The Statesman's review of the Austin economic climate is a much-needed profile and (to some extent) evaluation of the city's economy. There are four areas where the Statesman's coverage could improve.
1. Don't forget about sub-group income levels. Not everybody is 'OK'.
I often refer to the above chart as the most important overlooked chart in Austin policy and politics. Focusing on the city's overall economic situation and rendering an 'OK' evaluation based simply on unemployment relative to other municipalities obscures the significant pain being experienced by sub-groups. Moreover, making it simply a question of unemployment rates also obscures the decline in wages.
2. Discuss policy choices. Policy nihilism conceals the possibility of making unemployment lower sooner.
The coverage did not delve into policy options to reduce unemployment through municipal action. There are many potential policy choices from the left and right (e.g. have local public sector adopt a German kurzarbeit scheme, ease development regulations, undertake more capital projects and accelerate existing projects, etc.). The absence of a policy discussion might leave readers with an impression that the conventional wisdom dictates there's nothing that can be done or worth discussing to ameliorate local unemployment in the short-term.
3. Focus on the value added (or destroyed) by policy makers on top of the City's economic fundamentals.
The Statesman's article implies that there are certain aspects of the local economy - the location of the state public sector as well as the presence of technology companies - that help Austin outperform other communities. However, looking at relative levels can be misleading. As I have argued in the past, it's better to focus on communities that share a narrow band of characteristics that make them quite similar to Austin. So, other state capitals with tech hubs in the Southwest would be more appropriate than nebulous comparisons to other cities.
Visually, the newspaper could do a set of simple scatter plot visualizations to give readers a sense of how Austin performs given certain underlying characteristics. Said visualization approach replicates a multivariate analysis in a user-friendly way.
My concern is that readers will walk away thinking that the existing policy mix is value-creating when a more statistically-sound evaluation might reveal that we are actually wasting the underlying trove of economic advantages we possess.
4. There is no forecast or 'threat' assessment.
Toward its conclusion, the piece indicates that Austin has a positive 'reputation' that allows talent to be attracted. In my estimation, I believe this has to do with people thinking of Austin as a place with interesting cultural amenities, housing affordability relative to the coasts, quality public spaces, and dense urban land use. The article does not consider whether this important asset is likely to remain given the city's existing land use decisions. The article does discuss the potential downside of public sector layoffs, but in general, it did not ask whether the underlying mix of industries and policies are best moving forward.
I sincerely hope that the Statesman's journalists will consider some of these suggestions as they continue with their important series.
Come to think of it, they like to argue and obfuscate in abstractions, as well. They campaign in abstractions and make abstract pledges until those abstractions turn into something tangible, like a subprime lending crisis or a downgrade from a particular private rating agency.
We spend so much time wading through abstractions that we cannot get to the meat of the issues that face us today. Enough of that.
What really happens in a bad economy? And what is the public's role during these tough times?
It has been a tough news weekend for the United States.
I've been blocking out news coverage today and cringing every time I hear a partisan or pundit prognosticate about the decline of America, or our supposed shuffle closer to doomsday.
My heart breaks hard every time I think about the selfless men and women we lost in Afghanistan this weekend. Brothers and sisters alike, it seems almost trivial to sit here tonight and type--a freedom they have won for me--while so many are facing grim realities and long, tense moments of combat half a world away.
It's easy to lose focus of who you are and what you stand for in times like these.
Tonight, I'm reminded of a famous speech given by a wartime American president from Illinois (emphasis added):
"It is for us the living, rather, to be dedicated here to the unfinished work which they who fought here have thus far so nobly advanced. It is rather for us to be here dedicated to the great task remaining before us -- that from these honored dead we take increased devotion to that cause for which they gave the last full measure of devotion -- that we here highly resolve that these dead shall not have died in vain -- that this nation, under God, shall have a new birth of freedom -- and that government of the people, by the people, for the people, shall not perish from the earth."
It is easy to cower in the face of disappointment or unspeakable tragedy, to cave to the demands of those playing the temporary game of political opportunism. In these times, we should not forget who we are:
If the Republican Party's message during the midterm elections could be distilled into one word it that it has been campaigning against it would be: spending. The Republicans have been campaigning against spending without identifying any particular spending they would actually like to reduce. Except there is one particular program that they have been campaigning against: the American Recovery and Reinvestment Act of 2009. Otherwise known as the stimulus.
In February of 2009 Congress passed the Recovery Act and President Obama signed it, with the intent to prevent the Great Recession from turning into the Great Depression 2.0. While Republicans have criticized the Recovery Act for being ineffective, the Congressional Budget Office (CBO) released a report that stated that the stimulus raised the gross domestic product (GDP) by between 1.7% and 4.5%, lowered the unemployment rate by between 0.7% and 1.8%, and increased the number of people employed by between 1.4 million and 3.3 million. Not exactly as ineffective as the Republicans claim. However, over the last year and a half the Republicans have consistently criticized the stimulus as ineffective, and the economy's achingly slow recovery coupled with persistently high unemployment has contributed to the public's overall negative view of the stimulus.
