Good news: At least one Nevada assemblyman understands economics
Bad news: The rest either don't, or don't have the courage to oppose an idea that economists from Keynesians to Austrians understand will kill jobs in the long term.
What revealed this need for a lesson in basic economics?
Assembly Bill 144, also known as Nevada Jobs First, which passed the Assembly, 39-1 today. AB 144 would give Nevada-based contractors a 5 percent preference in bidding and put a whole host of new regulations on contractors working on government projects.
[T]he contractor, applicant or design-build team must ensure that: (1) at least 50 percent of the workers on the public work have a Nevada driver's license or identification card; (2) all of the non-apportioned vehicles primarily used on the public work are registered in Nevada; (3) at least 50 percent of the design professionals who work on the public work have a Nevada driver's license or identification card; (4) at least 25 percent of the materials used in the public work are purchased in Nevada; and (5) certain payroll records related to the public work are maintained and available within this State.There are so many problems with this provision, it's hard to know where to start. But that doesn't mean I'm not going to try.
The key to wealth creation, in Nevada and other states, is specialization. Economic policies like mercantilism or tariffs destroy wealth. Note the negative effects of Smoot-Hawley during the Great Depression.
If economic theory doesn't do it for you, consider these practical impacts:
First, the cost of every public-works project in Nevada will increase, which means we'll have fewer of those roads and schools that liberals claim we so desperately need.
Second, other states are likely to enact measures similar to this, which means Nevadans who work out of state will be hurt.
Third, this is going to dramatically increase the compliance costs for construction companies, which means they'll be spending more money checking paperwork rather than building things.
Fourth, policies like this delay long-term economic growth, because they send a message to construction workers that they don't need to retrain and get new skills. Individuals in the free market do an amazing job of creating wealth precisely because the market incentivizes workers to retrain for areas of higher need. This bill delays that necessary retraining.
Fifth, this is a perfect example of government picking the winners (Nevada construction workers working only on government projects) and the losers (taxpayers who are getting less for their money).
The U.S. Supreme Court also ruled that a similar measure in Alaska represented a violation of interstate commerce.
Read moreSenate Revenue, Feb. 17
In today's Senate Revenue Committee meeting, committee members heard a presentation on the targeted tax incentives given to large businesses who promise to invest in Nevada. The presentation was delivered by Michael Skaggs, Executive Director of the Commission on Economic Development.
Skaggs reviewed state programs for temporary tax abatements pursuant to NRS 360.750. This statute permits the Commission on Economic Development to grant targeted tax breaks to businesses that are consistent with the "State Plan for Industrial Development and Diversification that is developed by the Commission." (Read: businesses whose lobbyists gain political favor in Nevada.)
NRS 360 allows politically-favored firms to receive special abatements on the local school support tax, property taxes, and the state payroll tax (MBT). These tax breaks are in addition to the rebates that many well-connected firms might receive through tax-icrement financing or STAR bonds.
The ostensible purpose of these abatements is to incentize new business to move into the state and create jobs. However, a report prepared by legislative staff in 2009 revealed that many tax breaks awarded by the Commission on Economic Development completely fail to achieve this purported objective.
In 2006, for instance, the Commission awarded $5.6 million dollars in local school support tax abatements and a 50 percent abatement in payroll tax liability for four years to Solar Star in Clark County. In return, Solar Star hired a single worker who made $21.15/hour.
NPRI has always held that the best method of encouraging job growth and small business development is through a low, but uniform, tax and regulatory burden, combined with a well-functioning education system. Moreover, these two important components are not incongruous, as our friends on the Left would have you believe. NPRI has repeatedly demonstrated, using empirical evidence, that Nevada's educational system can see dramatic improvements through structural changes that would also imply a cost savings for taxpayers.
Targeted tax incentives create an uneven playing field that disadvantages the growth of native, small businesses to the benefit of politically-connected, large corporations. They also can foster an attitude of corruption and lead to inefficient decision-making.
