This continues a collection of links the people have been sending me on our long financial problems. For part I, click here.
Pieces on economic strategy:
- National business climate — I like the argument (linked to in the story) that we should get away from special business tax breaks and work for a lower overall rate instead. This makes sense at the state level as well as nationally.
- More on what is really needed to put the economy on a sustained growth path — “pro-growth tax reform, housing finance reform, increased infrastructure investments, greater support for education and research, job retraining programs, removal of outdated interstate competition barriers and stronger social safety nets.” The piece laments the focus on short term options rather than long term growth.
- A more developed proposal for long term growth — a small improvement in growth would have a huge impact on deficit reduction. Echoes the need for tax simplification, but also investments in infrastructure, education and science. I basically buy this vision of what needs to be done.
- Stock market perspective — the damage done by tax/regulatory policy uncertainty.
- A perspective as to why stimulus is hard to make work in this recession — “even though the private sector clearly isn’t going to spend all that much [because of desire to clean up balance sheets], the public sector is being stopped from spending by ideological imperatives [and so isn’t spending enough to stimulate].”
Pieces on state/local fiscal integrity:
- Understanding sovereign financial exposure — while the argument of the piece speaks to national sovereign data, I appreciate the point that our state financial picture is worse than it looks because of rising future liabilities due to aging.
- A portrait of the collapse of civic life in Greece and its financial implications — not that we are there yet . . . but there are warning signs.
- Buffet on municipal bond risks — risks are big if you believe that the federal government would let them fail. Compare
Meredith Whitney on the condition of the states — Massachusetts looks only fair.
Interesting mix of articles. I’m not buying the “uncertainty” claims of the guy at Boenning & Scattergood; I’ve seen polls of actual businesses (not finding it, it was quoted by one of the usual liberal suspects, I’ll keep an eye open) and the conclusion there was that what is slowing doing hiring and investment, is a lack of customers, and to the degree that there is uncertainty, uncertainty about future customers. Not taxes. Not regulations. Customers.
At the state level, I would tax, spend, and try to cut unnecessary regulations and regularize those that are necessary (for instance, can we at least be sure that all our local zoning codes are roughly written in the same way — just for example). Funding education through property tax is not long-term sustainable (wages outrun inflation); it makes more sense to pay wages, with an income tax, and to set aside a true rainy-day fund.
I’m working somewhat here from OMB estimates that say that a dollar taken from the government budget by spending, is more stimulative to the economy than a dollar taken by a tax cut; as long as we only do small adjustments around where we are, that means that tax-and-spend should grow the economy a little better than cut(taxes)-and-cut(spending). So, data-driven guy that I am, that is what I would do. Note, also, that we tried cutting taxes in the grand trickle-down experiment, but the boom of the 1990s was preceded by tax increases by Bush I and I think Clinton — not tax cuts. Bush II tried to stimulate with tax cuts, and for most people (but not the wealthiest) the resulting growth was at best tepid.
What I would spend money on. Schools, for one. We’re not matching the services delivered 40 years ago in Florida. I would also spend money on “stupid” stuff like street cleaning and road repair. Towns cheap out on this whenever and wherever they can (Belmont is not the only town with rotten roads; Burlington does a pretty scummy job with theirs, especially the roads used mostly by out-of-towners.) I ride my bike often in several towns, I get to compare how long a pile of broken glass, or a dead animal, sits on the road. (Burlington once crack-sealed a dropped shoe to one of their roads, I failed to get a picture of it before a snow plow tore it loose.)
I think the T needs help. They got the wrong end of the Big Dig debt, and when I talk to friends who live out in “the boonies” (Maynard, Westford), they talk about hour-long car commutes in the wee hours of the morning — the trains run too infrequently, and the suburban stations get completely full, or have unfriendly parking restrictions. I’m not sure what makes this work; the best I can come up with, is a combination of good, short-haul bike paths to the stations, plus perhaps limited-hours bus/shuttle service to give people an alternative to driving and parking. All that time spent driving is pretty much wasted, compared to being able to work, read, use the phone, or sleep on the train. And, when people drive to work, they often drive through Belmont, usually not stopping.
Click here for another very graphic piece talking about the decline of American manufacturing — the loss of low-skill jobs.