But, while the Republicans openly opposed the Recovery Act in Congress and criticized it in public, many of them worked behind the scenes to secure funds from the stimulus for their own districts. The Center for Public Integrity reported this week about a expansive letter writing campaign, where Congressional Republicans who voted against the stimulus sent letters to federal agencies requesting stimulus funds for projects in their districts. The Texas Observer reports that of the 22 Congressional Republicans from Texas, at least 16 officially requested stimulus funds from federal agencies.
There is a structural budget shortfall the Texas legislature will have to deal with next session. That is a fact. A fact, that until recently, was never in doubt. In fact, the only doubt was how large the shortfall would be when the legislature reconvened.
Rick Perry apparently doesn't want to admit there is even a shortfall.
"Rick Perry's in denial. He refuses to tell the truth about the budget hole he helped create. The whole rationale for his reelection campaign has been that Texas is on firm financial footing, and now that's crumbling right before his eyes," said Katy Bacon, campaign spokesperson.
Rick Perry doesn't want to debate and now he doesn't even want to admit there is a problem. Obviously, the first step to finding a solution is admitting there is a problem.
The press has reported the problem over and over again. Members of the moderate wing of Rick Perry's own party admit there is a problem. The legislative budget board, admits there is a problem. Republican comptroller, Susan Combs, admits there is a problem. Economist across the country admit there is a problem. To date, only Mark Miner and Rick Perry refuse to accept or acknowledge there is at least a $20.6 billion budget shortfall. And that problem seems to be growing ever day.
"Like you, we will have to make some very tough choices next session," he said. "I've asked members of the House to keep that in mind as they work on developing a balanced, no-new-taxes budget -- especially as we contemplate how to bridge a budget gap at the state level that is projected by the House to be at least $18 billion."
Other economic news Rick Perry is probably ignoring right now.
From Quorum Report, the Texas unemployment rate continues to climb and now sits at 8.4%.
This is why we need a debate. Rick Perry should come clean to Texans and stop lying to the press, voters and himself. We have serious economic problems and denial isn't a solution.
First of all, thanks to Debra Medina for tweeting out this report from her new organization, We Texans.
In 2008, the Pacific Research Institute, in association with Forbes, issued a report on the U.S. Economic Freedom Index. The study reported that Texas fell 14 spots from 2004 to 2008, which immediately followed a 9-spot drop from 1999 to 2004. Here's the rankings, according to Forbes:
Texas' Economic Freedom Index, According to Forbes
State
1999 Rank
2004 Rank
2008 Rank
Texas
8
17
31
The report singles out Texas as a state that is "headed in the wrong direction." Here's how they explain their results:
The methodology consists of four parts: (1) we compiled a set of indicators for economic freedom and from that we created five data sets; (2) these data sets were converted into 35 unique indexes using different weighting techniques; (3) we compared each index to the others in terms of its ability to explain, other things equal, human migration across the 50 U.S. states; and (4) the index with the greatest statistical link to migration was chosen as the best and was used to rank the U.S. states in terms of economic freedom.
Texas' economic situation is much worse than Rick Perry wants Texans to believe. Here's three articles to support that:
Every year, the state borrows money to make up for a cash-flow gap created every autumn, when its bills arrive faster than its revenue. The state normally pays the loan back in the spring and summer, when revenues catch up. But this year, there's a dull-but-important fact hidden in that cash flow estimate: State leaders looked a year ago and determined that the "deep hole" — when the cash-flow demand peaks — would be $7.8 billion. Now, Combs has told the debt markets that the deep hole is actually $10.8 billion, or about $3 billion worse.
Next week, Texas is set to sell $7.8 billion in cash-flow notes, officially called Texas Revenue Anticipation Notes, or TRANs. (It will have to make up the remaining $3 billion by borrowing from other state funds.) The disclosure documents accompanying that borrowing contain the first public disclosure of a deficit in the current budget. Even though state leaders have already ordered agencies to trim up to $1.2 billion from their current finances, the state will come up $1.3 billion short, the disclosure documents reveal.
Projected $18 Billion Budget Deficit For the Next Biennium
Mr. Perry, a Republican in office for a decade, is touting his tax-cutting prowess and tight-fisted spending record as proof that he remains the right man for the job. He has maintained a wide lead in polls.
But as the state's budget shortfall widens—to as much as $18 billion, or about 20% of the next two-year budget, according to the state legislature's latest analysis released earlier this month—critics are complaining that Mr. Perry's policies have left the state with little room to reduce spending.
The business tax, meanwhile, is expected to bring in $3.84 billion this fiscal year, said Mike Reissig, associate deputy comptroller, less than the nearly $4.3 billion Combs had predicted.