Moreover, opposition to "corporate welfare" is one policy stance that enjoys widespread agreement from across the political spectrum - from Grover Norquist to Ralph Nader. In Nevada, not only has NPRI remained critical of this practice, but so was former Assembly speaker Barbara Buckley, who admirably fought to curtail this practice in the 2009 session.
Today, Senator Sheila Leslie voiced some concern over the use of corporate welfare in this state. Hopefully, Senator Leslie does not forget this important issue and works to curtail the practice in Nevada.
Testimony, Joint Meeting on Higher Education, Feb. 16
My testimony today, following Chancellor Klaich's presentation on NSHE funding:
Testimony to Joint Committee on Education
February 16, 2011
Geoffrey Lawrence
Nevada Policy Research Institute
My name, for the record, is Geoffrey Lawrence and I am the deputy director of policy at the Nevada Policy Research Institute.
I wanted to speak to you because, as a lifelong student of Austrian economics, I have a unique perspective on some of these issues.
I believe the pursuit of academic achievement is certainly a worthwhile effort that can lay the foundation for a vibrant economy. However, I believe that there are several specific adverse impacts that can result from aggressive public subsidization for higher education, which I will highlight.
Acquiring a college degree entails significant costs. These include the direct financial costs of attendance as well as the opportunity costs that result when students contribute time and effort that could otherwise be spent pursuing other goals.
There are also a number of benefits that accrue to individuals who choose to pursue higher education. The most obvious is the increased earning potential that students hope to gain through the acquisition of a degree. There is also an implicit satisfaction that students might gain from their intellectual endeavors. My friends make fun of me, for instance, because I enjoy spending my leisure time reading textbooks. But there is a value to this type of satisfaction that is implicitly incorporated into the level of demand facing the higher education industry.
However, when students are not sensitive to the full cost of attaining a degree, they do not have to fully justify these costs by the benefits received. In strictly economic terms, this introduces an inefficiency because students' cost-benefit analysis has been manipulated.
To the degree that the cost of a degree is publicly subsidized, individuals becoming less sensitive to these costs are more likely to undertake efforts that they would not otherwise engage in. Some students who only have a marginal interest in attending college might decide to attend but, as they do not face the full cost directly, they take the effort less seriously, using taxpayer resources ineffectively.
Others, who do not have to justify the financial cost based on an increased earning potential, may be more likely to pursue degrees for which there is not great demand on the labor market.
Thousands of students graduate at public universities in America every year with a four-year degree in history, for instance. This is not to pick on history majors, but that degree typically does not add much value to a student's earning potential because there are not many employers on the market looking for this particular skill set. Had the student been more sensitive to the cost of attaining a degree, he or she would be more likely to pursue a degree that conveys a skill set for which there is higher demand, such as engineering or medical science.
Hence, I believe that a high degree of subsidization leads to a misdirected investment, wherein many students receive a skill set that is ill-suited to the true needs of society.
This is particularly relevant because, using any data source, Nevada's four-year universities have the among the lowest in-state tuition rates in the nation.
Heavily-subsidized public universities also effect a statistically regressive wealth transfer. Numerous studies show that children from higher-income families are more likely to attend college than children from lower-income families - despite the fact that the poor are forced to pay the taxes that fund this subsidization. In fact, taxes on consumption, such as the sales tax imposed in Nevada have a statistically regressive impact - further exacerbating this phenomenon.
I certainly sympathize with the idealism displayed by lawmakers who want to increase access to higher education for children from lower-income families. However, I believe that the current method of subsidizing entire institutions is ill-suited to achieve this end, because of the regressive impact that I've just highlighted. I believe that a much more effective means of achieving this end would be to charge general tuition rates more closely reflecting market forces, but to perhaps offer need-based scholarships to qualified students whose family income falls below a given threshold.
Finally, I'd like to clarify one aspect of NSHE finances that I believe is often overlooked. State allocations to NSHE operating funds account for less than half of the system's total operating budget. So, when we talk about funding "cuts," we are generally only talking about the state appropriation and not the impact on the total operating budget, which skews the percentages and misrepresents what is occurring.
