Wonkbook: Bad news on jobs, good news on states
Wonkbook leads with a bit of bad news today: Jobless claims jumped this week. That's a noisy data set, so it may not mean anything. But after a lackluster jobs report for March, it's not a good sign.
But we've got some good news, too: State revenues jumped 8.9 percent last year. As my colleague Michael Fletcher reports, "The improvement spanned the country, with all 50 states reporting an increase in tax collections — something just 11 states experienced during the previous fiscal year."
Their recovery isn't finished, of course. Revenues remain below pre-recession levels. But the worst of their pain seems to be over. And that will mean an end to one of the key drags on the recovery.
For the most part, states can't deficit spending. So, over the last few years, they've had to cut, and deep. State and local governments have lost more than 400,000 jobs since January 2010. And, just as worryingly, the budget cuts they've had to make have been savage, and have fallen hard on long-term priorities like higher education. The Center on Budget and Policy Priorities reports, for instance, that at least 25 states made deep cuts to higher education in their 2012 budgets. Some examples:
"Florida’s cuts in funding for the state’s universities has led to tuition hikes of 15 percent for the new school year, bringing the cumulative tuition increase since 2009 to 52 percent. Arizona cut state support for public universities by nearly one-quarter; when combined with previous cuts, this reduces per-student state funding 50 percent below pre-recession levels. California’s new budget reduces funding for the state’s two university systems by more than $1 billion. For one of those two systems, the University of California system, tuition for the 2011-12 school year will be 18 percent above last year’s rates and over 80 percent higher than it was in the 2007-08 school year."
Not pretty. But if revenues rebound, this should be the end of those kinds of cuts. And that's very good news, both for state's immediate budgets and their long-term growth.
1) Jobless claims jumped once again. "New claims for unemployment insurance jumped last week, adding to concerns the labor market may be losing momentum. Initial claims for unemployment benefits rose 13,000 to 380,000 last week, and the number from the previous week was revised upward. The increase in claims followed Friday's disappointing jobs report, which showed the pace of hiring slowed in March...Unemployment claims--which are a gauge of layoffs but tend to track with hiring over the long term--have shown marked improvement in recent months. And the increase last week was likely influenced by seasonal distortions, as well as a holiday for Good Friday and Passover's start. Those factors make the rise one that economists might ignore under most circumstances. What's worrying is that the rise in claims comes after a series of softer reports on hiring, auto sales, small-business sentiment and other measures of the economy's health." Conor Dougherty in The Wall Street Journal.
@dbernstein: Stupid jobless claims. You're a total downer, you know that?
@DLeonhardt: Funny day of econ data: Bad jobless claims, but @macroadvisers majorly ups Q1 GDP estimate, to 3.1% and keep Q2 at 2.5%.
2) On the bright side, state budgets are getting better. "The severe fiscal problems that crippled state budgets and sparked brutal political battles in the wake of the recession are easing, as state tax revenue rose substantially last year, the Census Bureau reported Thursday. State tax collections were up 8.9 percent in the fiscal year that in most states ended last June. The improvement spanned the country, with all 50 states reporting an increase in tax collections -- something just 11 states experienced during the previous fiscal year. The fiscal crisis faced by states had been the source of immense political battles across the country as governors and legislators took unprecedented steps to balance budgets and get a handle on ballooning debt...While revenue remains below pre-recession levels, nine states saw tax revenue increases of 10 percent or more in 2011, a marked improvement over the previous fiscal year, when no state saw tax receipts grow by more than 10 percent and five endured decreases at least that large." Michael Fletcher in The Washington Post.
3) The House GOP will try to insert Keystone XL into the highway bill. "House Republican leadership will take another crack at forcing approval of the Keystone XL oil pipeline on legislation extending federal transportation funding for another 90 days. 'American families and small businesses are struggling with high gas prices, and President Obama’s policies are only making things worse,' a House GOP leadership aide said...The aide said Republicans plan to attach language aimed at green-lighting the pipeline - which would carry oil sands crude from Alberta, Canada, to refineries on the Gulf Coast - to another 90-day extension. The move would set up a fight with Senate Democrats if the bill went to conference...Another 90-day extension -- although not likely palatable to Senate or House Democrats -- may be the only option for lawmakers who have struggled to work through their differences." Andrew Restuccia and Vicki Needham in The Hill.
4) A jump in oil prices is looking less likely. "A surprising boost in global oil inventories, aided by supply increases from Saudi Arabia, is blunting the possibility that sanctions against Iran will drive up oil prices--potentially undercutting Tehran on the eve of its first nuclear talks with the West in more than a year. The International Energy Agency, which represents the interests of major energy-consuming rich countries, said on Thursday that more than two years of steadily tightening oil-market conditions have reversed...As a result, many observers now see oil prices as stable or headed down, barring another spur from Mideast tensions. That outlook offers hope for consumers who have suffered for months with high prices driven in part by concerns about Iran. The trends, market analysts say, are pointing toward lower gasoline prices into the summer and the lead-up to the general election in the U.S." James Herron, Jay Solomon, and Farnaz Fassihi in The Wall Street Journal.
