Economy

State Finances Are Still in the Red, Even As the Economy Is Growing

Kil Huh: “…while the national economy is growing, most states are still struggling to recover from the recession and its aftermath. According to an analysis from the Associated Press, two-thirds of the states face a budget shortfall or are expected to confront one in the coming fiscal year. In 32 states, tax collections fell in the second quarter of 2016—ending seven consecutive quarters of growth in overall state tax revenue.”

“A new administration in Washington has also caused uncertainty for states, especially with the potential for federal tax changes. Forty states that collect personal income taxes link to the federal tax system, meaning that changes to the federal tax code could cascade down and have a varied impact on states’ tax systems and revenue. For example, a reduction in federal itemized deductions such as the mortgage interest deduction might increase the amount of taxes paid to some states. In addition, even the possibility of Congress lowering federal tax rates could give some taxpayers, especially high earners, an incentive to time their income and deductions to take advantage of the change in rates, creating additional volatility in state tax collections.”

America May Miss Out on the Next Industrial Revolution

The Verge: “Robots are inevitably going to automate millions of jobs in the US and around the world, but there’s an even more complex scenario on the horizon, said roboticist Matt Rendall. In a talk Tuesday at SXSW, Rendall painted a picture of the future of robotic job displacement that focused less on automation and more on the realistic ways in which the robotics industry will reshape global manufacturing.”

“The takeaway was that America, which has outsourced much of its manufacturing and lacks serious investment in industrial robotics, may miss out on the world’s next radical shift in how goods are produced. That’s because the robot makers — as in, the robots that make the robots — could play a key role in determining how automation expands across the globe.”

“The difference, he added, is how China is responding to automation, which is by embracing it instead of shying away from it, as the US appears to be approaching the issue. This is in stark contrast to industrial advances of the previous century, like Ford’s assembly line, that arrived first in American industries and transformed the country’s economy into one of the most robost on the planet.”

If You’re a Poor Person in America, Trump’s Budget Is Not for You

“If you’re a poor person in America, President Trump’s budget proposal is not for you,” Steven Mufson and Tracy Jan write for The Washington Post.

“Trump has unveiled a budget that would slash or abolish programs that have provided low-income Americans with help on virtually all fronts, including affordable housing, banking, weatherizing homes, job training, paying home heating oil bills, and obtaining legal counsel in civil matters.”

“During the presidential campaign last year, Trump vowed that the solution to poverty was giving poor people incentives to work. But most of the proposed cuts in his budget target programs designed to help the working poor, as well as those who are jobless, cope.”

Why Left-Wing Economics Is Not the Answer to Right-Wing Populism

Zack Beauchamp: “The problem is that a lot of data suggests that countries with more robust welfare states tend to have stronger far-right movements. Providing white voters with higher levels of economic security does not tamp down their anxieties about race and immigration — or, more precisely, it doesn’t do it powerfully enough. For some, it frees them to worry less about what it’s in their wallet and more about who may be moving into their neighborhoods or competing with them for jobs.”

“The upshot is that a significant shift to the left on economic policy issues might fail to attract white Trump supporters, even in the working class. It could even plausibly hurt the Democrats politically by reminding whites just how little they want their dollars to go to ‘those people.’ One can only imagine what Trump would tweet.”

“In this context, tacking to the left on economics won’t give Democrats a silver bullet to use against the racial resentment powering Trump’s success. It could actually wind up giving Trump an even bigger gun.”

The World Prepares to Move on Without U.S. on Trade

Adam Behsudi: “Here’s what happens when the U.S. pulls out of a major trade deal: New Zealand seizes the opportunity to send more of its milk and cheese to China. Japanese consumers pay less for Australian beef than for American meat. Canadians talk about sending everything from farm products to banking services to Japan and India.”

“President Donald Trump dumped the 12-nation TPP right after he took office, saying it was a ‘horrible’ deal and blaming it for sucking American jobs abroad. But now other countries are ready to rush into the vacuum the U.S. is leaving behind, negotiating tariff-cutting deals that could eliminate any competitive advantage for U.S. goods.”

Why Are So Many American Men Not Working?

Brookings Institution: “Despite recent gains in employment rates across the country, one in seven, (or 15 percent) of American men between the ages of 25 and 54 currently aren’t working—and this number has been on the rise for decades. This troubling trend has led to wasted human potential, more people collecting government benefits, and fewer people paying taxes, all of which are harmful to the economy as a whole.”

“But why is this happening? In a new video, David Wessel, Director of the Hutchins Center on Fiscal and Monetary Policy at Brookings, provides a few possible explanations:”

Latin America Could Pursue Free Trade Without the US

Andrés Velasco: “How should Latin America respond to US President Donald Trump’s America-first approach to the global economy? Here’s one possible answer: build a free-trade area of the Americas without the United States.”

“One reason why a region-wide trade deal foundered was that proud Brazil was unwilling to attend a party whose main host was the US. But if Trump sticks to his protectionist promises, we will no longer have to worry about US-Brazil rivalry within the same trade agreement.”

“In the past, US farm subsidies were also deal-breakers for large agricultural exporters like Argentina and, again, Brazil. With the US out of the picture, this also becomes a non-issue.”

How to Save Coal Country

Dwyer Gunn: “…while the surprising outcome of the election may extend the lifespan of the coal industry by a few more years, many in the region are now convinced that the future of Appalachia doesn’t lie in the coal fields, which are facing economic challenges that have nothing to do with the current occupant of the White House, or in the factories, which these days rely more on machines than people. Instead, policy experts and community leaders are fashioning a new economic development strategy for their communities—one that borrows more from liberal theories of urban revitalization than from Trump’s pledges to bring back lost manufacturing and mining jobs.”

“In Southwest Virginia, for example, community leaders have been working since 2004 on a plan to rebrand the region as a cultural destination, complete with a booming tourism industry, and a cyber-security hub, offering the kinds of jobs more often associated with Silicon Valley than rural Appalachia. ‘We do not want to get into the same situation where we have an economy that’s dependent on one dominant industry,’ says Shannon Blevins, associate vice chancellor at the University of Virginia’s College at Wise, who leads the school’s economic outreach efforts. ‘We want to make sure we have a diversified economy.'”

The Case Against a Cashless Society

“The cashless society – which more accurately should be called the bank-payments society – is often presented as an inevitability, an outcome of ‘natural progress’. This claim is either naïve or disingenuous. Any future cashless bank-payments society will be the outcome of a deliberate war on cash waged by an alliance of three elite groups with deep interests in seeing it emerge,” Brett Scott writes for Aeon.

Killing Free Trade Will Rob the World of a Highly Effective Deterrent to War

“History shows that trade agreements are rarely about economics alone. They are a tool of diplomacy—a way to shore up old alliances and forge new ones. And now, perhaps, a way to avoid World War III,” Dan Kopf writes for Quartz.

“Like GATT, the EU, the North American Free Trade Agreement (NAFTA), and the now-derailed Trans Pacific Partnership (TPP) were all efforts at economic diplomacy. At the heart of the EU project was the idea that Europe would become a ‘common market‘ that was so economically dependent it would be immune to war between members. NAFTA’s allure for the US was that it might stabilize Mexico as a friendly, capitalist democracy. The TPP was supported by then-president Barack Obama largely as a way to check the rising power of China.”

“There is strong evidence that free trade keeps the peace. Stanford economists Matthew O. Jackson and Stephen Nei examined why international conflict fell precipitously from the period 1820-1949 to 1950-2000, and concluded that international trade was likely a major contributor.”