According to a report prepared by NSHE staff, the system's total operating fund in FY 2010 was $1.724 billion while the state appropriation, including ARRA funds, account for only $800 million. In fact, NSHE's total operating budget increased by $30 million between FY 2009 and FY 2010 - something that is often lost in these discussions.
I believe there is room for significant structural reform to NSHE finance that could correct for the adverse impacts of aggressive subsidization that I have identified. As such, I believe that the funding proposals that have been outlined by Governor Sandoval represent a good first step in this direction.
Thank you.
Myths exposed as TransparentNevada provides access to 12 years of NSHE operating budgets
With the Assembly and Senate Education Committees set to hear from University Chancellor Dan Klaich tomorrow at 3:30, this information couldn't be more timely.
The NSHE operating budgets are here.
This is the kind of information that can provide the context and facts that's been lacking in much of the discussion of higher education budgets. Also, here's NPRI's press release on the release of the operating budgets and the myths this information exposes.
LAS VEGAS - Twelve years' worth of operating budgets for the Nevada System of Higher Education is now available through TransparentNevada, the Nevada Policy Research Institute announced today. The information is located at TransparentNevada.com, an NPRI-operated website devoted to providing Nevada taxpayers with crucial information on government financing.Update: RJ reporter Richard Lake tweets that his story on higher education yesterday exposed this myth on NSHE budgets. And he's right that his story did a great explaining where the various percentage figures in the budget debate come from.
The announcement comes just one day before a joint meeting of the Assembly and Senate education committees, which will feature a presentation by NSHE Chancellor Dan Klaich.
"For years, leaders in NHSE have attempted to scare the public about the impact of reductions in taxpayer subsidies to higher education - framing 'cuts' only in terms of the amount of subsidies the system receives, and not its total operating budget," said Steven Miller, NPRI's vice president for policy. "Lawmakers and the general public have had little access to the actual operating budgets of these institutions, which has limited their ability to fact-check and challenge the hyperbole coming from NSHE leaders.
"This newly available information changes that. Everyone can now check the facts and establish the proper context for debates over higher-education spending."
The operating budgets show that despite reductions in state subsidies and overblown rhetorical claims of the supposedly resulting 'devastation' in 2008 and 2009, NSHE's operating budget in Fiscal Year 2010 - $1.724 billion - was actually $30 million larger than its FY 2009 operating budget of $1.694 billion.
The publication of this budget data comes after Chancellor Klaich admitted at a Feb. 3, 2011 Board of Regents meeting that some NSHE officials have exaggerated the impact of past reductions.
"I think we [at NSHE] have been guilty of hyperbole in the past," said Klaich, "where we get the first dollar of a cut and we would like you to believe that the sky is falling in. And here we are a few years later and, lo and behold, the sky is right where it started out. It has not fallen in."
Miller praised Klaich for his honesty and urged other NSHE leaders to follow the chancellor's example.
"The chancellor should be applauded for acknowledging the past misstatements of NSHE officials," Miller said. "Instead of trying to scare the public - and their own students - by using misleading rhetoric, officials need to be honest with Nevada's lawmakers and citizens."
The data also shows that Nevada's subsidy to higher education more than doubled from FY 2000 to FY 2009, from $306 million to $623 million. After adjusting for inflation, Nevada's subsidy to higher education increased from $380 million (in 2009 dollars) in FY 2000 to $623 million in FY 2009.
"These facts are a direct refutation of those politicians, led by Senate Majority Leader Steven Horsford, who claim that higher-education subsidies are the key to diversifying and strengthening Nevada's economy," Miller said. "If these subsidies really were the key, Nevada wouldn't be in its current fiscal and economic predicament.
"Instead of trying to rhetorically inflate the size of budget reductions, politicians like Senator Horsford should be demanding accountability for the money Nevada has already spent. These budgets clearly show that lavishly subsidizing NSHE in an attempt to 'diversify' the economy has been a bad investment."
NSHE staff prepared the spreadsheets using the higher-education system's own data, at the request of Regent Ron Knecht.
