Fiscal and Monetary Policy

Third and State This Week: PA Budget Summit, Revenue Update and Pressure on Food Programs

This week, we blogged about our 2012 Pennsylvania Budget Summit, the state's revenue performance in January, programs that serve the poor coming under increasing pressure, and more.

IN CASE YOU MISSED IT

  • On the state budget, Michael Wood wrote that Pennsylvania's revenue performance in January offered some hope with General Fund collections coming in close to estimate, although corporate taxes continue to lag. Chris Lilienthal shared resources from the Pennsylvania Budget and Policy Center's 2012 Budget Summit this week and a Fox 43 news report on it.
  • In the Morning Must Reads this week, Mark Price blogged about news reports on soup kitchens and self sufficiency programs coming under pressure (as well as a new effort to identify the public health impacts of Marcellus Shale development); rising demand for Meals On Wheels in Reading and fines for a Hershey Co. subcontractor; and a look at policies in Europe and here at home that Paul Krugman has dubbed the "Pain Caucus."

More blog posts next week. Keep us bookmarked and join the conversation!

Morning Must Reads:The Pain Caucus in Europe and Pennsylvania

Paul Krugman leads off this morning with a review of the havoc created in Europe and here at home by what he calls the Pain Caucus.

Morning Must Reads: Unemployment Benefits Extended, Prevailing Wage Change Stalls and Running Government Like a Business

What a difference an election year makes. Last year was full of pointless brinksmanship over federal policy issues that will take several decades to solve. Those battles at times looked like they threatened the near term health of the economy. 

The New Year is shaping up to be very different. The New York Times reports this morning that a deal has been struck to extend the payroll tax reduction and extended unemployment benefits through the end of the year. Tentatively, it looks as if efforts to weaken the unemployment insurance system have been blocked. Both the payroll tax reduction and extended unemployment benefits were set to expire at the end of February, and the failure to extend them was on most economists' lists of things that could weaken the economy in 2012.

A Harrisburg Rooster Takes Credit For The Sunrise

A recent tweet (see above) from our good friends over at the Commonwealth Foundation highlights that private-sector job growth in 2011 was the strongest in Pennsylvania since 1999 and links that outcome to state tax and spending policy.

The figure below plots the 12-month moving average of private-sector payrolls in Pennsylvania since 1990. What you will notice about the figure is that in the period following a recession (the areas shaded gray*) private-sector payrolls expand. That's what is known in macroeconomics as an expansion; it's been a characteristic of every business cycle on record since 1854. Given where we are in the business cycle, to link private-sector job growth to 2011 state tax and spending policy is like the rooster taking credit for the sunrise.

Morning Must Reads: The Payroll Tax Cut, Cuts in Block Grants for Local Gov and the State Use Tax

The economic news in the past couple of weeks has been relatively positive so that must mean it is time for another down to the wire battle in Washington to help restore pessimism! At the end of the month, temporary extensions to the payroll tax credit and extended unemployment benefits will expire. With unemployment high, both measures should be extended through the end of the year.

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.

Developing Story: Bank Swaps and Philadelphia

As Sharon Ward wrote yesterday, the Pennsylvania Budget and Policy Center put out a new report documenting the millions made by large financial institutions like Wells Fargo, Morgan Stanley and Goldman Sachs off interest rate swaps negotiated with the City and School District of Philadelphia. Those swap deals have cost the city and school district $331 million in net interest payments and cancellation fees. If interest rates continue to remain low, still-active swaps could cost the city another $240 million in future net interest payments.

Here's a quick look at how the story is being told in the daily news clips.

Bank Swap Deals Cost Philadelphia City, School District

Large financial institutions, including many that received financial bailouts in the wake of the financial crisis, are making hundreds of millions of dollars off interest rate swaps negotiated with the City and School District of Philadelphia.

That's the key finding in a new report the Pennsylvania Budget and Policy Center out today. We found that swap deals negotiated with banks such as Wells Fargo, Morgan Stanley and Goldman Sachs have cost the city and school district $331 million in net interest payments and cancellation fees. If interest rates continue to remain low, still-active swaps could cost the city another $240 million in future net interest payments.

Morning Must Reads: Jobs, Budgets and Local Taxes

If you haven't heard by now, a temporary two-month extension of the federal payroll tax cut and emergency unemployment benefits passed by the U.S. Senate was scuttled by the U.S. House on Tuesday. With the failure to extend both measures expected to slow the already tepid pace of economic growth, it is hard to imagine the House will not reconsider its position in the 11 days remaining before the current extensions expire.

Third and State This Week: The Costs of Child Poverty, Too-Good-to-Be-True Liquor Privatization and Temp Workers

This week, we blogged about the economic costs of child poverty, a privatization study that is too good to be true, what the trends in temporary worker services suggest for Pennsylvania's economy, and much more.

IN CASE YOU MISSED IT

  • On poverty, Chris Lilienthal blogged about an analysis estimating that child poverty costs the United States' economy $500 billion every year in foregone earnings, healthcare expenses, and crime involvement. 
  • On privatization, Stephen Herzenberg highlighted testimony presented by researchers with the Keystone Research Center this week making the point that privatization of Pennsylvania's wine and spirits stores would not benefit state revenues but could increase alcohol-related social problems. 
  • On jobs and unemployment, Sean Brandon explained what the employment trends of temporary workers could mean for Pennsylvania as an indicator of broader job market trends. 
  • And in the Morning Must Reads this week, Mark Price wrote about news report on $7.7 trillion in loans and guarantees the Federal Reserve provided to troubled banks, the growing number of elementary school students who qualify for subsidized school lunches, and the real root of high unemployment among today's youth
More blog posts next week. Keep us bookmarked and join the conversation!
Syndicate content