Category Archives: Economy

As Wisconsin’s and Minnesota’s lawmakers took divergent paths, so did their economies – Since 2010, Minnesota’s economy has performed far better for working families than Wisconsin’s

Source: David Cooper, Economic Policy Institute, May 8, 2018

From the summary:
Since the 2010 election of Governor Scott Walker in Wisconsin and Governor Mark Dayton in Minnesota, lawmakers in these two neighboring states have enacted vastly different policy agendas. Governor Walker and the Wisconsin state legislature have pursued a highly conservative agenda centered on cutting taxes, shrinking government, and weakening unions. In contrast, Minnesota under Governor Dayton has enacted a slate of progressive priorities: raising the minimum wage, strengthening safety net programs and labor standards, and boosting public investments in infrastructure and education, financed through higher taxes (largely on the wealthy).

Because of the proximity and many similarities of these two states, comparing economic performance in the Badger State (WI) versus the Gopher State (MN) provides a compelling case study for assessing which agenda leads to better outcomes for working people and their families. Now, seven years removed from when each governor took office, there is ample data to assess which state’s economy—and by extension, which set of policies—delivered more for the welfare of its residents. The results could not be more clear: by virtually every available measure, Minnesota’s recovery has outperformed Wisconsin’s.

The following report describes how Minnesota’s and Wisconsin’s economies have performed since 2010 on a host of key dimensions, and discusses the policy decisions that influenced or drove those outcomes.

Key findings include:
– Job growth since December 2010 has been markedly stronger in Minnesota than Wisconsin, with Minnesota experiencing 11.0 percent growth in total nonfarm employment, compared with only 7.9 percent growth in Wisconsin. Minnesota’s job growth was better than Wisconsin’s in the overall private sector (12.5 percent vs. 9.7 percent) and in higher-wage industries, such as construction (38.6 percent vs. 26.0 percent) and education and health care (17.3 percent vs. 11.0 percent).

– From 2010 to 2017, wages grew faster in Minnesota than in Wisconsin at every decile in the wage distribution. Low-wage workers experienced much stronger growth in Minnesota than Wisconsin, with inflation-adjusted wages at the 10th and 20th percentile rising by 8.6 percent and 9.7 percent, respectively, in Minnesota vs. 6.3 percent and 6.4 percent in Wisconsin.

– Gender wage gaps also shrank more in Minnesota than in Wisconsin. From 2010 to 2017, women’s median wage as a share of men’s median wage rose by 3.0 percentage points in Minnesota, and by 1.5 percentage points in Wisconsin.

– Median household income in Minnesota grew by 7.2 percent from 2010 to 2016. In Wisconsin, it grew by 5.1 percent over the same period. Median family income exhibited a similar pattern, growing 8.5 percent in Minnesota compared with 6.4 percent in Wisconsin.

– Minnesota made greater progress than Wisconsin in reducing overall poverty, child poverty, and poverty as measured under the Census Bureau’s Supplemental Poverty Measure. As of 2016, the overall poverty rate in Wisconsin as measured in the American Community Survey (11.8 percent) was still roughly as high as the poverty rate in Minnesota at its peak in the wake of the Great Recession (11.9 percent, in 2011).

– Minnesota residents were more likely to have health insurance than their counterparts in Wisconsin, with stronger insurance take-up of both public and private health insurance since 2010.

– From 2010 to 2017, Minnesota has had stronger overall economic growth (12.8 percent vs. 10.1 percent), stronger growth per worker (3.4 percent vs. 2.7 percent), and stronger population growth (5.1 percent vs. 1.9 percent) than Wisconsin. In fact, over the whole period—as well as in the most recent year—more people have been moving out of Wisconsin to other states than have been moving in from elsewhere in the U.S. The same is not true of Minnesota.

