New Data Has Bad News for CT

New research from IHS Global Insight has some bad news for the State. Perhaps the Governor ought to switch course yet again, and go back to the no-tax-increase pledge. Because it appears we will need all the positive differentiating factors we can find. According to this data, it will take the various states a varying amount of time to recover the jobs lost since 2007. Some, such as Texas, will recover by next year. But some will take longer. Exactly five are expected to not recover until after 2015. These five are Michigan, Ohio, Indiana (the usual Midwestern suspects), Rhode Island ( a victim of the housing bust), and… Connecticut.

The data is here: http://blogs.wsj.com/economics/2009/07/28/home-prices-jobs-will-come-back-sooner-in-some-states-than-others/

I don’t know what the data is based upon, but if this is accurate, our tax receipts will not recover for years with the existing labor pool. The only way for the State to get solvent is to grow jobs, and the only way to grow jobs is to make business feel welcome.

It appears to be time for Hartford to start thinking of less spending, less taxes, and less regulation, and to stay in that mindset for a period of years. If not, the relocation business is going to be the only growth industry from Greenwich to Stafford Springs.

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34 responses to “New Data Has Bad News for CT

  1. AndersonScooper

    Be afraid, be very afraid.

    And if Vincent wants to cut thousands of State jobs, (into this recession), it’d be good if he just came out and said so.

  2. Well, Scoopster, I don’t make this stuff up. IHS has a fine reputation as a very accurate economic forecaster. (Their site is globalinsight.com)

    And There is more bad news out today. The National Assoc. of Manufacturers and CNBC did a state-by-state ranking for business-friendliness, and we came in 35th. That will not cut it intrying for attract new businesses.

    Here is that data: http://www.cnbc.com/id/31765926

    Again, I agree, it is scary, but I’m not making this stuff up.

  3. While it is important to make Connecticut an area where jobs will grow, I believe we need to question the mantra that cutting services which is a necessary part of cutting taxes is the best way to proceed. For example, in the data that Vincent points to, Connecticut is 20th in business friendliness. It is especially strong in quality of life and in education.

    Where it particularly lags is in transportation, where we come in 43rd. These transportation issues end up driving up the cost of living in Connecticut, in terms of getting to and from work, as well as getting goods and services and as a result Connecticut is also particularly weak in cost of living and cost of business.

  4. Interesting results.

    But with no explanation of the methodology used, and not even a hint of who paid for it, this “study” is hardly worth even the energy it’s taking me to type these words.

    Which is too bad. It’s an important topic.

    Generally, when a significant study is released, news articles about it have links back to the full research report. But not here.

    And not a word about this “study” anywhere on the IHS web site (that I could find, anyway).

    So until IHS explains itself, this “”study” has to go right into the ol’ circular file.

    Right next to the “Bigfoot” file.

    AND the “Hartford Patriots Season Tickets Order Forms” file (don’t even ask).

  5. James, it ran in the WSJournal, I’d guess the Journal reporter got early access to a new repirt that’s not posted yet. I agree, no word on methodology, but they aren’t a political think tank, like Heritage – they justy acll them as they see them, so I think it is likely to be sound.

    I agree Aldon, that transportation holds us down in these rankings, but think of this — we could eliminate a good deal of traffic density and train overcrowding by having jobs in places like New Haven and Milford, as opposed to having hordes of commuters moving in one direction (towards New York and Stamford), and very few in the opposite lanes or tracks. How to effect this improvement? Simply by creating jobs in these other destinations. How to create jobs? Create an environment that is business-friendly. This is much cheaper and much more likely to succeed in attracting business than is adding more cars to metro-North, or widening roadways.

  6. AndersonScooper

    Vincent, just for you buddy:
    Basic HTML: Creating Links to Other Pages.

  7. Dempsey Dem

    We all know that jobs are streaming out of Connecticut, U.I. has announced cutbacks with more to come. More military and space industry cuts can be expected. The Hedge fund jobs that have fueled Fairfield County (And the state coffers as well) have dried up, and it will take years to recover from the other Wall Street and business cutbacks to recover if at all. The housing situation down here is a mess, with fewer sales at lower costs further reducing transfer and sales tax revenues.

    If we are to follow the Republican plan of balancing the budget with service cuts and program reductions alone, then we ain’t gonna get it done. Listening to the Finance, Revenue and Bonding committee today, in spite of their Governor, the Republicans were still singing their head in the sand song. Show me the cuts and their effect on municipal financial planning, and I will listen.

