Category Archives: Economics

Why no state budget? Governor Ducey’s university bonding plan

This was supposed to be the week that the Arizona legislature passed a budget and then declared sine die. Didn’t happen.

According to the Arizona Capitol Times (subscription required), the holdup is Governor Doug Ducey’s university bonding proposal, the one he mentioned in his State of The State Address back in January but has still not fleshed out the details at this late date. Ducey’s bonding plan for universities has more questions than details:

Gov. Doug Ducey’s university bonding proposal is a vast unknown for Arizona lawmakers.

He doesn’t offer any long-term growth projections or specifics on how the state’s three universities will spend the $1 billion that the plan is supposed to generate. There is also no mention of oversight from the Governor’s Office or from the plan’s backers.

Lawmakers do understand the broad strokes of the universities’ wish list if they get the money: new buildings, research programs and repairs.

But the plan almost certainly will generate much more than needed to pay off a $1 billion loan over the course of its 30-year life, a fact acknowledged by both backers and foes, and that’s something lawmakers question.

Lawmakers are also hearing from cities and counties, which look to lose millions of dollars under the plan. Ken Strobeck, president of the League of Arizona Cities and Towns, said the plan is opaque by design, and he’s done his own analysis that shows the universities will gain more than $1 billion.

“These are not uninformed people,” Strobeck said. “I think they knew exactly what they were doing.”

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Higher minimum wage did not reduce restaurant employment after all (updated)

The Arizona Restaurant Association (ARA) is the principal chamber of commerce organization that has sought to defeat and to undermine Arizona’s Minimum Wage Act first approved by voters in 2006, and reaffirmed by voters in 2016.

The ARA was behind HB 2579, our Tea-Pulican legislature’s attempt to gut the 2006 Minimum Wage Act by narrowly redefining “wages.” The ARA participated in a failed legal challenge to the sufficiency of the 2016 Minimum Wage Initiative, and after the Minimum Wage Initiative was passed by voters, the ARA participated in the failed legal challenge to overturn the will of the voters.

The ARA’s position is always that the minimum wage (most restaurant workers are paid a sub-minimum wage and must rely on the kindness of strangers for tips) is devastating to restaurant businesses. The ARA always claims that a higher minimum wage will reduce employment in the restaurant sector.

While some marginal businesses teetering on failure may have closed due to higher wage costs, those businesses have been replaced by others that are competitive at the higher wage costs. And isn’t that what “creative destruction” in a free market economy is all about?

Howard Fischer reports today that employment in the restaurant sector has gone up since passage of the increase in the minimum wage. Food sector job growth outpaces state since wage hike on Jan. 1:

Remember those claims during the Proposition 206 debate that increasing the minimum wage would lead to less hiring and people being laid off from low-wage jobs?

The latest unemployment statistics suggest that hasn’t happened.

In fact, the data from the state Office of Economic Opportunity shows that the number of people working in bars and restaurants last month not only increased but did so at a rate six times higher than the economy as a whole. Employers who run food service and drinking establishments added 7,800 new workers compared with February, a 3.3 percent boost.

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GOP to try again with a zombie ‘Trumpcare’ plan, and hurtle towards a government shutdown next week

Congress returns from its recess next week with a government shutdown looming next Friday. “If Congress does not strike the first truly bipartisan deal of his presidency by then, Donald Trump will spend his 100th day explaining to the public why the government he’s charged with running has partially shut down.” How Trump’s First 100 Days Could End in a Government Shutdown.

But first, Tea-Publicans apparently believe they have enough time to try to raise a zombie “Trumpcare” plan from the dead. Sarah Kliff reports at Vox.com, House GOP members are floating a new health plan. Here’s what’s in it.

House Republicans are floating a new amendment to their health care bill — one that would likely cause even more Americans to lose coverage than the last version.

Leaders of the staunchly conservative Freedom Caucus and the more moderate Tuesday Group have reportedly hashed out a proposal that would let some states ditch key Obamacare policies, such as the requirement to charge sick people the same for coverage as healthy people. States would also have the choice to opt out of the Affordable Care Act’s essential health benefit requirement.

The Huffington Post reported on the development late Wednesday night, and Politico posted a short white paper early Thursday describing the changes. We still don’t know how final this amendment is or which House Republicans support the changes.

What we do know is that this latest proposal doesn’t do much at all to assuage concerns about the older proposals. While it meets many of the demands of the party’s far-right wing — namely, the deregulation of the individual insurance market — it does nothing to address concerns about massive coverage loss. Instead, it likely makes those problems worse.

“It’s pretty frustrating to see they’ve worked so hard to come up with another Rube Goldberg–type solution,” says Craig Garthwaite, a health economist at Northwestern University’s Kellogg School of Business.

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President Trump’s border policy creates uncertainty

For the year 2016, Arizona’s exports to Mexico totaled $8.3 billion, down from the $9.1 billion recorded in 2015. Arizona ranked fifth among the states exporting to Mexico in 2016, behind Texas, California, Michigan, and Illinois. The American economy is forecast to grow 2.3% in 2017. Economists have downgraded Mexico’s projected economic growth rate from approximately 2.5% to 1.5% mainly due to the uncertainty generated by the Trump administration’s anticipated policies. Since Mexico’s economic wellness depends in large part on its relations with the U.S., the country’s economic future looks a bit cloudy at this time.

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A Piketty ‘Inflection Point’ Heads Up

[Cross-Posted from Inequality.org]

The concentration of America’s wealth may be reaching a point where any further gains for the top 1 percent must literally come at the direct expense of everyone else.

 

The exquisitely succinct equation at the heart of Thomas Piketty’s best-selling Capital in the Twenty-First Century — r  > g — has impressed readers worldwide. Just three symbols. Even Einstein, for his masterwork, needed five.

Piketty’s core principle: The rate of return on the investments the wealthy make will normally be greater than the rate of growth in a nation’s economy and total wealth.

Piketty considers the three decades right after World War II an exception to his rule. In those anomalous postwar years, the French economist explains, the rebuilding required after Europe’s destruction generated a rate of growth, g, not sustainable in the long term.

In more normal times, Piketty believes, r > g will drive ever-increasing concentration of wealth at the top — unless tax and other policy choices impose sufficient constraint on that concentration. Continue reading

Trump to take health insurance hostage – by sabotaging ‘Obamacare’ – unless he gets his way

When I posted about this the other day, Obamacare subsides to continue while House v. Price remains in limbo, Greg Sargent of the Washington Post was so hopeful that he wrote In the battle over Obamacare’s future, Trump just blinked. Bigly.

That was then, this is now.

Just two days later Greg Sargent now writes, Trump has a strange new plan to threaten Democrats. It’s a sick joke.

President Trump likes headlines that portray him as a man of action, so he’s probably pleased with the barrage of Thursday headlines about his latest move on health care. ABC News, CNN, the Wall Street Journal, and many others all inform us that Trump is “threatening” to sabotage the Affordable Care Act to force Democrats to make a deal with him on its future. “Threaten” is a verb that is laden with action, purpose, and intimations of concealed leverage and power. Awesome!

Americans whose health, and for some whose life, depends upon Obamacare health insurance are a mere afterthought, they are simply collateral damage in “the art of the deal.” People must die so “Dear Leader” can claim his “victory.”

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