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Tuesday, December 12, 2017

County Data: Jobs Better, Wages Weaker

New county-level jobs and earnings numbers are in. The results are encouraging and disappointing - but even more so: predictable. 

Let us start with the encouraging part. In my last county-level labor market analysis, I noted that in the first-quarter private sector jobs numbers, only four counties saw growth in private-sector employment. For the second quarter, six counties climb into the job-growth bracket compared to the same quarter last year:

Figure 1
Source: Bureau of Labor Statistics

The jobs trend is overall less negative for the second quarter of this year than it was for the first quarter. This is consistent with the "new normal" scenario that I laid out already six months ago. Our state is not going anywhere positive, but we are in a frail state of stability. In theory, we could remain here forever; there is no such thing as an automatic economic "recovery". 

In practice, with the right kind of policy reform we can expect growth and sustained private-sector expansion. That said, the wrong kind of policies will send us into another episode of macroeconomic decline. 

As a warning sign of what that means, here is the disappointing part: looking at wages per job, the overall trend is weaker than it was in the first quarter. Table 1 reports change in per-job wages for, respectively, the first and second quarters in 2017 compared to 2016. In the first quarter, only one county saw overall decline in per-job earnings in the private sector; in the second quarter four counties ended up in the red. To further confirm the weaker trend, in the first quarter, six counties had a per-job earnings growth of less than three percent, while in the second quarter ten counties fell into that category. This, while not much happened at the other end of the table:

Table 1

  First quarter     Second quarter
Lincoln 12.7% Sublette 13.2%
Johnson 11.8% Weston 10.6%
Sublette 6.9% Sweetwater 7.0%
Crook 6.5% Goshen 6.5%
Converse 6.1% Johnson 5.7%
Park 6.1% Crook 5.6%
Teton 6.0% Natrona 5.3%
Goshen 5.2% Big Horn 5.2%
Sweetwater 4.5% Teton 4.4%
Fremont 4.3% Campbell 4.2%
Carbon 4.1% Hot Springs 3.5%
Weston 4.0% Laramie 3.2%
Albany 3.8% Fremont 2.5%
Sheridan 3.6% Albany 2.0%
Laramie 3.6% Platte 1.9%
Natrona 3.2% Sheridan 1.6%
Platte 2.9% Uinta 1.3%
Washakie 2.7% Converse 0.8%
Campbell 2.4% Carbon -1.9%
Uinta 1.9% Park -2.0%
Hot Springs 1.1% Lincoln -6.4%
Big Horn -0.7%   Washakie -8.0%
Source of raw data: Bureau of Labor Statistics

There seems to be a conflict between the jobs trend and the earnings trend: if the jobs trend is slowly getting better, should we not also see an improvement on the earnings side?

No. These two trends, which seem to point in opposite directions, actually confirm the "new normal" scenario. The jobs numbers confirm stabilization; employers no longer need to lay off workers are they did - generally, they have reached a balance between costs and revenue. The per-job earnings numbers convey the same message: while the threat of losing one's job is no longer acute, the jobs that still exist - and are created - do not offer quite the same level of pay as many were able to find before the downturn. 

All in all, the message is: do not rock the boat!

Monday, December 11, 2017

A Coordinated Effort To Raise Taxes

Despite mounting resistance from taxpayers, our statist politicians continue to push for their tax hikes. The latest example is a devious proposition from Campbell County Commission chairman Rusty Bell - and he is kind enough to draw our attention to a coordinated effort between state and local lawmakers to raise more than just our state taxes. 

Before we get to it, a quick piece of information that provides a good background. We all know that government produces essential services that we need for a functioning, orderly society and a strong economy. Those services are: 

a) The protection of life, liberty and property: law enforcement, a court system for the resolution of disputes, criminal justice, and fire and rescue services. It is not necessary that these services are operated by government, though contracting out, e.g., criminal-justice functions or fire-and-rescue services has the tendency of creating cronyism and private monopolies. These jack up the cost and can create inefficiencies and undue bias in service provision. 

b) The provision of infrastructure: highways, railroads, airports and seaports, designated flight corridors and seaways, and power grids. The reason why these functions fall under the realm fo government is that they tend to be so-called public goods, where there is no meaningful way to create a market. However, here more than under item (a), private partnerships can make a meaningful contribution. It is, e.g., a good idea to let an airport be run and operated as a non-profit private entity, owned by, say, a local municipality, as opposed to run it as a government agency. Please note the separation between the government-provided infrastructure and those who utilize it, such as the difference between a flight corridor designated by government, and the airline using that flight corridor, or the government-provided power grid and the power plant selling electricity through that grid. 

c) National defense. 