  8. James, it ran in the WSJournal, I’d guess the Journal reporter got early access to a new repirt that’s not posted yet. I agree, no word on methodology, but they aren’t a political think tank, like Heritage – they justy acll them as they see them, so I think it is likely to be sound.

    Vincent,

    I guess you’re righ– Wait! I’m having this incredible global insight: ” Too many mistakes are made by people who trust without proof.”

  9. Vincent,

    I would be curious about what you would do to encourage companies to create jobs in Milford or New Haven. According to the data you provided, Connecticut comes in above average in terms of business friendliness. The big hits seem to be transportation, cost of living and cost of doing business.

    I should note that the transportation of workers is only part of the transportation issue. To the extent that there is any effort to promote manufacturing in Connecticut, the transportation of materials and finished products is an important part of the equation.

    In terms of the cost of living and the cost of doing business, it is worth noting the only state that has a higher cost of electricity than Connecticut is Hawaii
    (Ref: Electric Industry Association http://www.eia.doe.gov/cneaf/electricity/epm/table5_6_a.html )

    There is clearly a problem with job creation in Connecticut, but, as I noted before simply cutting the services necessary to cut taxes does not seem like a wise approach to dealing with this.

  10. Hey – Where did I leave that study that shows how increasing taxes in Connecticut have been responsible for job losses? Hello?? CBIA, did you borrow it??

    Oh, damn, I forget again.

    There is no such study.

  11. Martha,

    Here are the stats from PA. Probably similer in CT: http://www.commonwealthfoundation.org/node/1368/print

  12. We don’t have the same economic drivers for job grow as in the 1994 to 2006 recovery.

    Tech, state, medical and financial jobs drove that boom. I don’t see the confluence of drivers (including deregulation) needed for the next leg up.

    The pressure to go single payer will hit CT hard in the Hartford region.

    The same claims were made about job losses in the post 9/11 era and the Bush recession in CT (actually both Bushes) . The predictions were largely correct — CT was slow to recover jobs.

    http://www.cga.ct.gov/2006/rpt/2006-R-0179.htm

  13. Another CT study on recessions and job growth. The claims in the WSJ are nothing new.

    http://www.cga.ct.gov/2008/rpt/2008-R-0551.htm

  14. We’ve lost as many jobs as we did in 2000-03. (60,000 jobs)

    It’s predicted we’ll lose 100,000 to 110,000 total ‘if the stimulus works’ .

    No one’s discounting the possibility that we could be looking at numbers as bleak as 1989-1992 where we lost nearly 156,000 jobs.

    Opinion: these numbers will be revised up in February after the seasonal layoffs and retail bankrupticies are announced.

    It’s also possible we don’t return to the 1.7 million job base until the 202os if ever.

  15. The Connecticut Center of Economic Analysis.

    http://ccea.uconn.edu/forecasts/CTOutlook_2009May.pdf

    This is their best case scenario: bleaker than bleak.

    If the Federal and international stimulus initiatives do not take hold by the end of 2009, Connecticut may see a deepening recession with job losses hitting 110,000 or more by 2011, with no end in sight.

    Given both the national and local patterns, the Outlook is the bleakest since its inception.

  16. The 7 years of job growth from 1993 to 2000 averaged 22,000 new jobs a year.

    The 4 years of growth from July 2003 to July 2007 averaged 15,000 jobs a year.

    Assuming that adding 15,000 jobs a years is realistic once this recession is over in mid-2011 and it would then require 7 to 8 years to return to employment levels in July 2007 and January 2000 (sometime in 2019). That assumes the current estimates of job losses (105,000 to 120,000) holds.

    If 2011 goes south and Rell has to rip into the unions in two years and the stimulus doesn’t work there’s more downside.

    I’m not a doom and gloomer but I’m thinking we are heading to the worse than expected 2011 scenario.

    Oh well. GDP figures tomorrow. Maybe I get an upside surprise.

  17. Here are the stats from PA. Probably similer in CT: http://www.commonwealthfoundation.org/node/1368/print

    Yeah –

    Once I was driving from Connecticut to Florida. I stopped for a night at a motel outside of Fairfax, Virginia. When I woke up the next morning, at first I didn’t know where I was. Then I just looked out the window and could have sworn I was still in Connecticut. The states are THAT similar!

  18. AND – Same thing happened in Hershey, PA!

  19. AndersonScooper is questioning cutting gov’t jobs in this recession, and Martha is questioning the relationship between increased tax rates and job losses? Where’s the common sense folks?

