Thursday, March 29, 2012

The St. Louis economy

The Post-Dispatch has had a small flurry of articles on the current state of the St. Louis and Missouri economies. The thrust of the articles is that the area is underperforming relative to the rest of the country and is likely to continue doing so unless we focus on education. Here is a roundup:
  • A March 13 post by Dave Nicklaus that discusses the revised estimates of employment growth for 2011.  According to new BLS data (and my own estimates beginning last September), official data had been overstating job growth for the first half of 2011. The new estimates indicate a net loss of 3,900 jobs last year.
  • A March 23 post by Dave Nicklaus describing how St. Louis has returned to its usual role of economic laggard.  He reports Dave Rapach's forecast of 1 percent job growth in 2012.  The post also includes my points that we are lagging in the short term because the areas doing well have oil and/or natural gas, and in the long term because of weak human capital formation (education).
  • A March 28 article by Tim Logan reporting on a Brookings study claiming that St. Louis growth slowed toward the end of last year. My own view is that this study is not entirely accurate because it relies on data that will be revised upward (see the next item).
  • A March 28 post by Dave Nicklaus on some good news for St. Louis: My benchmark revision showing that last summer was better than the BLS estimates show.  Specifically, according to my estimates, job growth in 2011 was actually 4,200 rather than a loss of 3,900. I expect further upward revisions for the 4th quarter.
  • An editorial today urging the governor and state representatives to focus on reforming Missouri's system of higher education. They quote my point that education is our real problem, not the business environment or lack of tax credits.

Tuesday, March 27, 2012

Irony on top of irony on top of Hillary

During the 2008 Democratic primary season, Barack Obama had very strong feelings about the individual mandate.  He didn't like it:
Obama felt so strongly about the issue that he even cut an ad attacking Clinton for her support of the individual mandate. "Hillary Clinton's attacking, but what's she not telling you about her health care plan?" the April 2008 ad asked. "It forces everyone to buy insurance, even if you can't afford it, and you pay a penalty if you don't."
In an earlier battle against Hillary Clinton's health care plan, it was conservatives and some Republicans who were pushing it as part of an alternative:
Former House Speaker Newt Gingrich on Saturday defended his previous support of a federal mandate requiring people to buy health insurance by saying that "virtually every conservative saw the mandate as a less dangerous future" than the health-care plan being advanced by then-First Lady Hillary Clinton in 1993 and that the idea of mandating that people buy health insurance "started as a conservative effort to stop Hillarycare in the 1990s."
While it is true that it in 1989 the Heritage Foundation published a health-care reform plan that called for mandating that all American households purchase health insurance, the plan did not gain many supporters in Congress.
In fact, the principal congressional advocate of an individual health insurance mandate at the time Hillarycare was being debated in Congress in 1993 was Sen. John Chafee--a liberal Republican from Rhode Island. Chafee later said he abandoned his plan for an individual mandate because, at the time, he could not get support for it on either the right or the left.
 Hillary Clinton just can't seem to win on this issue, no matter which side she takes.

Prospects for the St. Louis economy

Today's Post-Dispatch has a column by Dave Nicklaus that talks about how St. Louis has slipped back into its usual position of underperforming relative to the country as a whole:
During the Great Recession and for a while afterward, the metro area's employment reports tracked national trends closely. We suffered the same devastating job losses, percentage wise, as the rest of the country in 2008 and 2009, and we experienced the same halting recovery in 2010.
Then, early last year, the lines diverged. The nation continued to add jobs, slowly but steadily, and St. Louis didn't. For all of 2011, the metro area lost 3,900 jobs, a shrinkage of 0.3 percent.
As for the near future, Nicklaus notes that Dave Rapach of St. Louis University forecasts job growth of about 13,000 jobs for 2012, which feels a little high to about right.  During normal times such growth would be a bit below average, but given the hole we need to climb out of, it would be woefully inadequate.

The article quotes me going on about two recurring themes of mine. The first is that what little recovery the country has seen has a lot to do with the energy sector:
“It's just our usual thing of being behind,” says Howard Wall, chairman of the economics department at Lindenwood University. “The industries that are doing well, we don't have.”
Of late, that's the oil and gas industry. Until someone discovers shale gas under the Gateway Arch, we won't keep pace with states like Texas, North Dakota and Pennsylvania.
The second is that we need to keep our focus on things we have control over and which affect our long term growth prospects:
“Our long-term problem,” Wall continues, “is human capital. We have not enough workers who are highly educated and too many of the poorly educated.”
Political leaders, however, don't get it. Instead of figuring out how to improve Missouri's education system, elected officials debate tax-credit programs that shift money to favored industries.
They're fighting over pieces of the pie rather than making the pie bigger.

Conflict in suburban St. Louis

There's an interesting hubbub going on in Wildwood, Mo., a vast and mostly undeveloped suburban city about five miles from where I live.  Inspired by the New Urbanism movement, Wildwood was formed 17 years ago to prevent the sort of suburban development that had been seen in the rest of St. Louis county.  To achieve this, the city drew up a master plan that has guided development ever since.  A major component of the master plan is to restrict commercial development to an area called the Town Center.  I'm not much of an advocate for New Urbanism, but if Wildwood wants to pursue it for itself, then fine.

