Tag Archives: Infrastructure investment

Infrastructure Funding and Financing: Another Trumpian Disaster in the Making

Let’s start with the ASCE’s report card on Nevada’s infrastructure.  The last report card on our kitchen table gives us an overall average C-.  Nevada’s two lowest grades (both D’s) are in categories for schools and dams. The claims from the current White House administration would imply that Nevada will see marvelous levels of investment in Job Creating Infrastructure Projects.  Not. So. Fast.

There are some questions related to projected infrastructure legislation which Nevada elected officials may want to consider very carefully.

#1. Does the infrastructure legislation address Nevada’s greatest needs?  The answer at present is “maybe not.” The commentary coming from the White House, and from members of Congress imply that most of the infrastructure plans are part of the Transportation budget.  [Hill] Again, roads and bridges are important, so are airports, but the greatest needs in this state are for projects and funding for upgrading schools and dams.

This past February a dam failed in Elko county, flooding farmland, homes, and stopping traffic on the Union Pacific RR. Obviously dams must eventually get their due. First, we should notice that the state of Nevada doesn’t keep a ranking of hazardous dams, most of which fall into the “earthen” category.  Secondly, it should be noted that a high hazard dam refers to the damage possible should the dam fail, not to the actual condition of the dams themselves.  Third, many dams in this state are privately owned.  About one third of our 650+ dams are constructed for flood control, another third for mining operations, and the remaining third fall into the amorphous category “anything else.” The state has been relying on 11 engineers to keep track of the 650+ dams, and Governor Sandoval’s budget proposal calls for three additional engineers in the Water Division for the next fiscal term. [LVRJ]

School facility upgrades and construction generally lie outside the common understanding of ‘infrastructure’ expenditures, being the province of local school districts, and based on the shifting sands of bond issues. Nothing signaled by the administration thus far would suggest expansion of federal interest in this category of infrastructure investment.

#2.  Will the legislation address Nevada’s needs for the construction and maintenance of roads and highways?  Maybe not.   The situation at present:

“The Nevada Department of Transportation maintains 5,300 miles of state highways, which includes many rural roadways within Nevada. Without an increase in the gas tax since 1992, the state funding levels have stagnated and Federal funding has remained at a similar level the past 5 years. Hence, the maintenance of the existing highway system has fallen behind and the state will need approximately $285 million annually for the next decade to catch up on the current backlog of highway maintenance. The current funding levels provide only 60% to 70% of the required funding to maintain the state highways. This has resulted in an increase in the number of lane miles requiring either an overlay or full rehabilitation from 28% two years ago to 38% currently.” [ASCE]

New construction is great, no one should argue against it where it’s needed to improve the flow and traffic and attendant commerce, however, when nearly 40% of the current roadways need overlays or full rehabilitation, the problem is focused on maintaining what we have at present not necessarily on new construction projects.

#3. Does the administration’s plan differentiate between financing and funding?  This is important.  A definition is in order:

“Infrastructure funding and financing are different concerns. Funding specifies how resources will be collected to pay for infrastructure construction, operations and maintenance, and repairs. Financing generally concerns how to raise the large upfront costs needed to build the infrastructure.” [EPI]

So, the administration has spoken of “a trillion dollars in infrastructure investment,” what does this mean?  For the administration is apparently means “leveraging private dollars.” Again, some translation is necessary.  What the administration is talking about is the financing of construction projects. And, we’re back to the difference between funding and financing — if states are facing the same questions posed back in 2015, when Republicans proposed that HTF projects be limited to the revenue accumulated from gasoline and diesel taxation, then many projects, especially of the improvement and maintenance variety will be put on hold. [BondBuyer] Infrastructure funding will be a function of how the administration budget addresses the issue of raising the money necessary to construct, operate, and maintain.  However, if the administration is speaking of “leveraging private funds,” then we should assume that the White House is referring to new construction.  And, now we enter the land of the P3.