Status threat, not economic hardship, explains the 2016 presidential vote

Source: Diana C. Mutz (PNAS), published ahead of print April 23, 2018

From the abstract:
This study evaluates evidence pertaining to popular narratives explaining the American public’s support for Donald J. Trump in the 2016 presidential election. First, using unique representative probability samples of the American public, tracking the same individuals from 2012 to 2016, I examine the “left behind” thesis (that is, the theory that those who lost jobs or experienced stagnant wages due to the loss of manufacturing jobs punished the incumbent party for their economic misfortunes). Second, I consider the possibility that status threat felt by the dwindling proportion of traditionally high-status Americans (i.e., whites, Christians, and men) as well as by those who perceive America’s global dominance as threatened combined to increase support for the candidate who emphasized reestablishing status hierarchies of the past. Results do not support an interpretation of the election based on pocketbook economic concerns. Instead, the shorter relative distance of people’s own views from the Republican candidate on trade and China corresponded to greater mass support for Trump in 2016 relative to Mitt Romney in 2012. Candidate preferences in 2016 reflected increasing anxiety among high-status groups rather than complaints about past treatment among low-status groups. Both growing domestic racial diversity and globalization contributed to a sense that white Americans are under siege by these engines of change.

Significance:
Support for Donald J. Trump in the 2016 election was widely attributed to citizens who were “left behind” economically. These claims were based on the strong cross-sectional relationship between Trump support and lacking a college education. Using a representative panel from 2012 to 2016, I find that change in financial wellbeing had little impact on candidate preference. Instead, changing preferences were related to changes in the party’s positions on issues related to American global dominance and the rise of a majority–minority America: issues that threaten white Americans’ sense of dominant group status. Results highlight the importance of looking beyond theories emphasizing changes in issue salience to better understand the meaning of election outcomes when public preferences and candidates’ positions are changing.

Improving Economic Development Incentives

Source: Timothy Bartik, W.E. Upjohn Institute, 2018

From the Pew Charitable Trusts’ summary:
State and local governments commonly use economic development incentives such as tax credits and exemptions to try to boost their economies by encouraging businesses to relocate or expand within their borders. But such incentives can represent major budget commitments, costing these governments tens of billions of dollars every year. To make the best decisions about which policies to pursue, policymakers need reliable, high-quality tools and methods for evaluating their incentives and ensuring that they yield the intended results.

New research by Timothy J. Bartik of the W.E. Upjohn Institute for Employment Research offers practical guidance. In a recently released report, “Improving Economic Development Incentives,” the institute’s senior economist examines how policy design choices influence the economic impact of incentives and draws some conclusions to help state and local leaders assess and improve their policies.

Older industrial cities are key to addressing rising regional inequality

Source: Alan Berube and Cecile Murray, Brookings Institution, April 23, 2018

The United States is about to enter its 10th year of economic expansion, dating back to the end of the Great Recession in June 2009. Job growth is robust, the unemployment rate is low, and median household income is at an all-time high.

Yet there remains a strong sense, punctuated by the results of the 2016 presidential election, that many parts of the country have been left behind in the rising tide.

Regional inequality is on the rise
The evidence backs this up. Almost four in five urban areas nationwide had household incomes in 2016 at least 5 percent lower than their levels in 1999. Many of the hardest-hit communities were small to mid-sized areas throughout the Midwest, Northeast, and Southeast still feeling the effects of long-run industrial decline…..

Economic Development Tax Incentives Evaluation Act: Evaluation of “Motion Picture Production Tax Credits” – Tax Years 2013 through 2015

Source: State of Rhode Island, Office of Revenue Analysis, March 16, 2018

Part I: Introduction

Pursuant to Rhode Island General Laws § 44-48.2-4, titled Rhode Island Economic Development Tax Incentives Evaluation Act of 2013, the Chief of the Office of Revenue Analysis (ORA) is required to produce, in consultation with the Director of the Economic Development Corporation, the Director of the Office of Management and Budget, and the Director of the Department of Labor and Training, a report that contains analyses of economic development tax incentives as listed in R.I. Gen. Laws § 44-48.2-3(1). According to R.I. Gen. Laws § 44-48.2-4(1), the report “[s]hall be completed at least once between July 1, 2014, and June 30, 2017, and no less than once every three (3) years thereafter”. ….