Now it appears that what was meant as a plan for controlled development has been captured by those opposed to any development.  Thus, the city (or elements of its government) wants to restrict development even on land that is within the boundaries of the Town Center, where commercial development is meant to be allowed, and even encouraged.  The Post-Dispatch article misrepresents the conflict by framing it as one between New Urbanists and crazed developers.  It is not.  It is between New Urbanists and those opposed to any further development. New Urbanism is perfectly compatible with development, but the development is meant to be controlled within dense pockets.

Wants = needs = rights = obligations

Charles Sykes has an incisive commentary in Fiscal Times about the transformation of people's wants into taxpayers' obligations: The Entitlement States of America: We Want More!.  Here is the bottom line:
(W)ants have been transformed into “rights” in America and ultimately into obligations and entitlements. The process can be illustrated this way: “I want you to buy me lunch. Therefore, I need lunch. And if I need something, I have a right to it – and you, therefore, have an obligation to pay for it.”
The equation looks like this: Wants = needs = rights = obligations. The laundry list goes far beyond free lunch to include free health care, free cell phones, free birth control, free mortgage bailouts – and on and on.

If this is his "smart" diplomacy, what is his "smart" economic policy

You might have heard that President Obama was caught telling the Russians that he would be able to pursue a missile defense policy that is more to their liking after he is reelected:
“On all these issues, but particularly missile defense, this, this can be solved but it’s important for him to give me space,” Obama said, referring to newly elected Russian President Vladimir Putin.
“This is my last election. After my election I have more flexibility,” Obama said.
Our allies, the Poles, are "rattled", to say the least: Were they trading Poland?

If you were wondering what the President might have up his sleeve if he gets "more flexibility" with economic policy, James Pethokoukis suggests that it might look something like what the Congressional Progressive Caucus is proposing: Obama’s 2nd-term agenda? House Dems propose raising taxes by 40%, including on middle class. The article also has a useful comparison of six different budget plans that are out there.

Monday, March 26, 2012

Conservative disappointment with the Ryan plan

Veronique de Rugy is disappointed with Rep. Paul Ryan's budget plan because it doesn't do "nearly enough to reduce the size of government and make our lives and the lives of our children and grandchildren better."

Public-sector unions are driving two once-proud states over a cliff

There was a time when California and New York were the envy of the rest of the country.  Their economies and cultures led not just the nation but the world, and they were called the "Golden State" and the "Empire State" without irony.  Now, however, both states are pathetic shells of their former selves and are being brought to their knees by rapacious public-sector unions.  In California, Governor Brown had little intention of taking them on and is riding their greed to the state's doom.  I had higher hopes for New York, where Governor Cuomo started out strong, but now he too has found out who owns his party.

The party of Franklin D. Roosevelt should have heeded his words about public-sector unions:
All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress. Accordingly, administrative officials and employees alike are governed and guided, and in many instances restricted, by laws which establish policies, procedures, or rules in personnel matters.
Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees. Upon employees in the Federal service rests the obligation to serve the whole people, whose interests and welfare require orderliness and continuity in the conduct of Government activities.

Comparing budget plans

Keith Hennessey has a series comparing the budget plans of Rep. Ryan and President Obama.  The latest installment compares both to the plan proposed in 2010 by the President's own deficit reduction commission (Bowles-Simpson).  The Ryan and Bowles-Simpson plans have a lot in common, but also differ significantly in some ways.  In short, both plans include dramatic tax reform with lower rates and few deductions; the Ryan plan is revenue-neutral while Bowles-Simpson increases revenue; and both reform entitlements, but in different ways.  It would be great for the country if the debate was about these two serious plans.

But these are not the two plans we are debating.  Instead we have the president's plan, which includes tax deform (higher rates with more deductions) and leaves entitlements on their path toward fiscal disaster.  Here's the most telling illustration of the path our president wants the economy travel along:

Sunday, March 25, 2012

A day in the life of the American economy

If you've ever asked yourself "Why Is the Recovery Slow?", David Boaz says that "one day’s stories about new government assaults on wealth creation and new political transfers of wealth" might provide the hint to the answer:
  • The Federal Reserve is holding an international conference of central bankers to reassure themselves that their “easy-money policies” are working and won’t cause too much inflation this time.
  • The IRS is ramping up audits of the most successful people in the economy. If you make more than $5 million in a year, you can pretty much expect a time-consuming audit.
  • Federal regulators are preparing a drive to tell workers at nonunionized businesses they have many of the same rights as union members, a move that could prompt more workers to complain to employers about grievances ranging from pay and work hours to job safety and management misconduct.”
  • The Department of Energy has placed nearly one-third of its clean-energy loan portfolio on an internal ‘watch list’ for possible violations of terms or other concerns, according to a copy of the list obtained by The Wall Street Journal, highlighting how such concerns have spread beyond the now-bankrupt Solyndra LLC.”
  • The European Union is beefing up its permanent bailout fund to keep failed businesses alive.
  • States are circling Amazon and other online retailers, about to pounce with new taxes.
  • The Labor Department has “stepped up pressure” on PulteGroup, demanding thousands of records on its contracts with employees and subcontractors.

The world is preparing for our economic apocalypse

Leaders of well-run economies are working to insulate themselves from the looming economic disaster that is the U.S. economy:
The quiet back-room planning is driven by the alarming extent to which the Obama administration has already deeply damaged the US economy (compared to Canada) with its policies, actions, and insane deficits. The Harper government are now moving to shut down US environmentalist activity in Canada — “We’re not going to be your National Park.” says the PM — and are already developing scenarios for maximum-possible disconnect from the States in the event Obama and his crew are returned to power in the coming elections.