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Vilsack: Economic health of rural America dependent on education

admin — Fri, 06 May 2011 20:40:04 +0000

U.S. Secretary of Agriculture Tom Vilsack noted Friday that education is at the core of all efforts to promote economic development in rural America, echoing a theme that has appeared numerous times in reports by The Iowa Independent staff.

“A well educated work force is critical to a thriving business — to developing new ways of producing goods and providing services. And companies don’t want to locate in rural communities if they can’t guarantee workers with the skills they need,” said Vilsack, a former governor of Iowa.

Education, he notes, doesn’t just stop with “critically important” K-12 education. Post-high school education is becoming more essential to long-term success, both for the individual obtaining the degree and for the communities in which that individual lives.

“We are investing in community colleges and have increased the size of Pell Grants that help nearly 10 million students attend college each year,” he said. “And we are helping turn around low-performing rural schools so they can recruit and retain the best teachers.”

Rural students should have the tools they need to succeed, he noted, adding that the USDA is “focused on connecting rural schools to broadband internet and distance learning opportunities.” At the same time, the agency is encouraging new industries and businesses in small towns, so that new graduates have ample opportunity to remain in their communities.

Listen to Vilsack discuss the importance of education for rural communities below:

brings the gloom:

[Gordon] belongs to the committee of distinguished economists who officially declared on Sept. 20 that the U.S. recession ended way back in June 2009. Don’t mistake that pronouncement for optimism. According to Gordon’s research into the long-term determinants of growth, America’s next two decades are going to be disappointing. He predicts that between 2007 and 2027, gross domestic product per capita will grow at the slowest pace of any 20-year period in U.S. history going back to George Washington’s Presidency. Although the data he examined closely go back only to 1891, he says that based on his knowledge of early American economic history, he thinks it is fairly safe to predict that the period will witness the slowest growth ever in GDP per capita and, therefore, American living standards.

Why? The Baby Boomers will retire, meaning millions of them will stop contributing to the economy and will start living off of state programs like Social Security, disability insurance and Medicare. No technological revolution, like the internet, is on the horizon to juice growth either.

What’s worse is that the spell of gloom Gordon predicts would come after, well, a spell of gloom. For the decade before the recession, the United States’ GDP has grown at a reasonably healthy clip. But most workers have experienced no income gains at all. Instead, the income gap has widened, with wealth accruing disproportionately to the very, very well-off.

Consumer Confidence Declines to Lowest Level Since February

Annie Lowrey — Tue, 28 Sep 2010 15:46:32 +0000

A bit of bad economic news: This morning, the Conference Board announced that consumer confidence, a key indicator of the consumer spending that drives about 60 percent of the economy, is declining again.

The Consumer Confidence Index fell in September to 48.5, the lowest level since February. The Conference Board also revised August’s reading down to 53.2. An index reading of 90 indicates solid economic growth.

“Overall, consumers’ confidence in the state of the economy remains quite grim. And, with so few expecting conditions to improve in the near term, the pace of economic growth is not likely to pick up in the coming months,” Lynn Franco of the Conference Board said in a release.

Federal Reserve Holds Rates Steady, Says Conditions ‘Less Supportive’ of Economic Growth

Annie Lowrey — Wed, 23 Jun 2010 18:48:13 +0000

Today, as expected, the Federal Open Market Committee decided not to raise U.S. interest rates, instead holding the target federal funds rate steady between 0.0 and 0.25 percent. It reiterated its “extended period” language, indicating it sees no need to raise interest rates in the near term. And it released a queasy statement, saying that conditions are “less supportive” of economic growth due to poor fundamentals in the United States as well as real economic troubles abroad — meaning the debt crises in Europe.

Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.

Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.

Here is the language from the last FOMC meeting, virtually identical:

Information received since the Federal Open Market Committee met in March suggests that economic activity has continued to strengthen and that the labor market is beginning to improve. Growth in household spending has picked up recently but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures is declining and employers remain reluctant to add to payrolls. Housing starts have edged up but remain at a depressed level. While bank lending continues to contract, financial market conditions remain supportive of economic growth. Although the pace of economic recovery is likely to be moderate for a time, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability.

With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period. The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

In light of improved functioning of financial markets, the Federal Reserve has closed all but one of the special liquidity facilities that it created to support markets during the crisis. The only remaining such program, the Term Asset-Backed Securities Loan Facility, is scheduled to close on June 30 for loans backed by new-issue commercial mortgage-backed securities; it closed on March 31 for loans backed by all other types of collateral.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.