5) The CFPB is backing away from a crackdown on credit card fees. "The new U.S. consumer watchdog is backing away from a plan to restrict credit-card fees, a move that has caught some of its consumer-advocate backers off guard because it would let banks continue to push 'fee-harvester' cards...The consumer agency's proposal, unveiled Thursday, follows a decision by the U.S. District Court for South Dakota in September to issue a preliminary injunction preventing the restrictions on application and activation fees from going into effect. The legal spat began in July, when First Premier Bank, a Sioux Falls, S.D.-based lender that issues credit cards to subprime borrowers with poor credit, filed a lawsuit against the Federal Reserve and the consumer agency over rules the Fed wrote to implement the...CARD, Act, signed into law in 2009. That law limited lenders' ability to raise interest rates, charge late fees and change a borrower's terms without giving advance notice." Maya Jackson Randall in The Wall Street Journal.
1) KRUGMAN: America no longer thinks big about the future. "One general rule of modern politics is that the people who talk most about future generations -- who go around solemnly declaring that we’re burdening our children with debt -- are, in practice, the people most eager to sacrifice our future for short-term political gain. You can see that principle at work in the House Republican budget, which starts with dire warnings about the evils of deficits, then calls for tax cuts that would make the deficit even bigger, offset only by the claim to have a secret plan to make up for the revenue losses somehow or other...America used to be a country that thought big about the future. Major public projects, from the Erie Canal to the interstate highway system, used to be a well-understood component of our national greatness. Nowadays, however, the only big projects politicians are willing to undertake -- with expense no object -- seem to be wars. Funny how that works." Paul Krugman in The New York Times.
2) SAMUELSON: The European crisis was never gone. "The European 'crisis' is back. Actually, it never went away -- and won’t for many years. The problems are so deep and pervasive that there is no easy or obvious solution. Government debt and deficits in many countries are not sustainable, but the usual remedies of cutting spending and raising taxes -- a.k.a. 'austerity' -- may make matters worse by deepening already severe recessions. Europe is caught in a trap that promises more political and social unrest. The wonder is that, for a few months, there was a sense of complacency. Interest rates on vulnerable debtor countries Spain and Italy declined. Fears about European banks eased. Some commentators said 'the worst is over.' Well, probably not. Interest rates are headed up again, while European stocks have taken a pounding...Europe’s best hope may be that faster economic recovery in the rest of the world triggers an export boom. But this is a hope, not a policy. The policy has been to muddle through." Robert Samuelson in The Washington Post.
3) ELHAUGE: The Founding Fathers liked mandates. "In making the legal case against Obamacare’s individual mandate, challengers have argued that the framers of our Constitution would certainly have found such a measure to be unconstitutional...The framers, challengers have claimed, thought a constitutional ban on purchase mandates was too 'obvious' to mention. Their core basis for this claim is that purchase mandates are unprecedented, which they say would not be the case if it was understood this power existed. But there’s a major problem with this line of argument: It just isn’t true. The founding fathers, it turns out, passed several mandates of their own. In 1790, the very first Congress--which incidentally included 20 framers--passed a law that included a mandate: namely, a requirement that ship owners buy medical insurance for their seamen. This law was then signed by another framer: President George Washington. That’s right, the father of our country had no difficulty imposing a health insurance mandate." Einer Elhauge in The New Republic.
4) KRAUTHAMMER: The Buffett Rule wouldn't promote growth. "The reason Buffett and Mitt Romney pay roughly 15 percent in taxes is that their income is principally capital gains. The Buffett Rule is, in fact, a disguised tax hike on capital gains. But Obama prefers to present it as just an alternative minimum tax because 50 years of economic history show that raising the capital gains tax backfires: It reduces federal revenue, while lowering the tax raises revenue...Obama throws in a free economic lunch for all. 'This is not just about fairness,' he insisted on Wednesday. 'This is also about growth.' Growth? The United States has the highest corporate tax rate in the industrialized world. Now, in the middle of a historically weak recovery, Obama wants to raise our capital gains tax to the fourth highest. No better way to discourage investment -- and the jobs and growth that come with it." Charles Krauthammer in The Washington Post.
