MuniLand

Republicans’ jobs plan: The war machine

Although Republicans have been insisting on cuts to federal spending, they are fighting to keep the defense budget off limits. They agreed to make cuts to military spending as part of last year’s sequester agreement, but there is a full-court press in progress to derail the cuts as the date on which they are set to take effect nears. This well organized campaign involves members of Congress, governors, mayors and military contractors. Here is what is involved, according to the House Armed Services Committee:

If sequestration takes effect in January, the defense budget would be cut an additional $55 billion per year from the levels established in Budget Control Act. That would mean an additional $492 billion in cuts on top of the $487 billion already being implemented [over ten years]. In total, over $1 trillion would be cut over the next ten years with disastrous consequences for soldiers, veterans, national security, and the economy.

This amounts to a reduction of around 14 percent to the defense budget. Even with the cuts, the U.S. will remain the biggest military spender in the world by far. In its pitch to put off the cuts, the House Armed Services Committee invoked the threat of job losses:

Cuts to spending for the acquisition of military equipment alone would lead to the loss of over 1,000,000 private sector jobs. These cuts could push unemployment back up to 9%. Cuts to active-duty and DOD civilian personnel would amount to over 350,000 jobs lost.

The impact will be borne disproportionately by some states. The ten states that will feel the largest pain as a percentage of the state economy are Virginia, Connecticut, Alabama, Arizona, Maryland, Alaska, Hawaii, Wisconsin, Massachusetts, and Missouri.

The Connecticut business laboratory

Connecticut Governor Dannel Malloy is not waiting for the U.S. Congress to pass jobs legislation. Rather, he is moving on his own to get growth happening in his state. Although Connecticut’s output is running on par with national trends he has sent a package of growth proposals to the legislature. It’s an interesting blend of tax cuts, targeted programs for small business and skill upgrades for employees in the manufacturing sector. The Connecticut Mirror recently described the highlights:

$516 million in bonding for business and infrastructure investments, a new tax break aimed at small businesses, and a plan to streamline state regulations.

The single-largest investment in the plan involves adding $340 million to the Manufacturers’ Assistance Account, which provides various low-interest loans and grants to businesses.

An army of corporate lobbyists in the halls of Congress

Now that the Senate failed to pass President Obama’s jobs legislation last night, various pieces of his plan and other pet projects are likely to be introduced separately. It’s unclear whether an extension of the payroll tax reduction or additional unemployment benefits — two key planks of the President’s plan — will get floor time. But corporate interests are getting plenty of attention from members of the Senate. In particular, an army of corporate lobbyists has been vigorously promoting a tax holiday for U.S. multinationals.

Politico says the senior New York US Senator, Democrat Chuck Schumer:

has been quietly courting some Senate Republicans and Democrats to see whether there is any appetite for merging a GOP-backed idea — a tax holiday for corporations to bring home their overseas profits — with a Democratic-supported plan of creating a national infrastructure bank.

There is no evidence that giving multinational corporations a big tax break on profits earned overseas will create jobs or stimulate the economy. But some, like former director of the Congressional Budget Office Douglas Holtz-Eakin, believe that a tax holiday will actually create economic growth. Holtz-Eakin writes in Bloomberg:

Obama proposes direct aid to local governments

Obama proposes direct aid to local governments

Among the proposals made by President Obama in his jobs speech last night was his call for the federal government to fund the costs of public school teachers, firemen, policemen and first responders fully. This appears to be the only direct cash subsidy for jobs in his plan.

The American Jobs Act, if enacted by Congress, would specifically allocate $30 billion in funds for teachers and $5 billion would support the hiring and retention of public safety and first responder personnel. Using 2010 Census data this would provide a subsidy of approximately 12% to local governments for their elementary and secondary educator’s expenses and 8% for police and firefighters. The 2009 Recovery Act allocated $47 billion to local governments for teacher salaries so this proposal is about 40% less.

President Obama’s plan also includes “$25 billion investment in school infrastructure that will modernize at least 35,000 public schools.” While sounding good it’s important to point out this would give each school about $715,000 in funds for renovations. It’s helpful but not really a substantial amount.