Part II: Benchmarking Motion Picture Activity in Rhode Island, Selected Comparison States, and Nationwide

An understanding of current and historical motion picture production activity in Rhode Island as well as in comparison states and the nation provides context to the economic environment in which the MPPTC program operates. First, the benchmarking analysis contained within this part presents information on the availability of tax benefits targeting the motion picture industry in Rhode Island and in comparison states. Next, this part presents data highlighting current levels and long-term trends in motion picture production activity and employment and evaluate Rhode Island’s relative performance and on key economic indices.

ORA focused its investigation of motion picture activity, employment, and availability of tax incentives targeting motion picture production in four comparison states. The selected states are two neighbors, Massachusetts and Connecticut, in addition to two national leaders in motion picture production, New York and California. Additionally, this report includes selected comparisons to national data to allow the reader to consider the state-level data in the context of national levels, trends, and cycles. ….

Part III: Report Data Description

Part IV: Evaluation of the Economic Impact of the Tax Credit

Part V: Discussion and Recommendations

ORA Recommendations
Finding #1: The statutory goals of the MPPTC are poorly defined and performance measured against statutory objectives is relatively poor. ….
Finding #2: Current data reporting requirements lead to inconsistent and unreliable data on program performance. ….
Finding #3: MPPTC program fails to breakeven; program has negative return on investment. ….
Finding #4: Credit usage is low relative to the annual aggregate cap of $15.0 million, suggesting that the program is out-of-touch with the motion picture industry, and making revenue impacts difficult to predict. ….
Finding #5: MPPTC does contain a sunset provision, representing a best practice of tax incentive design. ….

Related:
Study: RI taxpayers lost $1.8 million a year on film tax credits
Source: Ted Nesi and Steve Nielsen, WPRI, April 16, 2018

State Study Finds RI Film/TV Incentives Generate Only 27 Cents For Every Dollar Spent
Source: Ian Donnis, Rhode Island Public Radio, April 18, 2018

A Macro Analysis of the Return on Investment of the Rhode Island Motion Picture Production Tax Credits
Source: State of Rhode Island, Office of Revenue Analysis, Discussion Paper, July 24, 2008

Infrastructure Reality Check

Source: Sarah Crane, Regional Financial Review, Volume 28 Number 7, March 2018
(subscription required)

This article assesses the magnitude of needed U.S. infrastructure spending and compares it to current proposals. Further, it assesses the multiplier effect of such spending and finds that it is stronger during a recession and the immediate recovery period when there is considerable idle resources in the economy.

Waiting — and Waiting– For Corporate Tax Cuts to Deliver Those Wage Hikes

Source: Manuel Madrid, American Prospect, April 13, 2018

Though if you’re a CEO or shareholder, the new tax cuts are the gift that keeps on giving. ….

…. It’s been nearly four months since the Tax Cuts and Jobs Act became law, and the good times continue to roll for shareholders and company executives. Corporate profitability is well on its way to hitting decade-long highs, and CEO pay, coming off of a record year in 2017, will be the cause of much champagne-popping. But if the new tax bill, which showered corporate America with an estimated $68 billion in savings, has been a party for Wall Street, folks on Main Street—the supposed primary beneficiaries of the tax-cutting bonanza, as Republicans told it—have yet to receive their invitations.

A new online database launched by Americans for Tax Fairness (ATF), a broad coalition of more than 400 groups championing progressive tax reform, tracks how corporations have responded to the new law. The ATF website, entitled “Trump Tax Cut Truths,” contains information on more than 800 companies, including the amount of tax savings those companies received along with details on planned bonuses, pay raises, and stock buybacks. The information is sourced from news articles, press releases, public corporate filings, independent analysis, and ATF research. ….