5) MALLABY: Obama is fumbling his chance for tax reform. "No reasonable person can doubt that the US must eventually raise taxes. The country is running an unsustainable budget deficit. Its tax take, measured as a share of gross domestic product, is the lowest in the OECD. The 1990s suggest the US can raise revenues without damaging growth. Other countries have also managed similar feats. Sweden, for example, which collects 53 per cent of GDP in taxes, has grown faster over the past decade than the US, which collects 32 per cent, counting state and local government. From all this it follows that a distressingly large slice of the Republican party is unreasonable. Equally, no reasonable person can doubt that the tax system must be used to soften inequality...A clever campaign gambit is a poor substitute for a serious proposal. By focusing his rhetoric on the Buffett tax, Mr Obama is fumbling his best chance to win a mandate for intelligent reform - reform, moreover, that ought to be the centrepiece of a second term." Sebastian Mallaby in The Financial Times.
Scottish rock interlude: The Vaselines play "Son Of A Gun" live on KEXP.
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Still to come: The trade deficit shrinks; states try to limit co-pays for some drugs; telecoms try to escape from a big requirement; troubles for solar; and a ticklish clouded leopard cub.
The administration's fund to help hard hit homeowners has given out a mere three percent of its money. "A fund to support homeowners in the communities hit hardest by the collapse of the housing bubble has disbursed just 3 percent of its budget and aided only 30,640 homeowners in the two years since its creation, according to a report released on Thursday by a federal watchdog office. The Hardest Hit Fund, which was created in the spring of 2010, grants money to state housing finance agencies for efforts to help families that are facing foreclosure. It has 'experienced significant delay' because of 'a lack of comprehensive planning' by the Treasury Department and limited participation by Fannie Mae, Freddie Mac and the large mortgage servicers, said the report by the special inspector general for the Troubled Asset Relief Program...The Treasury Department had estimated that the program would reach three million to four million homeowners. It has aided fewer than a million, though the program has been completing more and more permanent modifications recently." Annie Lowrey in The New York Times.
Economists think further Fed action this year is unlikely. "More economists are convinced the Federal Reserve won't take further action to spur growth this year as the economy appears to be on firmer footing, according to The Wall Street Journal's monthly economic-forecasting survey. Thirty-six of the 51 economists surveyed, not all of whom answer every question, say the central bank will refrain from another round of large-scale bond buying in 2012. The number who expect no action is up from 30 in the January survey...Expectations of steady growth also are making economists skeptical of the Fed's pronouncement that the central bank will keep interest rates exceptionally low through the end of 2014. Just eight of the economists think the Fed will still have its target for the federal-funds rate in its current 0%-to-0.25% range by June 2014. On average, they expect the rate will be up to 1% by then." Phil Izzo in The Wall Street Journal.
The U.S. trade deficit shrunk. "The trade deficit in the U.S. narrowed more than forecast in February as imports fell by the most in three years, reflecting the smallest amount of crude oil purchases in 15 years and a drop-off in demand for Chinese goods. The gap shrank 12 percent to $46 billion, the smallest since October, from a revised $52.5 billion in January, the Commerce Department in Washington said today. The median estimate of 73 economists surveyed by Bloomberg News called for a deficit of $51.8 billion in February. Purchases of foreign goods decreased by 2.7 percent, the biggest decline since February 2009. Exports barely rose to reach a record. The Chinese Lunar New Year holiday may have contributed to the slump in imports, indicating demand will probably rebound as a strengthening U.S. labor market bolsters consumer spending. At the same time, sales overseas by American companies may moderate as parts of Europe stagnate and China slows." Timothy Homan in Bloomberg.
@grossdm: U.S. is in decline b/c it doesn't make anything the world wants. . .Except the $181 b in goods and services exported in Feb. That's a record
Some companies are already taking advantage of the JOBS Act. "Two companies have submitted confidential plans for initial public offerings under the JOBS Act that was signed into law last week, an indication that some firms and their backers are moving quickly to capitalize on the controversial measure...The agency is requiring paper submissions instead of its current electronic system to ensure confidentiality, she said. The law, formally known as the Jumpstart Our Business Startups Act, eased some barriers to IPOs by rolling back corporate governance and accounting rules for as long as five years for so-called emerging-growth firms--defined in the act as those with less than $1 billion in annual revenue. Some parts of the act remain subject to rule making by regulators. Under one provision now in effect, qualifying companies can file draft registration statements for their IPOs on a confidential basis for review by the SEC staff." Randall Smith and Emily Chasan in The Wall Street Journal.
@jimtankersley: NJ newsroom just now. Me: "Unemployment! We should be talking about unemployment!" Colleague: "It's depressing, Jim."
Engineering is awesome interlude: The world's first chocolate 3D printer.
