Morning Must Reads: State of The Union, Stimulus and Austerity Economics PA Style

Tonight President Obama will deliver his State of the Union Address to Congress. We are expecting the President to recommend an extension through the end of 2012 of extended unemployment insurance benefits and the payroll tax credit. It looks as though a major theme in the address — besides the catch phrase “built to last” — will be conventional policies aimed at reducing inequality, such as increased spending/tax credits for education and training.

Education and training are important and fruitful means of reducing inequality, but they fall well short of what's needed to reduce the degree of inequality we now face.  A more forceful step in the direction of reducing inequality would include raising the minimum wage and making it easier for workers to form and join unions. We don't expect to hear the President call for either of those changes.

The President will propose paying for his new initiatives with higher taxes on wealthy households. As with education and training, restoring some sense of fairness to the tax code is a laudable goal but longer-lasting reductions in inequality will only come from policies that allow the pre-tax wages of more Americans to rise as the size and wealth of our economy grows.

Manufacturing, energy, job training and middle-class growth will be the cornerstones of President Barack Obama's speech tonight as he takes to the nation's grandest political stage for the annual address on the state of the union, according to senior advisers.

We are slowly getting details of a settlement of allegations of fraud by banks during the housing bubble. Dean Baker notes this morning that the deal is said to include immunity from prosecution for banking executives in exchange for mortgage relief paid for by investors (not the banks). It's good to be a banker.

The Philadelphia Inquirer reports this morning that the association that represents construction contractors who mainly compete for work in the non-residential construction sector is expecting essentially no change in the number of workers they will employ in 2012. Non-residential construction makes up roughly two-thirds of all construction employment in Pennsylvania. Also of note in the article: 62% of Pennsylvania contractors surveyed reported relying on some stimulus-related work. Remember that factoid next time you hear someone claim stimulus spending had no effect on the economy.

Construction employment will go up — very slightly — in 2012, contractors predicted in a survey released Monday by the Associated General Contractors of America...

The survey notes that many contractors relied on stimulus-funding projects over the past years, but few expect to perform much stimulus-funded work in 2012.

In Pennsylvania, for example, 62 percent of those surveyed had stimulus work, with most of them assigning the majority of their workers to those projects. But in 2012, only one in five expects stimulus work.

More news of property tax hikes, teacher layoffs and larger class sizes — this time out of Dauphin County.

The Central Dauphin School Board Monday night approved a $155.4 million preliminary budget for 2012-13 that could mean higher taxes, larger class sizes or furloughs of as many as 50 district employees.

The Patriot-News Editorial Board notes that the asset tests for food stamps proposed by the Corbett administration are unwise and likely to punish many rural families.

Creating an asset test for food stamps in Pennsylvania is the wrong approach...

Given the economic woes many families are facing with at least one parent — sometimes both — out of a job, the car rule hardly makes sense. This is especially true in rural parts of the state. Reliable transportation is critical to achieving financial independence, and in many families that means parents having two decent cars to drive.

The other issue is the $2,000 limit in savings. Families struggling to get out of poverty are likely to be trying to save money, build up funds to help them pay off bills, make a security deposit on an apartment or catch up on mortgage payments. It makes no sense to compel people to potentially liquidate funds to be able to put food on the table.

Hunger is a problem in our state, and many people rely on food stamps to solve it.

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