A P3 is: “Public-private partnerships (P3s) are contractual agreements formed between a public agency and a private sector entity that allow for greater private sector participation in the delivery and financing of transportation projects.” [DOT]

Let’s put this question of infrastructure investment in purely financial terms:  Who benefits from P3 structuring?  Hint: It isn’t necessarily the state and local governments because bond yields for such things as school construction, road construction, and other large projects have been dropping since their “highs” around 1982 (13+%) to the current rates (3.5+%). [MuniBond]

Bluntly stated, it’s not the financing that’s a problem for state and local governments, they’re paying almost historic low yields (interest) on the bonds they’ve issued for major projects.  The administration is approaching the infrastructure investment issue from the wrong end of the stick — focusing on the financing and not the funding.

#4. Is the use of the P3 structure based on the needs and capacities of the states and municipalities or the desires of private investment?  Some attention is required because:

“In theory, they can(P3)  be effective—but they provide no free lunches. Funding must still be found for the projects—and ordinary households will end up paying the costs through taxes or user fees. In addition, the details of contract construction and oversight are daunting and require a competent, democratically accountable government to manage them. In short, P3s do not allow for simple outsourcing because they do not bypass the need to fund infrastructure or the need for competent public management.” [EPI]

Or, P3s don’t replace the more traditional methods of financing — local and state taxation is still required for paying project costs. There’s nothing ‘simple’ about these arrangements, and they require extensive oversight and management.  Before leaping into a P3 it should be revealed that these generally allow governments and investors to ignore the requirement of Davis-Bacon Act ‘prevailing wages.’ This may ‘create jobs’ but it doesn’t create ‘good paying jobs’ in the construction sector.

#5. Does the administration plan specify financing and funding of infrastructure projects or is it simply a “tax credit” giveaway to investors?  It certainly sounds like it at this point, but the administration, as is becoming more obvious every day, seems to be short on specifics, and the only solid at the moment is the “tax credit” portion of the pronouncements.  If this is a tax credit for projects already in the planning stage, then it’s hard to characterize this as a bright and shiny new proposal.

#6. Location, Location, Location?  Granted that Nevada is an urban state, with most of the population located in two counties, but the roads, bridges, and dams are aligned through predominantly rural areas. Investors, in P3 or other financing schemes, can clearly see the benefits of construction in urban areas (toll roads, toll bridges, etc.) Rural areas, not so much. Nor does the financing strategy address other infrastructure issues in urban areas — how, for example, does Clark County improve its public transportation facilities and components? Washoe County? Or, Douglas, Lyon counties, and Carson City?  How will investment be directed to poorer areas, or areas under served by current transportation systems? Stated more generally:

“The other problem is that Trump’s approach makes it less likely he’ll actually create new jobs. If the customer base can afford it, and they really need the infrastructure, then the project is almost certainly already profitable and private firms are already willing to do it. The tax credit just sweetens the deal on the margins. Where there’s demand, the private market can already create jobs. The less you’re willing to redistribute, the fewer new jobs you can create.” [TheWeek]

This is another point at which the magic hand of the Market fails on one side and succeeds on the other — where there is demand (and the capacity to meet that demand, the tax credits are minimally useful (except to investors) — where there is great need but little capacity to meet the demand, then the tax credits aren’t an inducement to job creation.

We need to take some care to observe whether the “infrastructure” plan is (1) truly about infrastructure needs in Nevada? (2) truly a job creating plan and not merely a way to get tax credit benefits to the investor class, or ignore the Davis Bacon Act requirements for American workers, (3) about getting the infrastructure investments where it is actually needed.

Caveat Emptor.

 

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Filed under Economy, Federal budget, Infrastructure, Nevada highways, Nevada politics, Politics, public transportation

The Numbers Are Nice, What About The People?

Construction project7.5% unemployment sounds good.  If Nevada’s numbers follow the national trend then we’d expect another decrease in statewide unemployment, also a good thing.  However, we need to temper our enthusiasm with a nod to some other numbers which aren’t quite so reassuring.

Not all employment is created equal: “The workweek fell from 34.6 to 34.4 hours.  As a consequence the index of aggregate hours worked fell -0.4%, offsetting last months 0.4% increase.”  [AB] [BLS table B4] It’s fine to have more people working, but if they are working fewer hours then the amount of spending those families can afford doesn’t move the needle in terms of aggregate demand.