Except that this month, the FOMC says that the economy is improving “gradually,” rather than just improving. Last month, financial conditions remained supportive of growth; this month, less so. This month, the FOMC notes that underlying inflation is declining — for the past two months, there has technically been price deflation. All in all, not a particularly comforting message.

Philadelphia Fed Sees Little Chance of Double Dip, Predicts Job Growth

Annie Lowrey — Fri, 14 May 2010 16:35:24 +0000

Today, the Federal Reserve Bank of Philadelphia released a survey of 44 economic forecasters. The forecasters — all economists in the private sector — see a smaller chance of a double-dip recession and expect stronger economic growth in the next 18 months. The economists said there is a 7.4 percent risk of a negative quarter, down from an 11.6 percent risk at their last estimate. Compared with previous forecasts, the economists also forecast stronger GDP growth:

Additionally, they improved their employment outlook:

The economists did not move up their inflation expectations, and predict that the economy will start adding jobs next year. The combination of moderate growth and low inflation suggest there is little pressure on the Fed to raise interest rates in the near term.

Small Business Owners Represent Lost Opportunity for Recovery

Annie Lowrey — Tue, 20 Apr 2010 10:00:13 +0000

Sens. Mary Landrieu (D-La., center) and Debbie Stabenow (D-Mich., right) are crafting a bill to increase lending to small businesses. (Pete Marovich/ZUMApress.com)

Bloomingdale — a pretty neighborhood in central Washington, D.C., with brightly painted Victorian townhouses and wide tree-lined streets — is gentrifying. Ten years ago, it had problems with gangs, robberies and drug-related violence. Today those issues are greatly reduced, thanks in large part to the efforts of the neighborhood’s tight-knit community of black families and young professionals. In the past five years, it has cleaned up its streets, developed two new parks and a small urban farm and watched its home values rise.

[Economy1] Now, residents of Bloomingdale — east of the U Street corridor, near Howard University — could use some businesses. There is Windows Market, which sells sandwiches and groceries; Big Bear, a popular coffee shop; and Timor Bodega, an organic grocer. But the closest place to grab brunch or a drink after work is a fifteen-minute walk away. “There’s just tremendous pent-up demand,” John Salatti, the neighborhood commissioner, says. “I couldn’t imagine how well a business would do if it could just open up.”

But the problem for Bloomingdale is that it just cannot get businesses to open up. It is not for a lack of trying. In the past year, at least half a dozen restaurants have attempted to set up shop in one of the neighborhood’s empty storefronts. There is the sandwich and pizza place attempting to move in next to the Howard dorm and the fancy new condo building. There is the neighborhood tavern trying to open near the yoga studio. There is the restaurant that wants to take over the old fire house. Not one has succeeded.

Consider, for instance, the case of Aleks Duni. He owns Veranda, a Greek restaurant in the Shaw neighborhood, as well as Heller’s Bakery and Marx Cafe in Mount Pleasant. The three small businesses together employ nearly 40 people and did well even during the worst of the recession. Duni set out to open a pizza restaurant on the main drag in Bloomingdale. He scouted out a location and secured the necessary permits, even getting a liquor license and thus a guarantee of good revenue. Now, no bank will lend him the $50,000 he needs to finish the job. “It is only a matter of getting the money,” Duni says. “If I did, I could be open in a month.”

Duni approached four banks about securing the loan to finish construction and open the doors. Each one said no. “There are a million reasons they give,” Duni says. “The first of them is that credit has been reduced.” Now, he says, he is concerned about continuing to apply for loans just to be denied. “If you apply and you don’t get the loan, your credit score goes down,” he notes. Frustrated, he has even sought the help of the Small Business Administration, the government agency. “They had nothing for me,” he says. “I don’t need to know what the loan requirements are. And the SBA cannot give me a loan.”

Duni is one of millions of frustrated small-business owners, who represent a lost opportunity for economic recovery and a major concern for the Obama administration. Over the past 15 years, two-thirds of the new jobs created in the United States were created by a small business. Small businesses, like big businesses, require loans to grow and hire new employees. But unlike their medium and large counterparts, small businesses are still hobbled by frozen credit markets. Lending remains on the wane despite the Obama administration throwing tens of millions of dollars at the problem. An SBA initiative to back loans has worked, but only on a limited scale. Most Main Street banks continue to decrease funding to small businesses, allergic to the higher risks they pose.

