When Is Someone Going To Ask The Obvious Question?

SETTING THE SCENE: Nevada’s just seen the second straight month in which the unemployment rate as decreased, now down to 12.6% statewide.  Initial claims for unemployment benefits are down 14.9% since December 2010.  [DETR] Job growth is increasing:

Of course, the job levels have a way to go before we’re back at 2004 levels, especially after the plunge beginning in 2008. If there were ever a poster-child for economic diversification Nevada would be a prime candidate.  The following chart says it all:

Our manufacturing line, never a very major component in terms of employment in the first place, tends to drift down after the Housing Bubble cum Financial Crash of 2008.  Mining companies may be major players in Nevada’s political life, but aren’t a major source of employment statewide.

Education and health services employment increased — but not exactly by leaps and bounds.  Construction employment on the graphic looks like a ski jump.  The obvious is obvious: Nevada employment is predominantly tethered to a very recession sensitive industry — gaming.  The way out of this situation is reasonably apparent to any and all: To get out of the bind it seems necessary to emphasize attracting or developing professional and business services, construction projects, and education and health services.  These three already have a toe-hold as Nevada employers, why not start there?

Reading the Governor’s Office of Economic Development’s statement on infrastructure and utilities makes it sound as though we have the systems in place to facilitate information technology, computer data handling, and all the bells and whistles necessary to make a go of professional and business services.  However, employment in this sector inches painfully upward after the Big Crash.  The cause of the sluggishness may be discerned if we parse another piece of the Governor’s pro-business pitch:

“Nevada’s labor market provides high value to businesses, including high-tech industries and international trade; and our talent pool contains a large percentage of workers with advanced degrees.  The demand for skilled labor in Nevada is answered by many customized training programs designed for the needs of the state’s leading industries, such as the Train Employees Now program which provides an industry-specific employer with skilled labor in less time and at lower costs; and On-The-Job Training programs, which support the employer’s desire to train their team in the work environment, and provides subsidies for employee pay during training.”  [ GOED]

Do we have a large percentage of workers with advanced degrees?  84.3% of Nevadans have high school diplomas, compared to 85% nationwide.  21.8% of Nevadans have completed a bachelor’s degree or higher, compared to the national average 27.9%. [Census] So, yes we have a “large percentage” of college graduates, but not as large as the rest of the country.

The Governor’s office advertises that the State will provide customized job training programs, and help corporations defray the costs of employee training.  The Legislative Counsel Bureau’s report to the 2011 legislature mentions the TEN program, but doesn’t provide any statistics concerning program participation.  [LCB pdf]

The State advertises that we have no corporate income tax, no taxes on corporate shares, no franchise tax, no personal income tax, no nominal annual fees, no unitary tax, no franchise tax on income, and no tax on gifts or inheritances.  We have no estate tax, and a minimal payroll tax. Promise to stay in Nevada for 5 years and we will give you a sales and use tax abatement, sales and use tax deferrals, personal property tax abatement, and a modified business tax abatement.  If you are a qualified recycler we’ll toss in a 50% reduction in the recycling property tax. [LCB]

At this point our problem is beginning to show.  Nevada has a sincere interest in attracting businesses to the state, but its No-Tax policies (designed to attract businesses) are at odds with the state’s capacity to fund the institutions of higher education needed to “fill out” the business environment with qualified employees and research capabilities.  For the umpteenth time in this space:  It is not enough to merely create a Tax Free Zone to attract firms engaged in business and professional services, or medical technology and research, or education and health services IF the educational/research infrastructure isn’t in place.

This infrastructure isn’t the only one about which we ought to be concerned.  There’s the physical aspect as well.   Businesses require transportation infrastructure.  Of the public use airports listed by the Nevada Department of Transportation only 17 can handle jet aircraft. [NDOT] According to the 2009 Aries Consultants Report: (large pdf) Only five have commercial capacity, and five more facilities need to be constructed.   Not to put too fine a point to it but if you are trying to land anything larger than a Cessna Citation in Nevada, good luck.

If, as the UNR study reports, the Reno-Tahoe Airport contributes some $2 billion to the local economy, and creates about 22,000 jobs, [LVSun] doesn’t investment in airport and transportation systems seem to make sense?

Nevada has $246 million worth of wastewater infrastructure needs, and another $4.8 billion that needs to be spent on congested roads and highways. [ASCE]

Imagine the number of jobs which might be created if Nevada invested in its air transportation system?  In its wastewater management infrastructure, and spent some coin of the realm upgrading its roads and highways?  Initially jobs would be created in the construction industry as bids were put out and accepted from contractors engaged to perform the work, and then as the UN-Reno study indicates, the rewards keep coming.

NOW IT’S TIME TO ASK THE OBVIOUS QUESTION: What’s preventing us from doing this?

And, the most likely answer is the short term myopic vision of the Financialist perspective with which we’ve been saddled for the last three decades.

The financialist, or banker’s, perspective sees the creation, marketing, and sales of financial products as the raison d’etre of our economic system.  If “it,” whatever “it” might be, doesn’t show a clear short term (as in quarterly) profit then “it” isn’t attractive.  Financialism has an acute appetite for the bonds generated by states and municipalities to finance infrastructure projects, but it seems to have little or no interest in supporting tax structures that would allow those states and municipalities to repay them.

Financialists will fight, with all their nails and incisors, for fodder to feed the securitization schemes and derivatives markets.  However, when it comes down to devising tax systems which would allow for the investment and repayment of bonds in the first place — the loudest scream we hear is “No New Taxes.”

Thus Nevada will continue to operate governed by the pleasant fantasy that a “pro-business climate” means No Taxes to speak of, and a paucity of state and local resources to invest in long term capital improvements to establish a more “pro-business” environment.

At some point we really do need to ask the next obvious question:  When does the situation in terms of both employment and business infrastructure become so dire that we are forced to invest in our long term economic needs?

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Filed under 2012 election, Economy, Infrastructure, Nevada economy, Nevada politics

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