Not all wages are created equal:  There’s weakness in average hourly wages as well. Average hourly wages were $23.42 in April 2012 and a year later they’d ticked up to $23.87 — insufficient to keep up with inflation. [BLS Table B3] Leisure and hospitality wages, which are of interest to Nevadans, averaged $13.35 per hour in April 2012 and increased to an average of $13.42 as of April 2013. [TableB3] Rather an underwhelming increase.

Public Sector employment remains weakened:  For the “Drown Government in a Bath Tub” crowd this is taken as good news, but the problem is that public sector employees are also consumers and their contributions to aggregate demand are declining.  Overall employment at all levels was down 11% since March 2013.  This figure breaks down to a decline of 8% in federal employment, a 1% decline in state workers, and a 2% decrease in local government employment.  [BLS TableB1] At some point in the discussion we need to ask just how small the bathtub is supposed to be?

If we exclude radical libertarian ethereal musings about an entirely privatized system in which we all drive on toll roads the moment we leave the driveway, or all hire our own security and fire protection services, and all our schools, libraries, parks, and public health services are for-profit institutions in which you can get only what you can afford to pay for — then we need to specify which public services we expect, and what level of service is acceptable.  How long are we willing to wait for our IRS tax refund checks?  How long is an acceptable response time for police and fire calls?  How many days should the library be open?  How many children in a single classroom are acceptable?  How long should it be between health inspections in work places, medical service providers, restaurants?

Not all jobs are creating assets:  The Construction sector continues to be weak, with YOY nonfarm payroll numbers down 6%, with residential construction down 6.2% and non-residential construction off by 4.8%.  Heavy construction and civil engineering was down 3.8% since last March. [BLS TableB1]

Given the state of our nation’s infrastructure the decline in heavy construction and civil engineering projects is particularly disturbing.  The President’s Rebuild America Partnership proposal remains mired in Congressional inattention, and partisan bickering.  S. 387, a bill to establish an American infrastructure investment fund was introduced in the Senate last February, and now sits in the Senate Commerce, Science and Transportation Committee.   The website for this committee doesn’t show any hearing scheduled for this bill to date.

One of the nicer features of infrastructure investment is that it is a Win-Win proposition; engineers, contractors, and their employees get paychecks and the contracting agency gets valuable assets enhancing the unit’s overall financial position.  Senate inaction, exemplified that the body only managed to pass 2% of the bills put before it so far, isn’t helping our economy by assisting in the creation of construction sector jobs or by aiding the financing of public agency assets.

Not all jobs are full time:  Full time employment is obviously distinct from long term temporary or contracted employment.

What’s changed in the last 20 years is that there’s been an unraveling of job security in the labor market, as well as a diminishment of benefit packages and a deterioration of stable, reliable wages and promotion pathways,” said Katherine Stone, a law professor at the University of California, Los Angeles, and labor specialist. “There’s been a really fundamental shift in the nature of employment — it’s a sea change. Whether you’re talking about the expanded use of short-term employees, temporary workers, project workers, contractors or on-call workers, the use of workers who don’t have regular jobs has increased a lot.”  [CBS]

Regular, traditional long term employment, increases the inclination to secure more expensive long term assets — durable goods and housing. The employment numbers may mask a situation in which we have more people employed, but not in jobs that induce them to make personal investments in durable goods or in long term housing.  While independent contractors may, indeed, prefer project to project employment — there’s the other 50% of temporary workers who would prefer full time employment.

In April, the number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 278,000 to 7.9 million, largely offsetting a decrease in
March. These individuals were working part time because their hours had been cut back or because they were unable to find a full-time job.  (See table A-8.) [BLS]

The good news from the unemployment report this month is offset by weakness in the wages and hours figures, nor is it enhanced by the acknowledgement of continued weakness in the construction sector and the inattention to our infrastructure investment needs.  Additionally, we need to carefully monitor the trends toward temporary job creation as compared to more permanent jobs created as a result of increased aggregate demand.

Congress could help.  It could, for example, take up the American Jobs Act instead of attending to a plethora of ceremonial votes to “repeal Obamacare,” and continue its “War on Women.”  The Senate could assist by scheduling hearings and giving consideration to S. 387.

If we’d like even more optimistic news on the economic front it will probably be up to American citizens to insist that our federal legislators focus on JOBS, JOBS, JOBS.