Small businesses generally use commercial banks and finance companies for loans, and those lenders have continued to cut back their books even as the recession has started to lift. Commercial and industrial lending — the economic category that includes small-business loans — fell 20 percent in 2009 and declined a further four percent in the first three months of 2010. In January, the latest month for which data is available, nine big banks provided 28 percent less credit to small businesses than the month before, the Treasury Department reports.

A recent report by the National Federation of Independent Businesses, a small-business lobbying organization, underscores the point. The NFIB found that in 2009, 20 percent fewer businesses held a loan or credit line than in 2008. Just 40 percent of small-business owners that applied for a loan had “all of their credit needs met,” down from nearly 90 percent five years ago. The continued seizure of the credit markets is reducing small-business hiring and confidence, NFIB argues. Its index of small business optimism actually fell in March, with most businesses saying they had a gloomy outlook and did not feel it would be a good time to expand.

The underlying economic problem is twofold. First, banks claim that they do not have enough funds to lend to small businesses. Second, banks with funds are unwilling to take the risk of lending to small businesses, since they tend to default at higher rates. The Obama administration has tackled both problems with a spate of bills and initiatives. The two main ones include: a $730 million infusion of funding to the SBA, letting it increase government loan-backing to 90 percent and reduce fees, enacted last spring; and $17.5 billion in tax cuts, credits, and subsidies aimed in part at small businesses in the jobs bill passed last month.

These efforts have successfully boosted SBA lending back to pre-crisis levels. “Once the recovery act passed in February 2009, provisions went to the SBA to let us increase our guarantee immediately,” Hayley Matz of the SBA explains. “Since then, lending has increased 90 percent. We’re where we were. We’re at 2007 levels.” But the SBA is not a direct lender — and credit markets outside of the SBA’s control have remained frozen solid. “There is bipartisan support for SBA has done and acknowledgment that our recovery programs have been good,” Matz says. “The next step is not just to continue with what works.”

The administration is thus now pushing a stronger set of provisions to entice lenders to extend credit to small businesses in a bill currently being assembled under the watch of Sen. Debbie Stabenow (D-Mich.) and Sen. Mary Landrieu (D-La.), who heads the Senate Small Business Committee. The bill includes various tax breaks, including an exemption for earnings from small-business stock. But its centerpiece is a Treasury program to redirect $30 billion from the Troubled Asset Relief Program to community banks.

Still, small business advocates say it is too little, and too late. “We sure would have liked to have seen quicker action,” says Terry Gardner, policy director at the advocacy group Small Business Majority. “Like so many issues, these proposals are just bogged down. With the SBA loans, I had to ask — who is actually against this? Why is this still not moving? It has bipartisan and presidential support, plus support from banks and small business groups. It is frustrating.”

Moreover, he says that it is not clear if the administration plans will effectively convince banks to lend to small businesses. “The Treasury proposal providing more capital to community banks is only a good idea if it actually induces them to make loans,” Gardner says. “There has to be some incentive structure that guarantees that taxpayer money being loaned to these banks is accomplishing its purpose — to get more capital to small businesses to create jobs — because efforts to do that have stalled.”

Previewing the President’s Economic Speech

Mary Kane — Tue, 14 Apr 2009 13:11:21 +0000

President Obama heads to Georgetown University today to address the nation regarding the economy. On MSNBC’s “Morning Joe,” Christina Romer, chair of the Council of Economic Advisers, offered a preview of the speech’s message. Politico has the write-up.

Romer said Obama will address “what’s been going wrong” in the economy and also what the administration is doing to help.

The economic adviser said the administration is expecting to see some growth in 2011 or 2012.

“It certainly will take some time,” she said, adding that Obama knows the American people are still in for a rough time.

“That is something that he’s aware of,” Romer said.

Talking about the economy, no matter how he chooses to frame it, is tricky for Obama. People are worried about their jobs and mortgages, and angry about government bailouts. They want to know more about what kind of economic strategy the government has in mind.

At The Fix, Chris Cillizza says Republicans are looking at the speech as a possible opening to pin the economy’s woes on Obama:

Chris Wilson, a Republican pollster, added that the content of Obama’s speech today and how he frames the crisis are critical in determining how the message is received by the public.

