Morning Must Reads: Bleak Economic Forecasts and State Lawmakers Protect Bond Holders and Gas Drillers

The Philadelphia Inquirer this morning reviews recent economic forecasts and the news is not encouraging. Further evidence of the need for an "American Jobs Act" and a "Pennsylvania Jobs Act." What's that, you ask? What does evidence have to do with public policy?

Forty-five professional economic forecasters surveyed by the Federal Reserve Bank of Philadelphia predicted slower growth and higher unemployment next year and in 2013 than they predicted in August.

A publication by the Federal Reserve Bank of San Francisco said the economic uncertainty spurred by the European debt crisis had increased the odds to more than 50 percent that the United States would fall into recession early next year.

Joseph DiStefano was blunt Monday about who will benefit from a state takeover of Harrisburg: no haircut for bondholders (i.e., write down of incinerator debt as might happen with bankruptcy), but a crew cut for city workers and "other contracts" (e.g., providers of social services). Quick quiz: what will this approach do for job creation in the city? Time for a Harrisburg Jobs Act?

The proposed taxes have been unpopular among the city's largely suburban commuter workforce. To prevent Harrisburg from going into bankruptcy, Gov. Tom Corbett has signed legislation written by suburban lawmakers that would force Harrisburg to follow Philadelphia, Pittsburgh and other big cities in accepting the state's financial oversight. The state's draft plan would sell city parks and other assets and break labor and other contracts to save money without hurting the bondholders or bond advisers.

Thanks to the Pennsylvania Legislature, Christmas for gas drillers may be starting early this year.

Senate Drilling Fee Bill More Than Industry Asked For

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The Pennsylvania Senate approved legislation tonight that would enact a Marcellus Shale impact fee. I issued the following media statement on the bill's passage:

“We are disappointed by the Senate’s passage of an impact fee that gives drillers an even-better deal than they asked for and comes at the expense of our environment, communities, children and families.

“The Senate bill has a lower effective rate, at 2.2 percent over the life of a typical Marcellus Shale well, than an industry proposal last year from the Marcellus Shale Coalition, which had an effective rate of 2.5 percent. Drillers in Pennsylvania would also pay less under the Senate bill than they do in Arkansas, Texas, Wyoming and many other energy-rich states."

How Low Can You Go?

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The Pennsylvania House of Representatives is debating a Marcellus Shale impact fee today, and the Senate could take up its own plan later this afternoon. Unfortunately, both chambers appear to be playing a game of limbo to see how low they can go on a drilling fee rate.

Morning Must Reads: Imaginary and Real Threats to Employment Growth

Senator Mike Folmer of Lebanon County has an op-ed in The Patriot-News this morning arguing that unemployment insurance in Pennsylvania is costing the commonwealth jobs.

In fact, if it were not for the unemployment insurance system helping to maintain working families' buying power, joblessness in Pennsylvania would be significantly worse.

In the Senator's Lebanon County, for example, the unemployment rate climbed from 3.8% in December 2007 to just over 7% by the end of 2009. Over that period, transfers (which include unemployment insurance payments) climbed from 17% to 20% of personal income in Lebanon County. In the absence of unemployment insurance income, thousands of Lebanon County residents would have had to reduce their spending further, which would have rippled across the community as another round of layoffs.

The 6.7% unemployment rate in Lebanon County means that the people who lose their jobs each month through no fault of their own face a long queue of people already applying for jobs. With competition for jobs fierce, it takes on average much longer to find a job, and that makes unemployment insurance a vital source of income in these tough times.

What's really endangering jobs in Pennsylvania? As we explained last week, between September 2009 and September 2010, the commonwealth ranked fourth among the states in the number of jobs created and seventh by job growth percentage. But between April and September 2011, Pennsylvania’s job growth ranking slipped to the bottom 10 states.

What happened?

As federal Recovery Act dollars dried up and the national economy slowed over the spring and summer, the state Legislature gave the state another kick while it was down by sharply slashing spending on education and other essential services. As a result, the public sector in Pennsylvania began shedding jobs, adding yet more people to the unemployment lines.

In sum, the real threat to job growth in the Commonwealth is spending cuts — austerity economics — at the national and state level. The last thing in the world we need on top of current cuts is more cuts in unemployment benefits.

Morning Must Reads: Income Inequality and Finally Somebody Speaks Up for the Bankers

The Pittsburgh Post-Gazette has published the first in a series of stories on inequality this morning. The conservative position is apparently "What inequality?" followed by "I'm not conceding there is any inequality, but if there were, I'm sure I like it a lot!" Enjoy.

Third and State This Week: Income Inequality, Stagnant Wages and Putting the Brakes on PA's Recovery

This week we blogged about how public-sector job losses are putting the brakes on the state's economic recovery, the top paid executives in Central Pennsylvania, and wage stagnation. In the Morning Must Reads, we also highlighted news stories on the economics of fracking, a new report on campaign contributions made by gas companies, new data on job openings, and much more.