    Econ 101 review: dollars invested in the private sector return positive net. Dollars spent on the public sector (programs, public employee wages, services, etc.) return negative net. Dollars are not “invested” in government; taxes are collected under force of law. If it’s a question of where limited funds need to be spent, it makes economic sense to minimize dollars spent on government, and to ensure maximum capital available for private enterprise. This is especially true in our economy, where the vast majority of our state’s tax revenue is collected on income and retail transactions, which in turn, are directly dependent on increased private sector investment (business expansion and related job creation to support it), as well as increasing levels of private income (allowing more retail purchase).

    In fact, the two reasons above are why cutting income and retail taxes actually can create increased tax revenues for the state. Increasing taxes, or re-allocating more funds from the private sector where they can contribute to economic growth, to the public sector during a period of recession is therefore the exact opposite of what would be economically sensible. Barring tax cuts, the only sensible thing to do then; is to cut the size of the government. Any program, service, or bureaucracy that does not fulfill the most basic duty of government to protect life, liberty, and property; is a luxury we cannot afford during this economic downturn.

  20. AND – Same thing happened in Hershey, PA!

    I can see it now.

    There you were, naked and alone in a dark ally…..

    Damn! 2nd time this week!

    (thanks to WPLR)

  21. AndersonScooper is questioning cutting gov’t jobs in this recession, and Martha is questioning the relationship between increased tax rates and job losses? Where’s the common sense folks?

    CarGuy:

    Logic 101 Review:

    Your “explanation” about taxes and jobs is full of assumptions, conjecture, declarations, simplifications, “we all know”s, “it’s obvious that”s, and whatever else you have patched together under the hole-y umbrella of “common sense.”

    In a word (or two letters, anyway), it’s BS.

    (Hey man, it’s pretty obvious that the world is flat, right? Right?)

    Real knowledge comes from careful research and analysis.

    NOT from using short-cutst o justify your own pre-determined conclusions.

    A serious discussion would not look anything like this….. Sorry…..

  22. Thx to all for great feedback. Martha, I refer you to the years after 1981, when Reagan lowered taxes and the US created 22 million jobs, and to the years after the GOP tax cut in 1995, when they and Clinton Admin created over 17 million jobs. Not bad evidence, I’d say. James, Goatboy, great stuff, and excellent data as always, GoatBoy.

    PS — Why do you call yourself GoatBoy?

  23. PS — Why do you call yourself GoatBoy?

    After John Barth- ‘Giles, GoatBoy’ in which goatboy progresses from farm animal to the ‘World Tutor’.

    It satirizes the hero quest form of myth as well as the pretensions of higher learning and campus culture among other things.

  24. Logic 101 Review:

    Your “explanation” about taxes and jobs is full of assumptions, conjecture, declarations, simplifications, “we all know”s, “it’s obvious that”s, and whatever else you have patched together under the hole-y umbrella of “common sense.”

    In a word (or two letters, anyway), it’s BS.

    So your whole “logical” argument is that you disagree…and you think it’s BS. That’s some great “reasoning”. Thank you for debunking me with some fine “research and analysis”.

    Actual in-depth research and analysis, along with a healthy dose of common sense, has led me to these conclusions, but this is hardly the place to post a thesis. Besides, I think I summarized reality pretty well, thank you!

  25. So your whole “logical” argument is that you disagree…and you think it’s BS. That’s some great “reasoning”. Thank you for debunking me with some fine “research and analysis”.

    Actual in-depth research and analysis, along with a healthy dose of common sense, has led me to these conclusions, but this is hardly the place to post a thesis. Besides, I think I summarized reality pretty well, thank you!

    Sorry – the burden’s on you, dude. You’re the one making the claims about how the world works, not me. It’s a common pattern for some conservative bloggers. All I’m saying is: “Prove it.” Show us the research. Show us the science. Not just a bunch of statements and claims and opinions strung together and backed by bluster.

    And certainly not a listing of uncorrelated numbers. “Reagan lowered taxes and the US created 22 million jobs?” Yes, but, how in the world do we know if taxes hand anything to do with jobs? The Dodgers won the World Series in 1981 – maybe THAT led to job creation. Or, since there are no citations given, if those jobs really existed? .

    You’ve reached some personal conclusions. Horah. Now show us the money.