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Madness in March

Repro Rights Madness** Nevada’s own Sin City Siren has an outstanding Bracket, created especially for those who are interested in seeing how state and localities across this country are competing to see which can have the most regressive, reactionary, and repugnant statutes limiting the rights of women to make their own decisions (as in Small Government?).   Do click over and copy the brackets, and then share them with family and friends!

** The Nevada Progressive updates information about the continuing Soap Operas which are the lives of former Mega-Lobbyist Harvey Whittemore and the ever charming but perhaps a shade duplicitous Heidi Gansert.  Steve Sebelius added another page to the continuing drama that is Assemblyman Steven Brooks (D-NLV).  For the video version, see Ralston Reports.

*** The Nevada Rural Democratic Caucus reprints a good piece from Jim Hightower on how the GOP wants to transform Medicare into “We Don’t Care.”  For a refresher course in how Republicans have the wrong end of the stick on the Medicare issue, consult this March 10th post in Perrspectives:  In Five Charts. Congresswoman Michele Bachmann (R-LoonyTunes) should get more exercise dodging questions from reporters about how she substantiates her claims on the floor of the House that the Affordable Care Act “kills people.” [ThinkProg]  For those in the fact based universe:

While the main coverage expansion provisions will go into effect in 2014, the ACA has so far saved seniors over $6 billion on prescription drugs, reduced administrative overhead, deterred private insurers from requesting double digit premium increases, kept millions of young people on their parents’ health care plans, and provided 34.1 million people with Medicare preventive services without additional cost-sharing. [ThinkProg]

*** And, if we thought the continuing Management by Crisis thing was over in House Republican quarters — here comes Speaker John Boehner with the Demand, (Demand I say), that every dollar increase in the debt ceiling (The Debt Ceiling I say) will “require a dollar in spending cuts.”  Another day, another manufactured crisis.   Before one gets too hysterical about The Great Big Debt Crisis — read “Paul Ryan and Eric Cantor Are Trying To Con You Into Paying Their Debts. ”

*** Things we could be talking about if it weren’t for the manufactured debt “crisis” compliments of the GOP majority in the House of Representatives:

(1) The report that nearly two out of three hate crimes committed in this country goes unreported. [The Grio]

(2) The filibuster of Richard Cordray’s nomination to head the Consumer Financial Protection Bureau. [TPM]  Of District Court nominee Elissa Cadish, who withdrew her nomination after Senator Dean Heller (R-NRA and Shooting Sports Foundation) questioned her bona fides on the unrestricted and unlimited right to pack shoulder firing missile launchers as prescribed in the 2nd Amendment. [Bloomberg] Or, the filibuster of Appeals Court nominee Caitlin Halligan, who had the temerity to do her job and participate in a lawsuit of behalf of the City of New York in a lawsuit again gun manufacturers. [Bloomberg]  Or the hold placed on the nomination of Scott C. Doney, to head the NOAA — Mr. Doney relinquished his nomination. [NOLA] Or, Senator Roy Blunt (R-MO, and Tobacco Industry) placing a hold on the nomination of Gina McCarthy to head the EPA, because he has a problem with levee plans, which is interesting because McCarthy’s area of expertise is “fuel efficiency” and clean air administration. [LAT]  Here’s the list of nominations pending in Senate Committees.   Two days ago Bloomberg News oped asked “Are Republicans  Abusing the Filibuster?”  the answer still looks like YES.

***  Perhaps we could even be paying more attention to the latest report card release from the American Society of Civil Engineers on our nation’s infrastructure — hey! we’re up to a D+ now.  But, why worry — Nevada only needs about $2.7 billion to maintain and upgrade our drinking water delivery systems, another $2.9 billion to deal with our sewage; while we have 149 high hazard dams, and 40 structurally deficient bridges.  [ASCE]  Maybe we’re waiting for our kids and grandkids to pick up the bills?

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Dear Grandkids, We’re Leaving You Some Bills

GrandparentsDear Grandchildren,

It’s March 16, 2013 and we’re all in a dither about the debt we’re passing along to you.  Yes, it’s a big one.  The lines on the charts look devastating indeed:

National debt by administration

We chose to ignore the actual debt and real deficit reduction efforts in order to focus on cutting the “size of government” in your life so you could have more “freedom.”