The tax initially was project to yield $5.9 billion a year when it was approved.
The current budget was balanced with funds that are no longer available, including $12 billion in federal stimulus money.
When you add in the fact that, under Rick Perry, state debt has doubled and state spending has nearly doubled, it's no wonder Texas is losing its economic freedom. And that's before you get into the real cost of our economic crisis: the pocketbook costs that continue to increase, whether they are for homeowners insurance rates, utility rates, college tuition, or health care preimums.
Rick Perry will spend millions of dollars to engage in election year politics that spread lies about Bill White and try to hide his failed record. It's why he won't appear before editorial boards and it's why Rick Perry refuses to debate Bill White. I'm thankful that Debra Medina, at least, is willing to share reports like the one she did today, so that more and more Texans can learn about Perry's failures.
What should Congress do? Right now, nothing. Why should Congress do nothing? Because if Congress does nothing then the Bush Administration tax cuts for the wealthiest of Americans will expire and this will recover much needed revenue and help reduce the budget deficits. Except for the first time during the course of the Obama Administration Congressional Republicans actually want to do something: extend the Bush Administration tax cuts and some believe they should be made permanent.
If tax legislation is passed all the tax cuts passed under Bush Administration in 2001 and 2003 will expire. The tax rates would then revert at the end of the year, with the top marginal income tax rate rising to 39.6% from 35%, and other corresponding rates for lower income brackets would also increase. There basically have been three different lines of thought on the Bush tax cuts, and that has been to either let them all expire, let some of them expire, and to let none of them expire. Generally speaking liberal Democrats have been making the case to allow the tax cuts to expire, while conservative Democrats have been arguing to allow some to expire but maintain the lower tax rate cuts. Of course Republicans have been arguing that they should all be extended.
According to a new report by the Annie E. Casey Foundation, Texas ranks 34th nationally in a state-by-state study on the well-being of America's children. There are also significant areas in which Texas is among the worst in the nation, and these ranks represent a failure in many of the public policies instituted over the last two decades.
Texas is among the very worst in preventing teenage pregnancies. The teen birth rate in Texas in 2007 was 64 births per 1,000 females ages 15-19, which is considerably higher than the national rate of 43 births per 1,000. Texas ranked 48th in the nation in teenage pregnancies, and only New Mexico and Mississippi ranked higher. This follows a nationwide trend of increased teenage pregnancies. According to a report by the Guttmacher Institute, after a decade of declining teenage pregnancies the nationally teen pregnancy rate rose 3% in 2006, which reflected an increase in teen birth of 4%. The report notes that the cause of the decline in teenage pregnancies in the 1990s was due to more and better use of contraceptives among sexually active teens. However, during the 2000s sex education programs aimed exclusively at promoting abstinence, and these programs have lead to increasing teen pregnancy rates especially in states such as Texas.
This week the Congress passed a $34 billion dollar extension of benefits to Americans who have been out of work for more than 26 weeks, and these benefits where passed along party lines with the Republicans in the Senate blocking the benefits for weeks. Congressional Republicans argued that the benefits should not be passed unless a corresponding amount of budget cuts could be made, however, another argument that Republicans have offered is that unemployment benefits themselves are a disincentive to find work. At a time when long term unemployment is high than at any time since the Great Depression, and there are five workers applying for every one job these arguments seem ludicrous. The unemployment benefits will help 2 million struggling Americans, and the extension of benefits will last through November.
The idea that unemployment benefits will unacceptably add to the deficit is a relatively weak argument, considering that the fall in consumer demand if unemployment benefits are not extending in the long run will add more to the deficit in lack of tax revenue. Also, it seems a bit disingenuous for Republicans to lecture anyone on deficits or government spending. According to analysis by the Center for Budget and Policy Priorities, significant causes of our current deficits where due to the 2001 and 2003 Bush Administration tax cuts (which by the way Republicans are still arguing doing not need to be paid for with corresponding cuts in the budget). The other idea that unemployment benefits are a disincentive for people to find employment is another weak argument when you consider that there are not enough jobs for American workers. What these arguments are about is plain and simply politics.
The economic downturn has had devastating effects on all Americans, and economist are predicting that there are long to be long term affects and that the economy will not recovery fully for a significant amount of time. According to the last report from the Bureau of Labor and Statistics, 14.6 million people are currently unemployed, 9.5%. The long term unemployed, those who have been unemployed for 27 weeks or longer, make up 6.8 million of the jobless Americans. However, the economy has had a disproportionate effect on people of color, in an economy where people of color have already long been at a disadvantage. The latest statistics show that while the overall unemployment rate for whites is 8.6%, the unemployment rate for Latinos is 12.4% and the unemployment rate for blacks is 15.4%. While white America may be in the middle of the Great Recession, people of color in America are in the middle of a prolonged depression.