States are trying to limit co-pays for costly drugs. "Spurred by patients and patient advocates like Ms. Kuhn, lawmakers in at least 20 states, from Maine to Hawaii, have introduced bills that would limit out-of-pocket payments by consumers for expensive drugs used to treat diseases like cancer, rheumatoid arthritis, multiple sclerosis and inherited disorders. Pharmaceutical companies would also benefit from such legislation because high co-payments discourage patients from taking their medicines. The pharmaceutical giant Pfizer has been helping the legislative drive behind the scenes, even drafting some of the bills, according to legislators and patient advocates. The bills aim to counter efforts by health plans to reduce the amount they pay for expensive medicines by making the patients pay a percentage, typically 20 to 35 percent, of the cost...Insurance companies are pushing back, so some bills are dying, as in Washington State, or being watered down, as was the one in Maine." Andrew Pollack in The New York Times.
The Komen Foundation is funding Planned Parenthood again. "Grants from the Susan G. Komen Foundation for the Cure are flowing to Planned Parenthood, as the women’s health organizations seek to rebuild their relationship after the controversy in February over the breast cancer charity’s unsuccessful attempt to defund Planned Parenthood. At least 17 Planned Parenthood affiliates will be funded this year, about the same number that received grants in 2011, according to a tally provided by Komen. The total amount of the grants, which are for breast-cancer screening and other breast-health services, is still being worked out. Most recipients this year also received funds last year. A half-dozen applications were turned down, mostly because the local Komen affiliates lacked funds, executives said. It is not unusual for there to be more applicants than available funds, although in some locations the controversy has hurt donations. Planned Parenthood officials said they do not believe politics played a role in grant awards this year." Lena Sun and Sarah Kliff in The Washington Post.
@BuzzFeedAndrew: When Medicare/Social Security comes up it will be the War on Grandmothers.
DOMENICI AND SMITH: Mental health parity must be implemented. "In 2008, Congress passed and President George W. Bush signed the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act. This law, which garnered bipartisan support, requires that large group health plans and Medicaid managed-care plans provide coverage for mental or substance-use disorders on par with the coverage offered for physical ailments. But when any law is passed, the federal government must implement and enforce it to make its benefits and provisions a reality. President Obama voted for the bill as a U.S. senator, and all indications are that he remains supportive. Yet regulatory action has stalled since 2010...The Obama administration should issue its final regulations to implement the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act. Doing so would allow employers to plan with certainty and stability -- and would let families know that help will be there when they need it." Pete Domenici and Gordon Smith in The Washington Post.
Telecoms are trying to be freed from the requirement to provide telephone service to homes. "More than 130 years after the first residential phone line was installed, telecom companies are pressing to be freed from the obligation of providing low-cost fixed-line telephone service to homes, a move critics say will leave Americans with less reliable or more expensive options. Four states have passed laws that release the telephone companies from this requirement, as consumers flock to mobile phone and Internet devices. Several other state governments, facing vigorous lobbying by phone companies, are considering similar measures. The push from the telecom industry is forcing policymakers to re-examine what has long been a basic guarantee of the government -- that every American home should have access to a phone, along with other utilities such as water or electricity." Cecilia Kang in The Washington Post.
Adorable animals being adorable interlude: A clouded leopard cub is ticklish
The solar industry is struggling. "Late Wednesday night, BrightSource Energy, a start-up formed to build solar thermal power plants, was forced to make a humbling admission: Despite a year of hopes and efforts, it could not find the market it wanted for its stock. The company canceled its initial public offering of shares just hours before trading was to begin...In part, the company’s I.P.O. troubles show the limits of investor faith in the kinds of large-scale solar power projects that BrightSource develops, analysts say. The projects often pose environmental challenges, need new infrastructure and take up acres of land, and they require enormous investments before generating revenue, posing large risks for developers. But BrightSource is also emblematic of the dark clouds that have settled over the solar market, analysts and industry executives say. Despite a vast increase in the installation of solar panels in the United States and the rollout of new utility-scale plants, profits are scarce." Diane Cardwell in The New York Times.
Global investment in green energy dropped. "Global investment in green energy fell sharply in the first three months of 2012 as European financial woes, upcoming U.S. elections and fears of declining federal support fed a 'destabilizing uncertainty,' a report unveiled Thursday finds. New financial investment fell 28 percent from the prior quarter to $27 billion, according to Bloomberg New Energy Finance, which called the first quarter 2012 tally 'the weakest since the depths of the financial crisis' in early 2009. The $27 billion total is also 22 percent below the first quarter of 2011. The tally includes venture capital, private equity, public markets and asset finance, but not small-scale projects and corporate and federal research and development...U.S. production tax credits for wind-power projects are slated to expire at the end of the year, and their renewal is uncertain. A stimulus program that provided developers grants in lieu of traditional tax credit financing lapsed at the end of 2011." Ben Geman in The Hill.
@drgrist: "Environmental problems occur today because we were not alert enough, informed enough or farseeing enough yesterday." - Richard Nixon, 1970
Wonkbook is compiled and produced with help from Karl Singer and Michelle Williams.