When government goes beyond these essential functions, it wanders into a territory where its contributions are of decreasing economic value, given the resources it uses. There is a rich literature on this, especially on the international level, that shows how higher taxes lead to drops in productivity and mounting inefficiencies. For example, a taxpayer in Sweden gets less than 60 percent of the government services that an American taxpayer gets, for every tax dollar (or equivalent thereof) they pay. Since taxes are about twice as high in Sweden as they are here, this means that their extra taxes they pay are a net loss to the economy, even taking into account the inefficiencies inherent to non-essential government functions.

Closer to home, so to speak, Key Policy Data has recently published a study of government productivity at the state level - and the verdict is not good for Wyoming. Their method starts with replicating some of the data I have reported on the Government Employment Ratio and the Government Compensation Ratio, then moves on to a new form of index for government productivity. According to the Key Policy Data analysis, Wyoming has the third least productive government sector in the country. Their method is overly complicated, putting unnecessary distance between on-the-ground economic activity and the index itself, but it is nevertheless worth a look. Their analysis gives some good reasons for a discussion on whether or not we get what we pay our government employees for.

In other words, not only do we have the largest government workforce in the country, but we also have one of the least productive government workforces. Let us keep this in mind as we get back to Commission Chairman Rusty Bell in Campbell County. From the Gillette News Record:

Local governments will talk next year about whether to make the Optional 1 Percent Sales Tax a permanent fixture. Commission Chairman Rusty Bell said he will bring it up in the coming months. 

Voters in Campbell County just said that they don't want higher taxes. You don't need a Ph.D. to realize that they probably will not want to make this tax permanent either.

Back to the News Record:
He was 3 years old when the tax first passed in 1976, and he’s seen Gillette grow into the city it is today. “A lot of that is because we decided to fund things ourselves with the 1 Percent,” he said. 
Could Commissioner Bell please provide evidence of that? No, it does not suffice to just point at a few buildings constructed with this tax. He will have to show that the activity in those buildings is absolutely essential to the city; basically, the bar of evidence requires that the commissioner proves that this tax has been the difference between the coal industry staying and leaving the area. After all, looking at Gillette from the outside, it seems as though the coal industry is what has grown Gillette into the city it is today, but if Commissioner Bell can prove otherwise, I would be delighted to hear about it.

While we wait for the commissioner's evidence, perhaps we should ask the commissioner to place his tax proposal in the context of what our beloved Joint Revenue Committee is up to. Oh, wait - the News Record already talked to him about that:
In a joint meeting between the county, city of Gillette and town of Wright on Wednesday, he said that anything the Legislature does when it comes to taxes could hinder the ability to renew the tax, not just in Campbell County, but also in the other 18 counties that have the optional tax. Lawmakers know this, and they keep asking counties and cities if they’ve made their optional taxes permanent, Bell said. “The answer is no, we let the voters decide,” Bell said. “And they say, ‘Well, we put that tool in the toolbox for a reason.’ They continually put it back on the counties to at least look at that option. I just want to throw that out there.” 
This is interesting. Apparently, according to Commissioner Bell, with their right hand leading state legislators encourage local governments to permanently raise the sales tax; then, with their left hand, they craft proposals for massive state-level tax increases. 

We have just learned the answer to the question "when is government big enough?" Never. Which is why it is absolutely paramount that every fiscal conservative in this state starts talking to the members of the Joint Revenue Committee, and to their local county commissioners, about the problems with higher taxes. 

Then, as the News Record article continues, Commissioner Bell makes a nice rhetorical somersault:
He said that when the 2018 legislative session is over, he wants “to at least have that conversation about making that 1 Percent tax permanent.” He’s not advocating for its permanency; rather, he just wants everyone to come together and have a civil discussion on its merits and faults. “I think we owe it to the people of Campbell County to have the discussion, if nothing else, to educate people on what (the tax) does for Campbell County,” he said. 
So he is not advocating for the tax, but he wants to have a civilized conversation about all the good things with the tax. 

The commissioner's idea of what a conversation is reminds me of an old joke by Rodney Dangerfield:

"I was having an argument with my wife, and I said 'there are two sides to this argument' and my wife said 'yeah, my mom is coming right over!'"

