Two prominent media outlets, USA Today and Governing.com, have recently run stories that trumpet increased state and local government hiring. But both outlets make crucial errors in their calculations.
This morning’s jobs report revealed that 79,000 net new jobs were created in the country in May, nearly 50 percent below the consensus forecast of 150,000. Almost immediately following the release, there were loud and insistent calls for another round of monetary and fiscal stimulus. “Job growth stumbles again, raising pressure on Fed,” the Reuters headline ran. My fellow Reuters blogger Felix Salmon called for immediate federal stimulus funded by more debt issuance. Felix’s rationale, like many others’, is that with U.S. borrowing costs so low, stimulating current economic activity is a higher priority than worrying about paying down the debt in the future. Or to put it differently, a little more debt is preferable to enduring the economic pain of the economy rightsizing itself.
Thumbs down on President Obama’s infrastructure bank
The Bond Buyer is reporting that U.S. transporation groups have given the thumbs down to President Obama’s proposed infrastructure bank. The core repayment mechanism for loans guaranteed by the proposed bank would be user fees and tolls. This contrasts to the current methods, which involve state and local governments borrowing in the municipal market to fund projects or the federal government collecting gasoline taxes to fund highway infrastructure. Given the growing opposition globally to the privatization of public assets, the core purpose of the infrastructure bank is bound to create more unease among public players and citizens. From the Bond Buyer: