WashACE Blog

U.S. Chamber of Commerce seeks trial on global warming -- latimes.com

Reporting from Washington - The nation's largest business lobby wants to put the science of global warming on trial.The U.S. Chamber of Commerce, trying to ward off potentially sweeping federal emissions regulations, is pushing the Environmental Protection Agency to hold a rare public hearing on the scientific evidence for man-made climate change.

Chamber officials say it would be "the Scopes monkey trial of the 21st century" -- complete with witnesses, cross-examinations and a judge who would rule, essentially, on whether humans are warming the planet to dangerous effect. "It would be evolution versus creationism," said William Kovacs, the chamber's senior vice president for environment, technology and regulatory affairs.

"It would be the science of climate change on trial."

via www.latimes.com

Intriguing move by the U.S. Chamber. The EPA should do it. We'd all learn from the debate.

Washington Research Council Economist Sees Lean Times Ahead for Seattle

Here is a chart of annual taxable retail sales in the city of Seattle for the years 1994 to 2008. To remove the effects of inflation, we have adjusted spending spending to 2008 values using the BLS's Seattle Consumer Price Index.

via www.researchcouncilblog.org

This is surprising: "...for 2007, the peak year of the last expansion, real taxable retail sales for goods and services other than construction were lower in Seattle than they had been in 2000."

Preliminary State Economic Forecast Released

Arun Raha, head of the Economic and Revenue Forecast Council, released his preliminary economic forecast yesterday. This report sets the stage for the September revenue forecast. The jobs outlook is mixed.

The most recent estimate of Washington employment is slightly higher than we expected in our June forecast. In fact, the Employment Security Department reported a gain of 4,000 (SA) jobs in July which was the first monthly increase in nearly a year (excluding the transitory impact of the Boeing machinists’ strike). While this may turn out to be a turning point, we are not willing to  make that call based on just one month’s data. We continue to expect a trough in Washington employment in the fourth quarter of 2009 with a peak-to-trough decline in employment of 136,000 (4.6%). At this time, the services producing industries appear to be bottoming out; but construction and manufacturing continue to lose jobs, though a reduced rate.

More later.

Reaction to Boeing's Decision to Seek Permits in South Carolina

 The Boeing Company will file for permits that would allow for eventual development of a 787 production line in its new facility in South Carolina. The news broke yesterday and responses came fast and furious.

The Everett Herald carries statements from U.S. Senators Patty Murray and Maria Cantwell and from the Washington Aerospace Partnership. They also have this from Boeing:

“Understand this is a procedural step. It certainly recognizes Charleston is a candidate as is Everett, Wash., and other locations,” said Boeing spokesman Russ Young.

Seattlepi.com has comments from Snohomish County Executive Aaron Reardon, Congressman Jay Inslee, D-Bainbridge Island, and Everett Mayor Ray Stephenson. Here's a bit of Reardon's statement:

Our goal as policy leaders must be clear, and that is to create the most competitive regional and state economic environment for the future of commercial aerospace. We must do whatever is necessary to keep the Boeing Company in Washington state, thus protecting tens of thousands of jobs related to the aerospace industry.

Television is also gathering reactions to the statement. Denise Whittaker, KOMO TV, interviewed me this afternoon. I focused on the economic impact of Boeing on the state, citing the WashACE brief, What if Boeing Left Washington? (It's not a rhetorical question.) Even if they cut the interview, I hope they use the data. Short form: Each of Boeing's 75,000 jobs supports nearly three others in the economy, for a total jobs impact of 300,000. That's more than 10 percent of all payroll jobs in the state.

We've had more wake-up calls than a reluctant teenager on the first day of school. It's time to wake up.

UPDATE Click here for the KOMO story.

Independent Voters, Centrists Turning Away From Progressive Agenda

In this morning's TNT column, I take a look at recent polling data and discuss the implications for our state and local governments. Please read the whole thing. Here's a snippet.

As the president and Congressional leaders have ventured into virtually every area of American life – health care, education, industrial policy, finance – the national debate both overshadows and shapes state and local politics. Their aggressive intervention raises the stakes for policymakers in our state.

... Economic recovery remains voters’ top priority. They want to know that lawmakers share their concern. Proceed with caution, they say, much is at risk. Don’t gamble with our futures.

They are properly skeptical of untested policies with high costs and uncertain benefits.

Thoughts?

Seeing a Boeing Shakedown Where There is None

Ted Van Dyk wrote yesterday in Crosscut about Boeing's pending decision regarding the location of the second 787 production line. It appears the column was triggered by an editorial board visit to the online publication by House speaker Frank Chopp. After a review of recent history - headquarters move to Chicago, competition for original 787 work in 2003, incentive package that landed the production in Washington - he gets grouchy. Taking on the company's reported desire for a no-strike clause, Van Dyke writes:

In the meantime, Boeing is again talking about the need for fresh public subsidies to keep it "competitive." This appears to be a four-stage operation: First, deunionize South Carolina. Second, blackmail local Machinists. Third, extort fresh multibillion-dollar subsidies from Washington state taxpayers. Fourth, take the money and jobs and run.