The News Record continues:
Bell said he wants to hear from all three entities as well as residents, whether they’ve benefited from the tax or would like to see it go away. It may be that a majority of people support the tax, but also like voting on it every four years, he said. If this is the case, then it’ll stay on the ballot. “At least we’ve done that education part of that, and it’s all out there, what we do with that money,” he said. “I think we should have a good conversation, have people talking about it and they can make up their minds.” 
With the risk of being overly pointed: a conversation, Mr. Commissioner, is an interaction where opposing views are contrasted in a mutually respectful manner. An activity that only presents one argument is not a conversation. If a one-side argument is well constructed and thoughtfully executed, it is called "persuasion". If not, it degenerates into "propagation". 

Take your pick, commissioner. Either way, don't try to fool Campbell County voters. They have already said no to higher taxes. They can do it again. 

As for the collusion between state legislators and county commissioners in raising our taxes: it only goes to show how devious, desperate and destructively ignorant many of our elected officials are. Yes, these are harsh words, but they only match the harsh economic reality that will follow if our state is burdened with half-a-billion dollars in higher taxes. 

We must stop Taxmageddon in 2018. End of story.

Sunday, December 10, 2017

WyoFlot Q and A

With reference to the ENDOW plan's idea for a de facto state-run airline, an anonymous reader commented:
what is a meaningful macroeconomic result that would warrant the investment? Is there ever one to your mind? You provide no result or threshold where your opinion might change. Are you willing to make a case against air service as a component to a healthy economy? How about providing some insight into what an economy really needs? Again, I am with you that the state is not the best agent for this most of the time, but how do it in an economic desert otherwise?
Let me answer these questions one by one.
what is a meaningful macroeconomic result that would warrant the investment?
The answer is simple: when growth is strong enough for the private sector to be able to sustain commercial air services without government support. The question is, namely, based on the premise that it is government's job to run a commercial airline in the first place. 

Government running an airline is like government running a trucking business. Just like government should not control all commercial aspects of the trucking business, it should not control all commercial aspects of commercial air service. 

To maintain the trucking analogy, the only part of the industry where government could make a meaningful contribution is at the airport level. If that was what the ENDOW program suggested, then this conversation would take a different route.
Are you willing to make a case against air service as a component to a healthy economy?
No. Commercial air service provided by private companies is a vital part of our economy. 
How about providing some insight into what an economy really needs?
An economy really needs a government that: 

a) protects life, liberty and property;
b) produces public goods, defined as products for which there is no functioning market (strictly, there is no exclusion in consumption); infrastructure such as a highway and an airport can fall under this category;
c) the only economic regulations that exist are there to protect property rights and the enforcement of voluntarily signed contracts; and
d) is banned from engaging in economic redistribution between private citizens. 

For example, a commercial airline run by government - even if the actual flying of the airplanes is outsourced to a private entity - is economic redistribution. The state's airline exists only because it wants to be able to sell airline tickets below market price. In doing so, government taxes all citizens and provides entitlements to a few, namely airline passengers (and, to be precise, the airline that flies them on a monopoly contract with government). This is economic redistribution and has no place in the government that an economy "really needs".

There. If anyone has any more questions, I would be happy to answer them.

Taxes, Income and Growth

My latest on Larson's Political Economy offers some comments on the macroeconomic prospects of Trump's tax reform:

Friday, December 8, 2017

A Plan to Save Wyoming

I have said it before, and I will say it again: this upcoming legislative session is a do-or-die moment for Wyoming. 

As 2018 approaches with frightening speed, let us take inventory and see where we are at today. Here is a quick rundown of our economic problems, our political hurdles and some of the solutions that can bring us back on track to prosperity and growth.

Economic problems

Thursday, December 7, 2017

Statist Rhetoric and How to Respond

The fight against Taxmageddon is making progress. The Revenue Committee has now, twice, postponed votes on their tax monstrosity. Their latest approach is to piecemeal it through, hoping to fly under taxpayers' radar.

Assorted statists provide increasingly aggressive support for these tax hikes. They use all kinds of arguments about how government is not growing, government has been starved and cut to the bones, and so on. As we approach the 2018 session - one of the most important in our state's recent history - the debate over the size of government is only going to intensify.

Wednesday, December 6, 2017

Tax Reform Entrenches the Welfare State

In my latest article for the American Institute for Economic Research, I explain how the GOP tax reform is the first of its kind - and not in a way that will make conservatives happy: