuer (take your pick) gets a better deal from South Dakota where the labor and living costs are substantially lower, the house of cards collapses and the state's economic future will be in the crapper.

State employees, the largest sector, did not receive any cost of living for the fiscal year starting in July. In the last 10 years there were several other times when state employees received either nothing or one percent raises when the inflation rate was higher. But there were no layoffs either.

I also can't remember the last time retirees got a cost of living adjustment in their state pension. This doesn't seem to bother many of the state's legislators who are state double and triple dippers. By comparison though, the New Castle County government seems to be awash in extra money that provided for pay raises and beautification projects without raising taxes in the past three years.

Look, I'm no economic guru and I'm not saying the sky is falling-yet. I have written four books on the financial markets and also see which way the wind is blowing. Delaware needs to diversify its economic base if the economy here is to improve. This advice and 75 cents will probably only get me a can of soda. Sigh.

Howard M. Berlin, of Wilmington, is an electrical engineering college educator and a member of The News Journal Community Advisory Board. Send e-mail at w3hb@yahoo.com.