National Debt Presidencies But, all this said, we are leaving you some bills we sincerely hope you can pay!  In our fervor to erase the national budget deficits and reduce the level of national debt we left a few things for you to do to pick up after us, we hope you don’t mind.

The Water Bill:    We knew that as of 2009, and more information is coming on March 19, 2013, that we were running up an $11 billion per year backlog of funding to replace aging water system components.  In reality, the 2009 report wasn’t our first clue:

“The Congressional Budget Office (CBO) concluded in 2003 that “current funding from all levels of government and current revenues generated from ratepayers will not be sufficient to meet the nation’s future demand for water infrastructure.” The CBO estimated the nation’s needs for drinking water investments at between $10 billion and $20 billion over the next 20 years.” (emphasis added)

We knew that there had been a 159% increase in the demand for clean drinking water between 1950 and 2000, but we did precious little about the issue.  We moaned about the ARRA’s expenditures for water treatment, about how it would run up the Debt, so our Congress appropriated a “drop in the bucket.”

“The new federal stimulus law provides $6 billion for water projects, with $2 billion of that directed to drinking water systems. But that money is only, well, a drop in the bucket: a report released last month by the E.P.A. estimated that the nation’s drinking water systems require an investment of $334.8 billion over the next two decades, with most of the money needed to improve transmission and distribution systems.” [NYT, 2009]

We knew that the design life of concrete treatment plants would expire in 60-70 years, so the plants built in 1950 are now on their last legs.  We knew that the trunk mains were built to last from 65 to 95 years. Some of those are now aging into oblivion. [ASCE]  So we’re leaving you with the bill for $334.8 billion over the next twenty years to pay for the maintenance of a water distribution system we bragged about but didn’t really want to pay for.

The Sewer Bill:  Our 15,000 public wastewater treatment facilities serve about 225 million people in this country, but we’re still subject to about 900 billion gallons of good old raw sewage discharged every year from aging and dilapidated facilities. [NYT 2011]  We knew back in November 2002, when you were just little tykes, that the Congressional Budget Office estimated the expenditures needed for new and improved wastewater treatment would be in the range of $3.2 to $11 billion. [CBO pdf]  There was a Gap Analysis conducted by the CBO back in 2002 which had some more disheartening information:

“According to the Gap Analysis, if there is no increase in investment, there will be a roughly $6-billion gap between current annual capital expenditures for wastewater treatment ($13 billion annually) and projected spending needs. The study also estimated that if wastewater spending increases by only 3% per year, the gap would shrink by nearly 90% (to about $1 billion annually).

The CBO released its own gap analysis in 2002, in which it determined that the gap for wastewater ranges from $23 billion to $37 billion annually, depending on various financial and accounting variables.”  [ASCE]

So, when all is said and done, we dawdled around until the EPA estimated that it would cost about $390 billion over the next 20 years to repair or replace inadequate water treatment plants and other components of the systems.  We hope you don’t mind we’re leaving you this bill for $390 billion?

The Education Bill:  It’s hard to account for all the needs of our 98,917 public schools in this country. [NCES]   If we’re being honest, we haven’t really looked at the number of aging buildings, or carefully studied their functional age since the “turn of the last century,” in 1999.  We do know that children who are in poverty are also in the oldest buildings. [NCES]   Additionally, we’ve known this not-so-fun fact since the 1999 study: “While 40 percent of small schools (enrollments of less than 300) were built before 1950, 23 percent of large schools (enrollments of 1,000 or more) were built before 1950.”  Since large schools tend to be secondary, we can assume we’ve been following the time honored practice of building nice big new high schools and moving the junior high kids into the old buildings?  Then there’s the “portable building” problem — we’ve known since the Fall of 2005 that portable buildings have more problems which interfere with instruction than standard buildings. [NCES] While the issues might not be too far from the similar interferences in standard buildings — we know they exist — it was just cheaper to ignore them.  Our spending on school construction, as analyzed by the ASCE might give you some pause:

“While detailed conditions and needs numbers do not exist, we do have up-to-date numbers on spending levels. According to the American School and University’s 34th Annual Official Education Construction Report, school construction completed in 2007 (which included both new construction and renovations) totaled more than $20.2 billion. That is down from a peak of $29 billion in 2004. The downward trend is expected to continue: with $52.7 billion in funding is projected between 2008 and 2010. This represents a significant decrease from the $68.4 billion spent between 2005 and 2007.1″