  • On income inequality, Mark Price blogged that between 2000 and 2007, while Pennsylvania's per capita output grew, workers' wages remained stagnant. Stephen Herzenberg also had a post on Central Pennsylvania's highest-paid executives.
  • On jobs and the economy, Stephen Herzenberg wrote about a new policy brief from the Keystone Research Center showing that public-sector job losses are putting the brakes on Pennsylvania’s economic recovery.
  • In the Morning Must Reads this week, Mark Price highlighted new data on job openings, noting that there are 4.2 unemployed workers competing for each new job opening. He also wrote about a bleak employment outlook from Dean Baker and J-1 visas and teacher layoffs in Pittsburgh.
  • Mark Price also focused three Morning Must Reads this week on the Marcellus Shale. He highlighted a new study by Common Cause on campaign contributions made by natural gas companies in Pennsylvania; blogged about a news report stating that taxpayers could be stuck with most of the $100,000 it costs to plug an abandoned Marcellus gas well; and shared Paul Krugman's primer on the basic economics of fracking.

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

Morning Must Reads: Frackers Go Shopping, Students See Tuition Rise and the Delaware River Used to Peal Paint Off the Bottom of Boats

A new report sums up campaign contributions from natural gas companies to elected officials in Pennsylvania. I'm sure it is just a coincidence that the state House Finance Committee has settled on a drilling fee that is the equivalent of just 1% over the life of a typical Marcellus Shale gas well.

A four-month study by Common Cause, which calls itself the people's lobby, found that over the past 10 years, natural gas companies have spent more than $747 million across the country on a 'stunningly successful' campaign to win the support of members of Congress and state legislators for 'weak' regulations. The study was released at a news conference in Harrisburg...

For state politicians, Gov. Tom Corbett was far and away the leader, at $1.6 million. Second was state Senate President Pro Tem Joe Scarnati at $282,034; third was state Rep. Dave Reed, R-Indiana, at $105,732. House Republican leader Mike Turzai, R-Bradford Woods, got $79,100. Republican senators Don White, R-Indiana, and Jake Corman, R-Centre, got $69,125 and $65,640 respectively, while GOP House Speaker Sam Smith got $58,000..House Democrat Bill DeWeese, D-Waynesburg, got $53,300...

The groups also criticized a bill that won approval from the House Finance Committee last week and could face a full House vote next week. It would impose a fee on drillers that amounts to 1 percent over the life of a gas well, which could produce $160 million in profits for its company, said Sharon Ward of the Budget and Policy Center.

In totally unrelated news, the Community College of Allegheny County, which provides training to workers in the natural gas industry, has already raised tuition twice this year and looks headed for a third increase if Allegheny County cuts another $7 million from its budget.

Putting the Brakes on Pennsylvania’s Recovery

Public-sector job losses are putting the brakes on Pennsylvania’s economic recovery, endangering private-sector job gains

Those are the findings in a new Keystone Research Center policy brief that I co-authored with Mark Price. (You can read the press release here.)

Over the last year, Pennsylvania has lost 21,000 public-sector jobs, including some 13,000 education jobs. The impact is being felt well beyond the public sector, slowing the pace of private-sector job growth as the ripple effects of out-of-work teachers and laid-off government workers take a toll on the broader economy.

Morning Must Reads: Big Gas Gets the Goldmine and Taxpayers Get the Shaft

Natural resource extraction produces wealth, but it also imposes large costs on third parties. For instance, when a Marcellus Shale gas well stops producing, the well must be plugged. But as the many abandoned mines in Pennsylvania illustrate, gas well owners, in the absence of requirements to fully fund the decommission of a mine, often prefer to take their money and run.

Have You No Shame, Sir (Plus Mary)?

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The Central Pennsylvania Business Journal this week published the list of the highest-paid 10 executives in the region in 2010. Nine of these executives are men. The tenth was Mary F. Sammons, the former Chairman and CEO of Rite Aid.

Some of the salary information in The Business Journal is not new. (See, for example, the CEO pay list in Table A1, starting on page 21 of The State of Working Pennsylvania 2011.) What is new is that The Business Journal also published these executives’ pay in 2009, allowing us to look at the change in pay from 2009 to 2010 for a group of Pennsylvania executives. (Earlier, we only had information on change in executive pay from 2009 to 2010 for U.S. CEOs.)

Here’s what we found. The dollar increase in pay for these executives ranged from $2.55 million for Michael Lockhart of Armstrong World Industries to less than a million dollars (about $900,000) for Neil Shah, the President and COO of Hersha Hospitality Trust. The average increase was $1.64 million.

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