  26. The 90s boom had many drivers behind it including the ‘Peace Dividend’ military cutbacks, the internet and tech booms that many compared to the railroad booms of the 1880s and the auto boom of the roaring 20s both of which led to recessions or depressions in the following decade.

    The deregulation that helped create the recent housing bubble and derivatives fiasco had their birth in the 90s. There was an increased demand for US goods and services in the former USSR and China. The BRIC economies were starting to lift off.

    There are persuasive arguments that the Bush recession of 2002 was turned around as much if not more by deficit spending as personal tax cuts and stimulus checks.

    There’s also quite a bit written around personal tax cuts versus corporate cuts or targeted incentives and their effectiveness on job growth (I favor targeted cuts as a vehicle for job growth).’

    I’m not arguing for big government as an economic driver but the argument for the success of supply side personal tax cuts under Bush II is way overdone.

  27. Three points about Reaganomics often over looked by Supply Siders.

    1) Largest deficits of any President. Some claim the deficits were traditional Keynesian stimulus.

    2) Began the trade deficit: The US began living off of foriegn financing of consumption.

    3) Heavy buildup of military weaponry: The buildup minimized the effects of the decline in American manufacturing. Remember Naval Secretary Lehman’s quest for the 600 ship Navy? This was aided and abetted by foreign arms sales. CT, for example, benefited and then took it on the chin under Bush I in 1989-1992 when hard weaponry was getting cut back .

    The corporate and personal tax cuts are acknowledged as having a positive effect on job growth as is deregulation but the pure supply siders neglect the stimulus effects of the above three points.

  28. OK, where to start?

    Let’s just say the federal government is spending 3.7 trillion a year for instance. If tax cuts are then instituted without a correlating decrease in spending, the immediate result is a deficit, no?

    However, since capital is being shifted to the private sector, that capital starts generating more capital, but not necessarily right away, since it takes time to hire people, buy new equipment, build new plants, negotiate new deals, etc. This influx of capital creates new jobs, which until the past several decades, meant new jobs in the U.S., and an increase in income tax revenues. Profits increase, creating more capital, which gets re-invested, and so on and so forth.

    At some point, if government spending stays at the same level, or unbelievably, actually decreases, then the deficits will be erased and debts get paid down, and surpluses generated.

    But of course there are thousands of variables. Reagan spurred a faster economic boom by creating a demand for military machinery – not only did he re-introduce capital back into the private market, but fast tracked it by creating an immediate market. Considering that we were in the Cold War, this wasn’t a completely unwise move, though central planning of the economy often results in “bubbles” or misallocation of resources in the form of surplus production, which was the case following the end of hostilities, when the military had an overabundance of military machinery, and needed to be downsized. Businesses built around government contracts then had a surplus of factories, factory workers, etc., who were forced to find employment elsewhere – or find new clients (not exactly feasible with weapons manufacturing).

    The Bush tax cuts failed to deliver the same impact for several reasons, but most importantly the increases in government spending. The Bush tax cuts failed to produce as good a return on investment due to immense debts that needed to be paid off before accounts could be returned from red to black following the tech bubble collapse, the amount of capital sent overseas, failing to return revenue to U.S. coffers, the low interest rates directed by the Fed, creating misallocation of funds into risky investments, and quite frankly, an explosion of government spending, in the form of a new entitlement prescription drug program, and a War on Terror with two separate fronts, including the rebuilding of Iraq. Hard to find a net profit in all that mire.

    The principals I described in my previous post hold true however. But of course, there are many variables that determine the effectiveness of any economic change. How many times, after all, have you earned a bonus, or gotten a sizeable commission, or gotten a promotion/raise, only to have to spend those extra dollars that were going to “get you ahead”, to fix/replace a car, washer/dryer, or the like, and see those funds dry up?

  29. The Bush tax cuts failed to deliver the same impact for several reasons, but most importantly the increases in government spending. The Bush tax cuts failed to produce as good a return on investment due to immense debts that needed to be paid off before accounts could be returned from red to black following the tech bubble collapse, the amount of capital sent overseas, failing to return revenue to U.S. coffers, the low interest rates directed by the Fed, creating misallocation of funds into risky investments, and quite frankly, an explosion of government spending, in the form of a new entitlement prescription drug program, and a War on Terror with two separate fronts, including the rebuilding of Iraq. Hard to find a net profit in all that mire.

    Bingo.

    The shovel-ready stimulus jobs are similar to Reagan military contracts.

    The hedge fund model is what works. Look for companies with the potential to expand rapidly with capital infusion and become self-sustaining. Support those industries and companies with tax dollars. Advanced depreciation for purchasing US technology, etc.

