Following in the footsteps of the president under whom he served, Gov. Phil Murphy is trying to bring an innovation strategy to New Jersey in 2018 that is similar to the one President Barack Obama introduced to the country in 2009.
“We’re digging out of a hole,” Murphy said in a recent interview with ROI-NJ. “We’re the land that time forgot here in terms of the development of this economy.
“We used to be really good at it, we did it in our sleep — and then we stopped. So, we are pulling a lot of different levers right now.”
The economic strategy is one those in the technology industry understand well, and have seen growth from, in the last decade.
Phil McKinney, the former chief technology officer of Hewlett-Packard, wrote in a January 2017 blog post that innovation has been the successful strategy for the past few decades in the country.
“While in older economic models, innovation is seen as an independent force, in innovation economics, innovation is viewed as a central tenet that should be encouraged by government policies and bolstered by knowledge, technology and entrepreneurship,” McKinney wrote. “Spurring these factors should be the main goal of economic policy, along with developing effective private-public partnerships that spark increased innovation and productivity.
“The innovation economy can be illustrated by the U.S. economy of the last few decades. While capital was needed to move the economy forward, it wasn’t the driver. It wasn’t used to build more mills, plants or factories. It was used to invest in research and development, better products and services, and introduce new ones. The most successful cities in America were not the manufacturing hubs, like Detroit. If anything, those cities suffered. The success stories came from the cities that encouraged innovation, like Silicon Valley, Boulder and Portland.”
But, unlike the national-level support that Obama enjoyed in his first few years in office, Murphy has to focus on state resources to achieve any potential success.
“We can do a lot on our own, and we are,” he said.
Between free tuition for community college students and providing rent assistance to startups, Murphy is moving forward with many of the core areas of aid that he believes will lead to a stronger economy. He is supporting renewable energy sources and greater public-private partnerships, has revamped the research and development tax credit, and his administration has made an effort to put greater emphasis on incentivizing startups and angel investors.
Much of this has been either directly from his office or through the state Economic Development Authority. But Murphy made it clear it’s all hands on deck.
“I’m completely convinced you have to get at this in a variety of ways,” he said. “My hope, in the fullness of time, is that we’ll look back and say that we unleashed a lot of different levers in the innovation economy, and we’ll tweak it over time. My strong suspicion (is), like everybody, we all learn over time. What works best, what works less well.
“We’ve got the deputy chief of staff in our front office in charge exclusively of economic development. You’ve got the EDA, you’ve got Choose New Jersey, you’ve got the commission to the secretary of higher education, commissioner of education. I artificially talk about innovation and infrastructure. The fact of the matter is, they lean on each other, and then you’ve got specific policies within each of that.”
All while President Donald Trump’s administration is favoring coal, fighting trade wars and pulling away from incentives of the Obama administration.
“It’s more complicated, because you’ve heard me speak a lot about rebooting the innovation and the infrastructure economies,” Murphy said. “The infrastructure economy is harder with this administration, particularly on something like Gateway, which is a huge project, and their lack of funding, the lack of enthusiasm about funding it, that is a big issue — literally, stuff that impacts the welfare of the 9 million folks who are in New Jersey.”
Murphy, however, said he remains optimistic.
Even after the struggle he faced in passing his first budget this past summer.
“We got 99 percent of what we wanted in the budget,” he said. “There were a couple of things in there that we didn’t get, but they were tiny.
“I don’t like the mix of revenue relative to what I had hoped it would be, but we still got all the money. And, so, we’ve got our own fiscal issues inside the four walls with New Jersey. We’ve mismanaged our house for a long time, particularly over the past eight years. There’s no question about that.”
When asked if he has seen any negative responses from the increase to the income tax for pentamillionaires or the corporate business tax, Murphy said, “No.”
“I’ve heard no blowback,” he said. “Not one person has come to me and said, ‘I can’t believe you just did this to me.’
“I’ve had a significant amount of conversations with the corporate community, almost all of which, if not all of which (were) initiated by me or us to say, ‘Listen, we want to make sure you understand why we’re doing what we’re doing. This is the direction it’s headed.’ Folks out there: I get it. I’m not saying that everyone is happy. I’m not saying that everybody is either going to stay or folks who were looking at coming here will all come here. But when you lay it out, clearly there’s logic to it.”
What he has heard, repeatedly, from visiting various companies in the state, is that the transit system is broken.
“What comes up in every conversation with CEOs are education and infrastructure,” Murphy said. “I’ll give you an example in this particular conversation, and it’s not the first by a long shot. One company, which is in Middlesex County, said to me when I sat with the CEO, I (asked), ‘What’s the biggest X-factor right now?’ And he said, ‘That is our ability to attract millennials coming from either New York city or living in Hudson County via NJ Transit, into the middle of the state to work in the morning and then back out at night.’ He said getting that as good as it can be is the most important thing from the state right now.”
New Jersey businesses have a far more particular relationship with their local municipalities than in other states. The home rule mentality creates a strong bond, and larger anchor businesses can have significant impact and influence.
Critics have pointed to this as one of the reasons the Red Tape Commission under the previous governor, Chris Christie, was well-liked and gave the state a more pro-business vibe. But Murphy sees the benefit in the home rule mentality, too.
“We are the ultimate home rule state,” he said. “There are different layers and you’ll hear a lot of frustrations around permitting as an example, right? To develop a project, we’re trying to streamline that process. I’m not saying it never happens, but it’s rare when somebody says, ‘I can’t believe this is how you do business here. I wasn’t expecting this.’
“People understand when you’re in the most densely populated state in the nation, you’re going to have a different level of standards or different level of care. The short answer is probably more complicated.”