Must infrastructure spending shrink along with muniland?

Paul Krugman at the New York Times has a good graph that shows a substantial withdrawal of government demand from the economy. He attributed this to the decline of federal government stimulus to state and local governments as the American Recovery and Reinvestment Act winds down. There is also another factor that is reducing government demand: state and local governments are issuing less debt, which in turn creates fewer building projects and construction jobs.

Municipal bond issuance is about $108 billion less this year than the same period in 2010. Several stories today highlight how states and cities continue to face fiscal challenges that cause them to lower the amount of municipal bonds that they issue for infrastructure projects.

Does reduced state and local infrastructure spending suggest a rationale for increased national infrastructure spending as hinted at by President Obama? Will his proposal be big enough to make up the shortfall of municipal spending on infrastructure? From Bloomberg:

Muniland is shrinking

Although municipal tax revenues have rebounded in the last few quarters, the declines of prior years have hit state and local employment hard.  In the chart above Matt Yglesias shows the collapse of state and local revenues; with the collapse of revenues we’ve seen the loss of many muniland jobs. Now the story is pivoting to large potential job losses at the federal level.

The New York Times is reporting that:

The financially strapped U.S. Postal Service is considering cutting as many as 120,000 jobs.

Facing a second year of losses totaling $8 billion or more, the agency also wants to pull its workers out of the retirement and health benefits plans covering federal workers and set up its own benefit systems.

Singing the passion song

Singing the passion song

Kathleen Kennedy Townsend, the former lieutenant governor of Maryland, writes passionately in The Atlantic about the need to create jobs in the United States, especially those linked to infrastructure. I welcome her opinion as we need more passionate voices drawing attention to the need to stop outsourcing American jobs. We will never recover if we make economic decisions solely on the the basis of manufacturing costs. Ms. Townsend says:

As a country we have to decide what our values are. Do we really want to be a nation that funds our spending spree through the Chinese, who then make our goods and do our work while we go into debt and remain unemployed? Work is more important than saving tax dollars. Jobs are critical. Work, not an unemployment check, is what makes people feel they are worth something.

I hope the combined forces of politicians, the unions, and the Chamber [of Commerce] will eventually overcome the resistance to the infrastructure bank. We need to create jobs, and we need to rebuild our roads, railways, sewage, and water systems. Most of all, we need to revive our sense of energy and excitement — the deep fulfillment that comes of making things we can touch and feel, things that really improve our lives.

America will never recover when China builds our infrastructure

End game for America’s jobs

America will never recover if we outsource everything, including our public infrastructure. Bloomberg made the excellent video above about California outsourcing the construction of a portion of the San Francisco Bay Bridge to Shanghai Zhenhua, a Chinese firm. Shanghai Zhenhua is assembling the section and will then ship it to California for installation. The state is supposedly saving $400 million with this move. The workers at the Chinese facility are making $12 dollars a day.

In times of fiscal stress it’s easy to understand why public entities are trying hard to cut costs. But this “cost cutting” is really just off-shoring American jobs. Something has to give — we can’t recover without creating American jobs. It’s our choice, and I choose spending more and creating jobs at home.

Background on the project from Bloomberg.

Hungry market gobbles up new municipal bonds

Bond Buyer reports:

The week’s new inventory can’t seem to reach the muni market fast enough. One trader in Florida said there is little product anywhere. “There are fewer bonds than usual,” he said. “It’s hard to find anything to sink your teeth into.”

The foolishness of Ann and Amanda

Television is my least favorite medium because pundits usually strike outlandish poses that are wholly disconnected from the facts. Case in point is the short video above from MSNBC with Chris Hayes of The Nation, author Amanda Foreman, pundit Ann Coulter and political commentator and comedian Bill Maher. What are these people talking about?

Amanda Foreman: “Government doesn’t create jobs. Ideas create jobs. Innovation creates jobs.”

Fact check: State and local governments employ approximately 19.6 million people.

  • # Editors & Key Contributors