  30. Loving all this commentary. Great stuff from all sides. James, “proving” anything in economics is difficult — the world is not a clean slate, so there are always a multitude of variables to ponder. But were there tax cuts in 1981 and 1995, and did economic growth and job creation increase? Absolutely. Were they related? It’s speculative.

    But it isn’t speculation to hold that “investment” in government services rarely creates economic benefits, as we have the specific examples of states such as New York, California, Massachusetts, and Connecticut, which run extensive social-service programs far outpacing the national norm, and which also have been experiencing economic contraction and outmigration for many years. In the end, that is my point — start to lower the burdens of state taxing and spending, or start to rev up the moving vans.

  31. A friend of mine, somewhat embittered by high taxes, thinks that taxes should be doubled for people who think, as James pretends to do, that there is little or no connection between business activity and high taxes.

    Let’s suppose this were to happen and James’ taxes were to be doubled. What are the chances that he would be arguing that there is little or no connection between the doubling of his taxes and the condition of his income?

    Certainly he would experience a loss of purchasing power and all its attendant evils: He would not be able to pay his mortgage or his rent or – fill in the blank, and the blank really should be at least as long as the circumference of his life.

    Why should it be any difference with businesses? Neither James nor any business he would care to mention can actually create money, a process left to money-eaters at the federal level that ultimately produces inflation, which is a tax on purchases.

    Why should it be any different with states? If James had a choice between living in a state that taxes him twice or one that hits him only once – and if James had a chance to move to any state he wished – well then, assuming James was a rational creature (and he certainly is), would it not be prudent of him to move to the state that least diminishes his personal fortune?

    Why should it be any difference for businesses?

    You don’t need studies to answer questions like these; common sense will do well enough.

    Here’s the rule: What ever you tax tends to disappear. That is why, applying the same rule, liberals give tax credits to the kinds of business activity they wish to see prosper – like environmentally safe cars and, here in Connecticut, movie studios and Indian casinos.

    There is no need to ask for proof of these things, Just open your eyes, use your brain, reason…

  32. Here’s the rule: What ever you tax tends to disappear. That is why, applying the same rule, liberals give tax credits to the kinds of business activity they wish to see prosper – like environmentally safe cars and, here in Connecticut, movie studios and Indian casinos.

    I think this is true — but that’s why talking about “taxes” as if they were applied as one massive penalty is a problem. Conservatives have a monomaniacal opposition to taxes of any stripe, when in fact it’d be easy for them to tilt the playing field so the taxes we levy are “the right kind” of taxes.

    I’d love to see government financed by speculation taxes, carbon taxes, and steep penalties levied on companies with abusive consumer practices. I can see the logical argument against the income tax, as it discourages work at some level, but if it were going to be replaced it should be with something that does discourage excess accumulation of capital, which is the source of so much of the financial mischief over the last decade. Sales taxes (on non-essential items) and Social Security taxes don’t bother me; neither do estate taxes.

    Don, you seem to recognize that tax policy is all about social engineering. The political environment seems to push us towards either inelegant hacks (“tax what you can”) or dismantling government altogether, piece by piece. Look at what Vincent took away from that article — that we need “less spending, less taxes, and less regulation” — it’s just as uncreative and unhelpful as Chris Donovan pushing on income taxes.

    What we need is a better quality of engineering, and to finance the services we want in the most efficient and logical way that we can.

  33. Don, put a different way, once passage of Cap and Trade was assured, what if Republicans had tried to increase its cost in exchange for a corresponding reduction in the income tax?

    Do you think that a) the tax code would be improved by such a change, and if so, b) would they would have been successful in their effort?

  34. I get your point Samuel and agree with some of it. Of course it depends which taxing authority we’re talking about, state or federal. In a federated system such as we have, the states act as experimental terminals; mistakes made at the state level can be corrected, and business traffic in and out of the state is a sign of success or failure. The federal level is a different story. Mistakes made at this level can be fatal because the consequences of the programs are universal and can only be reversed by a change in government at the federal level. My comments here relate to the state.

    As to cap and trade, not everyone who believes that global warming is bad would agree that cap and trade will significantly reduce global warming. If the cost benefit factor is put to most people, they begin to look for other ways to control pollution. Have you ever heard of Polywell Fusion (http://iecfusiontech.blogspot.com/2009/01/easy-low-cost-no-radiation-fusion.html
    )?

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