A couple of thoughts. If the South Carolinians want to decertify the union, that's their right. Reports are that most workers there don't believe they've been well served. The fresh public subsidies, as the link above shows, are entirely speculative at this point. If by subsidies, he means tax incentives, that's money the state would only receive if there were additional investment here. The company can't "take the money and jobs and run" because the incentives only apply if there's investment and job creation here. Of course, since we don't know what's on the table, there's not much point speculating.

Van Dyk misses entirely the distinction between incentives and subsides, setting up an adversarial conflict that contributes nothing positive to the state business climate.

More on this at Boeing Works Here.

One huge thing that Van Dyk neglects to mention is the very real impact that Boeing’s departure would have on Washington. The company is our largest private employer and the biggest engine for our state’s economy.

And, for them, location is a choice.

Seattle 2nd in Taxes on Travelers

Earlier the Washington Research Council reported on Seattle's lost decade, ten years that saw growth in the suburbs. Taxes and regulations in the city made it the less attractive alternative for investment and job creation.

Now, the Puget Sound Business Journal reports that visitors, too, face an extraordinary hit when the show up in the Emerald City.

Seattle, with nearly $38 in total taxes on travelers, trails only Chicago, at nearly $41 per day. The U.S. average was $29.71.

Wonder if the mayoral candidates will talk about it.

Washington View: High taxes, red tape remove shine from Golden State - Columbian.com

California was once the land of opportunity. Since 1848, when John Marshall discovered gold in the Sierra Nevada foothills, people have flocked to "The Golden State" for jobs, sunshine and opportunity.Now our nation's most populous state with 37 million people, California has earned a tarnished image for high taxes, onerous regulations, government gridlock and unfriendliness toward business. That's disastrous news for a state with the world's 10th-largest economy at $1.813 trillion (gross state product).The unsavory reputation is having its impact on the state's beleaguered budget. These days, California's unemployment rate is two points over the national average at 11.5 percent, and its unemployment insurance fund is broke. Republican Gov. Arnold Schwarzenegger is feverishly working to plug a gaping $15 billion hole in the state's budget and has resorted to issuing IOUs.Neither Schwarzenegger nor the California legislature has much sympathy. In fact, voters showed their anger earlier this summer by handily rejecting tax increases to balance the budget.So what's wrong with California?As The Economist magazine recently reported, "Back in its golden age in the 1950s and 1960s, it (California) offered middle-class people, not just techy high-fliers, a shot at the American dream — complete with superb schools and universities, and an enviable physical infrastructure." Indeed, high taxes, coupled with intrusive regulations on business and greenery taken to silly extremes, have gradually strangled what was once America's most dynamic state economy," the well-read British magazine added.The Economist compared California to Texas, where unemployment is 2 percent below the national average, taxes are low and government regulations are more reasonable. California's core problem starts with a hobbled manufacturing sector. Manufacturing was the staple of California's economy, but a recent Milken study comparing California with Arizona, Indiana, Kansas, Oregon, Texas, Minnesota and Washington quantifies the decline. Milken's findings confirm that California has developed a reputation for not being friendly to business, as exemplified by the state's onerous regulatory climate and high taxes. According to its study, California lost 79,000 manufacturing jobs between 2000 and 2007, while its seven peer states added 62,000 manufacturing jobs.

via www.columbian.com

Good column by Don Brunell, AWB president, on California's self-inflicted wounds.

Economic Recovery - V, U, W, or ?

Economists continue to fret about the shape of the recovery. In yesterday's Financial Times, Nouriel Roubini shared his perspective. Here's his projection.

the debate [on the shape] is between those – most of the economic consensus – who expect a V-shaped recovery with a rapid return to growth and those – like myself – who believe it will be U-shaped, anaemic and below trend for at least a couple of years, after a couple of quarters of rapid growth driven by the restocking of inventories and a recovery of production from near Depression levels.

For the rest of the article (read the whole thing), Roubini assesses the risks, citing two factors that could send the globe into a double-dip ('W') recession.

For a start, there are risks associated with exit strategies from the massive monetary and fiscal easing: policymakers are damned if they do and damned if they don’t. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stag-deflation (recession and deflation).

But if they maintain large budget deficits, bond market vigilantes will punish policymakers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation.

Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand.

What do you think?

Rising Unemployment Remains a Concern

Bloomberg News reports today that 26 states saw rising unemployment rates last month. In our state, the unemployment rate dipped slightly, from 9.2 percent to 9.1 percent. Bloomberg notes the ongoing worry:

The figures are a blow to states already hurt by declining receipts from income and sales taxes and underscore economists’ projections that the national unemployment rate will reach 10 percent by early 2010.

We're relatively better positioned here. Another month or two will tell whether July was a turning point or an anomaly.