The budgets can be downloaded at http://transparentnevada.com/static/NSHE_budgets_00-11.xls.
MORE: Video of Chancellor Klaich admitting past NSHE hyperbole regarding budget reductions: mms://wms.csn.edu/CCSN/specialBoR2-3-2011.wmv (48:30 mark).
There are plenty of other myths to expose though, and this data will give lawmakers and citizens a chance to do it.
Senate Select Committee on Economic Growth and Employment, Feb. 14
Today Robert Lang, Chairman of the now-defunct Nevada Vision Stakeholders' Group is presenting the group's final report to the Senate Select Committee.
Dr. Lang's introduction provides a fairly accurate depiction of the recent history of Nevada's economy. Although he failed to identify the impact that easy-money policies at the Federal Reserve had on infusing artificial credit and illusory home equity earnings into the holdings of private families, Lang notes that it was this illusion of disposable income that drove record profitability among Nevada's resorts. As profitability rose, so did the demand for labor - drawing workers into the state en masse.
Now that the market has begun to correct for the government's mistakes, many workers that had relocated to Nevada - especially in the construction industy - find that they have been displaced as a result of these policies.
However, Lang continues by stating that, with the demise of profitability in the gaming industry, that Las Vegas is well-suited to become a leader in renewable energy development. Lang cites as a potential model the USTAR initiative that was launched in neighboring Utah. This initiative allocates state money for renewable energy research to the state's university system.
Lang says that the government does not pick winners and losers in the renewable energy field in Utah. Instead, university researchers develop new technologies and pitch them to venture capital firms in Utah's "Angel Network." The venture capital fims then decide which technologies make the most sense to invest in.
The point that Lang misses is that Utah state government is picking winners and losers by making some technologies more or less profitable depending on the level of tax subsidies offered by Utah lawmakers. Lawmakers in Utah offer a bevy of tax subsidies to renewable energy companies that would otherwise not be profitable. These are in addition to the generous federal tax subsidies such as the Production Tax Credit.
Dr. Lang may have very good intentions in suggesting new avenues for economic growth within Nevada. However, prosperity is not generated from an industry that can only be profitable through subsidies - leeching off the productivity of all other taxpaying citizens.
Dr. Lang concludes by claiming that, if the state is to see economic recovery, lawmakers will have to spend much more to subsidize both K-12 and higher education. To his credit, Lang says that "money isn't everything" with regard to K-12 education and that meaningful structural reforms are important.
However, Lang should note that in-state tuition rates at Nevada's public universities are far below those of neighboring states and (according to data from the US Department of Education) nearly half of the national average. So, by reasonable standards, higher education in Nevada is already heavily subsidized and, indeed, this may be the root of many problems. Among other adverse results is that the abnormally low in-state tuition rates help to crowd out private universities from competing in the state. Further, this lack of competition likely hampers the quality of education offered at the state schools.
I applaud Lang for trying to offer solutions. However, his central arguments are ill-conceived because they fail to consider all of the dynamics involved.
Alternative "visions" have been offered by the Nevada Policy Research Institute that I believe have more merit.
Before they testify: Remember the four problems with the Nevada Vision Stakeholder Group
The Nevada Vision Stakeholder Group is presenting their recommendations before the Senate Select Committee on Economic Growth & Employment today at 1 pm.
The NVSG's final report is here. If you've been following NPRI for a while, then you know that the NVSG represents the taxeaters, not the taxpayers, of Nevada, and the group was designed to provide political cover for tax increases.
For those interested in or attending the Committee meeting, here are four problems NPRI has identified with the NVSG. NPRI first pointed these problems out over a year ago, in January 2010. These problems are as big today as they were then.
1. The Nevada Vision Stakeholder Group shouldn't exist: The NVSG's goal is to identify quality-of-life goals for Nevadans. Problem is, it isn't the government's job to identify, define or pursue quality-of-life goals for anyone.