If you are thinking that you might be able to kick this discussion down the road, as we did, because privatization is the solution to every public problem, please think again. First, the charter schools are public buildings in which instruction is immediately governed by groups outside the system.  Secondly, they may not be located conveniently near you, or serve the age groups of your offspring:

“In 2009–10, over half (54 percent) of charter schools were elementary schools. Secondary and combined schools accounted for 27 and 19 percent of charter schools, respectively. In that year, about 55 percent of charter schools were located in cities, 21 percent were in suburban areas, 8 percent were in towns, and 16 percent were in rural areas. [NCES]

There are studies indicating some charter schools are doing better than some public schools, but we have to be careful with our numbers.  For example, one summarization of the different levels of educational achievement (read: test scores) failed to note that charter schools youngsters tend to be from more financially secure families.  [WaPo]  However, if we’re honest, we’d tell you that we’ve not been looking too closely behind the numbers of either the cost of building or maintaining schools, or at the cost of employing qualified teachers… But, Hey, we walked to school and back uphill both ways in driving blizzards.   And, about those standardized tests — “States are likely to spend $1.9 billion to $5.3 billion between 2002 and 2008 to implement NCLB-mandated tests, according to the non-partisan Government Accounting Office (GAO),” as of 2005. [RSO]  We’re leaving you the bill for that too. Whatever it might be.

The War Bill:  We were going to have another “Splendid Little War,” the one in Iraq.  The Bush Administration and a compliant Congress authorized the expenditures as “supplemental appropriations,” meaning that we didn’t have to look at the tab we were running in real time.

Total federal spending associated with the war has reached $1.7 trillion. Future promised health and disability payments for veterans through 2053 add up to $490 billion. So, as it stands now, the Iraq War has cost $2.2 trillion, which is a far cry from the initial 2002 estimates of $50 to $60 billion. When you factor in the interest, war expenses could swell to more than $6 trillion over the next four decades. [NYDN]

So, we missed by a few dollars… but we’re leaving you with the very possible  $6 trillion bill anyway.

We might have paid for some of these items ourselves. We might even have given more consideration to the state of our bridges, dams, and public buildings.  We could have thought of the state of the air traffic system, or the highway syste, or the rail transportation system, we were leaving to you.  However, fretful as we were about these expenses and future costs, we decided that it was not in our best interests to close tax loopholes for giant multi-national energy corporations, or for yachts, or for private jets.  We decided that we “over taxed” our corporations, and rewarded them when they “repatriated” money earned overseas to the U.S.   We decided it was more important to appropriate money for airplanes that didn’t fly than to pay for G.I. benefits earned by service.  We decided it was more important to protect the interests of Wall Street than Main Street.  We decided that money earned in speculation was just as hard won as income from investments or good old fashioned hard labor.   We didn’t want to “burden” you with restrictions on financiers, or humongous banks, or on the incomes to be earned by the top 1% of the population — we wanted you to be “free,” to have “liberty,” and to say nice things about America!

We love you dearly, and want you to know that we think of you always.   Good Luck.   (PS: Hope you don’t mind we’re moving in with you.  After cuts in Social Security and the voucherization of Medicare we’re having a little financial difficulty at the moment.  Even Meals on Wheels isn’t coming anymore.  We could babysit for you now that the Headstart Program serves only a few kids in your neighborhood?)

The Gramps

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Be careful with questions, they often have answers

Fresh from a convention which dramatically promoted Bold New Ideas from the Nineteenth Century, the ever-innovative GOP has a NEW question for the 2012 campaign — Are you better off than you were four years ago?  Somehow, I think perhaps I’ve heard that before somewhere… oh, I remember, 1980?

And the answer is a resounding YES.  If we are speaking in general economic terms, we are much better off, and trending in the right direction.  Taking one of the most general measures, the Gross Domestic Product, things are looking much better than they were in late 2008 – early 2009.

Now, let’s add some highlights to the same graph:

We get a bonus in this category, not only do the figures indicate we are better off in terms of the improvement in our Gross Domestic Product, but the ARRA appears to have mitigated the worst impact of public sector layoffs, strain on the automatic stabilizers, and problems in the construction sector.

