South By North Strategies, Ltd.

Looking At The Evidence

The North Carolina Budget & Tax Center rounds up the evidence about the relationship between tax cuts and job growth.

In times of economic distress, the economic evidence demonstrates that preserving public investments in education, health, and public safety is the right path to boost job creation in the short term and promote shared economic prosperity in the long term. Contrary to the conclusions drawn from the Center for Competitive Economies’ report, cutting taxes will not only result in more job losses than keeping taxes at current levels and sustaining public investments, it will also undermine the gains made over past decades to build the highly skilled workforce and first‐rate infrastructure necessary for the North Carolina and its people to compete for the jobs of tomorrow.

State Fiscal Policies & Growth

Over at the blog of The Atlantic Monthly, Richard Florida looks at some new research about the relationship between state fiscal policies and economic growth.

There are two major take-aways. First, a “state’s fiscal policies have a measurable relationship with per capita income growth, although not always in the expected direction.” Tax impacts, they report, are “quite variable”; “expenditure impacts are more consistent.”
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Second, they find “moderately strong evidence” that a “state’s political orientation, as indicated by whether the governor is Republican or Democrat, whether the state has enacted tax and expenditure limitation legislation, and whether the state frequently elects a governor of the same party as the incumbent, have consistent, measurable, and significant effects on economic growth.”  And then they drop their bombshell: “Having a Republican governor,” they conclude, “is associated with lower rates of growth.” They qualify their conclusions slightly–but only slightly–noting that past measurement errors may have introduced some distortions into the record.

Around The Dial – 5/10/11

Economic policy reports, blog postings, and media stories of interest:

• Paul Krugman doesn’t see much elite wisdom.
• The Wall St. Journal reports on anti-union legislation.
• E.J. Dione points out that the auto assistance package worked.
• Economix remembers the nation’s unemployed mothers.
• Robert Kuttner runs down a not-so-great jobs report.

The UI Squeeze

Annie Lowery of Slate.com is baffled by the decision of many states to cut unemployment insurance benefits.

… But there also remain worrying signs that it is too soon to pull the plug on this specific economic support. Gross domestic product is growing at a snail’s pace. New claims for unemployment insurance—an early sign of where the labor market is headed—have bounced back up. A whopping 13.7 million Americans are looking for work. One month of jobs numbers and a boatload of hoarded corporate profits do not a restored economy make. As happened last year, the economy could exhaust its strength, and unemployment could track back up.
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If the recovery does start to flag, those unemployment insurance payments become very, very important. For one, they help families make it through a tough period, with about four jobseekers for every available position. But they also provide what economist-types call an “automatic stabilizer”: Federal money automatically kicks in to juice the economy, helping keep overall demand up. For those reasons, the government has never before cut unemployment benefits when the jobless rate is higher than 7.5 percent. But this time, legislators are starting to dismantle the system early. Count it as one more reason to hope that the jobs picture keeps getting sunnier.

Not What A Recovery Looks Like

Economist’s View points out that a recovery won’t be underway until the employment-to-population ratio begins improving.