Government should provide essential services, like education, roads and fire and police protection. Government should fund those services with a uniform and low tax and regulatory burden. Government should be concerned with preserving and increasing freedom, not picking the winners and losers in an economy or a society or under the guise of "quality of life."
2. People should define their own quality-of-life goals: Every individual is unique, so "quality of life" means something entirely different to each individual person.
The beauty of freedom is that it enables us each to pursue our own interests and define what "quality of life" means to us as an individual (and the beauty of capitalism is that individuals pursuing their own interests creates enormous wealth and opportunities for everyone). And "quality of life" might mean the opposite thing to two different people. As long as they don't infringe on another's rights, they are free to pursue their own quality life.
This isn't possible if the government is defining and imposing its own views of "quality of life" on a community or society.
Imagine the reaction if a religious institution tried to impose its quality-of-life beliefs on a society. There would be understandable outrage. Why aren't we as outraged when government does the same thing?
Now, there is nothing wrong with religious beliefs or, likely, even some of the quality-of-life goals the NVSG is going to produce. The problem occurs when a government or any institution uses coercion to force those beliefs on other people.
3. The Nevada Vision Stakeholder Group doesn't represent Nevada: The NVSG has 19 voting members. Of those 19 members, nine (or 47 percent of the committee) are current government employees. The Las Vegas Chamber of Commerce recently did a study that concluded that there are fewer than 44 state and local employees for every 1,000 Nevada residents, which is less than 5 percent of the population.
The other 10 members of the committee include a retired government employee (Paul Dugan) and a representative of the Nevada State Education Association (Brian Rippet). Most of the representatives of the business community represent gaming and mining or businesses that rely heavily on government contracts.
The Nevada Vision Stakeholder Group doesn't represent Nevada. It represents a combination of rent-seeking business interests and the 5 percent of Nevadans who are employed by the government.
To top it off, the NVSG's non-voting chair is Dr. Robert Lang of Brookings Mountain West, who moved to Nevada in January of 2010. Lest you think that's a typo, I called the Brookings Mountain West's office at UNLV, and got this information confirmed. Also, Dr. Lang's bio on the Brookings Mountain West at UNLV website still says: "Currently, Dr. Lang is a professor of urban planning and director of the Urban Affairs and Planning Program at Virginia Tech's National Capital Region in Alexandria, VA."
Here's a screenshot:
[Update 2/14/11: At one of the final meetings Chairman Lang clarified that he is from New York, not Virginia.]
As I said before, the Nevada Vision Stakeholder Group doesn't represent Nevada. It should be renamed the Nevada Tax Consumers' Vision Stakeholder Group.
4. The outcome is predetermined. The Nevada Vision Stakeholder Group is going to select quality-of-life "goals" that require more tax money: This the natural result of a gathering of tax consumers and special interests. What makes tax consumers' lives better? More taxes from the 95 percent of Nevadans who don't have a seat at the table. The outcome was never in doubt, and was predicted by NPRI's Geoffrey Lawrence in early October.
Instead, the NVSG is likely to be a coalition of public employee unions and other rent-seeking special interests eager to craft a deal that makes all of them happy - at the taxpayers' expense, of course. Those who would be required to finance the grandiose schemes that result from these "stakeholder processes" are rarely considered relevant "stakeholders" themselves.For the reasons above, the Nevada Tax Consumer's Vision Stakeholder Group is a sham. Liberal legislators will use its skewed and illegitimate findings to justify calls for tax increases in 2011. Nevada's citizens should know the truth about the N(TC)VSG and reject legislators' soon-to-be announced call for increased taxes.
And, one year later, these problems still exist. Taxpayers beware.
Assembly Government Affairs, Feb. 14
It looks like there was great interest in the "jobs" bill being heard in the Assembly Government Affairs Committee this morning, since it is standing room only in the meeting room.
The Committee is hearing AB 144 this morning, which aims to change the bid preference statutes for public works projects. According to the bill summary, "Under existing law, a contract for a public work is awarded to the contractor who submits the best bid."