What about employment?  We’re better off in that economic category as well:

Taking a purely Cartesian view of the graph above shows the “numbers” moving from the 3rd Quadrant wherein all things are negative to the 1st Quadrant in which all things are positive.  However, it’s not necessary to have been thrilled to sit in Algebra II in order to observe that in terms of employment the situation is much better than it was in late 2008.

So, why doesn’t it FEEL better?  The CBPP offers this explanation —

“Although employers began to add jobs in 2010, the economy has recovered only about 4 million of the 8.7 million jobs lost between the start of the recession in December 2007 and early 2010. As a result nonfarm payroll employment was 3.4 percent (4.7 million jobs) lower in July 2012 than it was at the start of the recession.” (emphasis added)

A rough analogy might be that we’re economic “sophomores,” one of the traditionally  more difficult years in high school — and the year in which the oldsters now were then parked in that Algebra II class — we knew we weren’t lowly freshman anymore, but the “end” looked to be off in some distant horizon unreachable in human terms.  We obviously have some work to do to get back to pre-recession employment levels.

Another reason the economic situation may not “feel” as good as the days before the Wall Street Wizards drove the American economy into a very deep ditch is that the jobs lost tended to be middle income level,  while the jobs gained tend toward the lower end of the pay scale.  There’s a chart for that, too, from the National Employment Law Project:

Readers preferring the numbers will note the NELP study showed: “Lower-wage occupations constituted 21 percent of recession losses, but 58 percent of recovery growth. Mid-wage occupations constituted 60 percent of recession losses, but only 22 percent of recovery growth.  Higher-wage occupations constituted 19 percent of recession job losses, and 20 percent of recovery growth.”  (emphasis added) See also: NYT.

What American workers are facing is called “job polarization,” as Catherine Rampell explains in her NYT article:

“Job growth has been concentrated in positions that tend to fall into two categories: manual work that must be done in person, like styling hair or serving food, which usually pays relatively little; and more creative, design-oriented work like engineering or surgery, which often pays quite well.

Since 2001, employment has grown 8.7 percent in lower-wage occupations and 6.6 percent in high-wage ones. Over that period, midwage occupation employment has fallen by 7.3 percent.”

Those mid-wage jobs lost tended to be in manufacturing in which automation and off-shoring account for considerable, and permanent, job declines and public sector employment for teachers, law enforcement personnel, firefighters, and other middle class wage level public employees.  [NYT ] Down-sizing government means hiring freezes, or layoffs, and the loss of those wages recycling back into the economy.  To borrow a GOP analogy — it’s not hard to reduce the size of government until it could be drowned in a bath tub — BUT we’re draining those wages out of the economy along with the reductions.

Yet another reason for the bind in middle income jobs is that the construction industry still hasn’t recovered from the Housing Bubble puncture.  Construction sector employment peaked in January 2006 when banks were still happily handing out mortgages of questionable terms and provenance in order to sate their appetite for more fodder to create highly profitable asset based securities and their derivatives.   In numerical terms, the Bubble Collapse and subsequent recession eliminated approximately 2.21 million construction sector jobs. [CalcRisk]

The Prescription:  If we accept three fact-based propositions in regard to the employment bind the policies necessary to address the real issues becomes more clear.  (1) The reality is that the economic pit into which we tumbled was deeper than advertized.  (2)  Most of the jobs lost tended to be middle income employment. (3)  Those middle income jobs tended to be in the public sector and in the construction industry.

In order to address these three realities any “jobs” plan presented by any politician should (1) seek to halt the decline in public sector employment of teachers, police officers, firefighters, and public service personnel who live and work in communities which need their economic contributions to sustain their economies.  Contrary to the half-baked but often served conservative image of The Greedy Public Employee munching vigorously at the trough — these are people who pay taxes, make mortgage payments, purchase automobiles, shop at the local grocery, buy furniture, and otherwise contribute to local economies.

A real “jobs” plan should (2) immediately and directly address the situation in the construction sector.  There is a real opportunity here to reprise our Greatest Generation and repair, replace, or maintain the physical legacy of their efforts especially in terms of our infrastructure.  We have construction companies seeking to bid for infrastructure related contracts, workers ready and willing to work to complete those contracts, and an almost unconscionably long list of roads, bridges, dams, water treatment facilities, airport facilities, and sewer treatment plants that demand renovation.