“If he gives another speech like those he has given so far, the actual message America perceives will quickly change from ‘it’s the other guy’s fault’ to ‘I don’t know how to fix this,’” predicted Wilson. “When that happens, not only does Obama ‘own’ the problem, he starts to drown in it.”

So far, however, the public hasn’t blamed Obama for the economy, and Republicans haven’t put forward any economic ideas that have been embraced as possible alternatives to the government’s approach. It’s not surprising Obama would choose to continue addressing the biggest problem facing most Americans. But despite Wilson’s assertions, it doesn’t necessarily follow that the political stakes will be that high. Sometimes a speech on the economy really is just about the economy, and not about the polls.

–

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Neither Candidate’s Tax Plan ‘Pro-Growth’

Matthew DeLong — Fri, 24 Oct 2008 18:49:27 +0000

During an interview with MSNBC’s Andrea Mitchell a short time ago, Sen. John McCain’s senior economic adviser, Doug Holtz-Eakin, said a nonpartisan tax analysis found McCain’s tax plan would better promote economic growth than that of Sen. Barack Obama.

“You go to the independent, quote, Tax Policy Center, a group I know very well, and I encourage people to go there. They’ll say, ‘John McCain’s [tax] plan is better for growth.’ What does this economy need? It needs to grow.”

A look at the Tax Policy Center’s analysis (PDF) of the two candidates’ tax plans, last updated Sept. 12, reveals that Hotz-Eakin’s claim appears to rest on this passage:

By many measures, the distribution of income has become much less equal over the past 20 years, and the recent tax cuts have exacerbated that trend. Since 2001, inequality in the distribution of after-tax income has grown faster than inequality in the distribution of pretax income. The Obama proposal tries to buck that trend by making the tax system much more progressive (as detailed in the next section). However, it does so at the cost of higher marginal tax rates and additional complexity.

Many provisions in Obama’s plan share a common shortcoming in their use of phaseouts to limit their benefits and constrain revenue costs. Phaseouts reduce tax benefits over a range of income and thus increase the effective marginal tax rate on taxpayers in that range. To the extent that higher tax rates affect behavior — inducing people to work fewer hours or save and invest less — the phaseouts adversely affect economic activity and growth. Furthermore, phaseouts add significant complexity to the tax code, making it more difficult for taxpayers to determine how much they owe and harder to understand how the tax system works. [Emphasis added]

However, the report’s executive summary (PDF), last updated Sept. 15, suggests neither plan would do much to promote economic growth:

Both John McCain and Barack Obama have proposed tax plans that would substantially increase the national debt over the next ten years, according to a newly updated analysis by the non-partisan Tax Policy Center. Neither candidate’s plan would significantly increase economic growth unless offset by spending cuts or tax increases that the campaigns have not specified.

Holtz-Eakin’s claim may be technically true, but according to the Tax Policy Center, it is insignificant.

Report: California Energy-Efficiency Policies = Major Job Growth

Suemedha Sood — Mon, 20 Oct 2008 18:16:58 +0000

Members of industry have long contended that environmental protections are incompatible with economic growth. That was one reason the Lieberman-Warner Climate Security Act didn’t get passed this year.

But a new economic study released today crunches some numbers and finds that environmental and economic interests are often aligned.

In California, government policies promoting energy efficiency created about 1.5 million jobs and saved consumers about $56 billion in energy costs from 1977 to 2007, says economist David Roland-Holst of the UC Berkeley Center for Energy, Resources and Economic Sustainability, who conducted the study.

California was way ahead of most states in embracing energy-efficiency policies. These policies, adopted as early as 1978, have stimulated certain sectors of the state’s economy, according to the study.

Specifically, from 1977 to 2007, employee compensation in the state’s service sector increased by $17.8 billion, in wholesale and retail trade by $11.2 billion, in the financial and insurance sectors by $7.3 billion and in the light industrial sector by $1.2 billion — all because of the energy efficiency policies. Workers in the electric power industry were the exception — their compensation dropped by $1.6 billion.

When there’s less demand for electricity because of greater efficiencies, the study explains, consumers have more money to spend on other things and employers respond to the increased demand by creating more jobs.

Then there are the environmental of curbing climate change and reducing our dependency on foreign oil, which power generating plants. As Roland-Host told the AP, “If the country can follow California’s example, it will have a dramatic effect on our future emissions and energy independence.”