A real “jobs” plan should (3) acknowledge that some of the manufacturing jobs of old are not coming back, and that in order to promote industrial growth we need to look to new technologies and offer greater support for innovation.  We dismiss new alternative energy technologies at our peril, because while some Republicans are dismissing solar and wind tech as “passing fads” the Germans and the Chinese are investing in them such that they will be permanent and profitable segments of their economies.

The answer to the question is YES, we are better off than we were four years ago, and YES we could be doing better.  The answer is definitely NOT to “elect a Republican, give the top 0.1% another big tax cut, and hope the Chinese and the Germans see the ‘error’ of their ways.”  Such a response is the economic policy equivalent of telling the patient to take two aspirin, and to ignore what’s really causing the pain.

 

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Filed under 2012 election, ARRA, Economy, Infrastructure, public employees, Republicans

Quick Picks: Bishops To Square One on Contraception

Bishops to Square One:  The US Conference of Catholic Bishops is pleased to announce their “Fortnight to Freedom,” June 21 to July 4, described by the Catholic News Agency, as follows:

“The initiative was created in response to several moves by the Obama administration that are threatening the Church’s religious freedom. The most well-known action is the Health and Human Services mandate that requires employers to cover birth control and other services that Catholics and other believers find morally objectionable.”

Now, what was that old line the Bishops used to find so objectionable, could it have been “They want to hang their religions around other people’s necks?”

Tax dollars are going out the back door to private schools.  This may not be what the Alliance for School Choice had in mind:

“While the scholarship programs have helped many children whose parents would have to scrimp or work several jobs to send them to private schools, the money has also been used to attract star football players, expand the payrolls of the nonprofit scholarship groups and spread the theology of creationism, interviews and documents show. Even some private school parents and administrators have questioned whether the programs are a charade.”  [NYT]

How many didn’t believe the programs were a charade in the first place?

Solyndra and Lobbyists in Romney’s Bundle?  If an article included  “Solyndra, lobbyists, fundraising, and Romney” would you click over and read it? Would it surprise anyone that Romney has not released the names of any of his bundlers?  We could guess we’d find the list in the stack with his tax returns?

The Not Debt Crisis?  Next time some one tells you that the national debt is Crushing the Nation!!!  Ask why then have Treasuries remained low after a $35 Billion 2 yr. sale. “The securities drew a yield of 0.300 percent…”  [Bloomberg]

Meanwhile back with the “Job Craters” — JPMorganChase is being sued by employees whose retirement funds were hit by the bank’s Big At Least $3B Blunder. “The defendants were accused of violating their duties to 401(k) and other retirement plan participants by including company stock as an investment option, hiding the stock’s risk, and failing to move participants to safer choices.” [Reuters]   And about their former risk manager… there were red flags. [Reuters]

Infrastructure Anyone: The Chinese say yes.  Reuters reports:

The pace of investment in the likes of roads, bridges and real estate is running at its weakest in nearly a decade, April data showed, suggesting the world’s second-biggest economy is heading for a sixth straight quarter of slowing growth.

To provide some support the government had asked for project proposals by the end of June, even for those initially earmarked for the end of the year, said the China Securities Journal, one of the country’s top financial papers.

Citing government sources, the article said Beijing did not rule out bringing forward next year’s projects, if it thought more investments would be needed to stimulate the economy.

Meanwhile, the American Energy and Infrastructure Act  stalled in the U.S. House of Representatives. [ASCE] There is a House-Senate Committee moving on the topic in fits and starts. [VTD]

Flowing Foreclosure money?  Want to see what your state has done with settlement funds from the Big Five Banks?  Pro Publica has the information in a convenient chart.

Yucca Mountain is Still Dead.  [Las Vegas Sun]

Nevada unemployment rate drops below 12% for the first time in 3 years.  [NNBureau]

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Filed under Economy, education, energy, energy policy, financial regulation, GOP fundraising, Infrastructure, national debt, Nevada economy, Politics, Romney, women, Women's Issues, Womens' Rights, Yucca Mountain