AB 144 would add five new conditions to the bid preference laws, as follows:
(1) At least 50 percent of the workers on the public work have a Nevada driver's license or identification card;
(2) all of the non-apportioned vehicles primarily used on the public work are registered in Nevada;
(3) at least 50 percent of the design professionals who work on the public work have a Nevada driver's license or identification card;
(4) at least 25 percent of the materials used in the public work are purchased in Nevada; and
(5) certain payroll records related to the public work are maintained and available within this State.
Obviously, there are some onerous accounting requirements that will be involved in the submittal of all public bids in Nevada - something that flies in the face of legislative leadership's professed committment to streamlining regulations on the construction industry.
More than that, however, this blatant effort at state mercantilism is certain to invite reciprocal treatment from neighboring states. As representatives from the Associated Builders and Contractors testified to the Senate Select Committee hearing on Friday, many native Nevadans are currently working on public works projects commissioned in other states.
In todays meeting, Assemblywoman Debbie Smith testified that "Other states are on board with this," referring to the changes included in AB 144. I'm guessing she means that she's conferred with lawmakers in other states and that they have agreed to discriminate against Nevadans in their public bidding processes just as Nevada will do with residents of other states.
Mercantilism as an economic theory was thoroughly refuted more than 200 years ago, but it is alive and well at the Nevada Legislature.
Testimony to Senate Select Committee on Economic Growth and Employment, Feb. 11
Anyone following the development of a "Nevada Jobs Bill" that could siphon money from taxpayers in order to benefit a narrow interest group like the construction lobby, should take note that legislative leaders have said they would like to pass the first component of this effort out of the Assembly Governmnt Affairs Committee tomorrow morning. I will be there providing live coverage.
Also, my testimony before the Senate Select Committee on Economic Growth and Employment on Friday, I believe, provides a well-rounded critique of this policy effort:
My name, for the record, is Geoffrey Lawrence and I am the deputy director of policy at the Nevada Policy Research Institute.
I wanted to speak to you today to clarify some of the issues regarding projections for potential job-creation that might exist if the state is to commit public money into a "jobs fund" to finance public works construction projects. I believe that most of the estimates I have seen are dramatically overstated due to a series of specific methodological errors that led to their calculation.
All of the estimates that I have seen rely on the existence of a "multiplier effect" that would lead to new job creation across the economy as the new construction money drives up demand, not only for construction labor, but also for labor in related industries. While this may be true, the analyses that I have seen fail to account for any supply-side constraints.
There are two major supply-side constraints that must always be considered in any credible econometric analysis. This is because there is a definite limit to the supply of both labor and capital. Certainly, the constraint on the supply of available construction labor in Nevada is not extremely significant at this time. However, there is always a constraint on the amount of available capital.
In order to finance a dramatic expansion of public works projects, the state will have to extract capital either directly from citizens through taxation or it will have to resort to private capital markets. When public agencies borrow capital, that capital is not available for alternative projects and entrepreneurial ventures that might yield higher returns on investment.
Perhaps the greatest weakness of the estimates that I have seen is that they account for the positive "multiplier effect" of new government spending, but fail to account for the off-setting negative "multiplier effect" that will result from higher taxation or reduced access to capital due to government borrowing. As taxpayers are left with less disposable income, demand across all sectors will be depressed, leading to economy-wide job destruction in order to benefit a specific sector: in this case, construction. If this off-setting multiplier is considered, then the aggregate impact of new government spending on job growth is likely to be minimal or non-existent.
Certainly, Nevada's construction industry was acutely impacted by the effects of the recent global recession - leaving a disproportionate share of workers unemployed. There are many interpretations as to why this happened.
NPRI follows the Austrian School of economics which holds that prolonged expansion of artificial credit worldwide over nearly a 20 year period - driven largely by easy-money policies at the Federal Reserve - reduced financing costs for construction and fueled a consequent bubble in real estate development.
One result of this bubble was that the artificially high demand drove up labor demand within the industry - siphoning more laborers away from other industries and into construction. However, since this resulted from an artificially-imposed distortion, there were more workers drawn into the construction industry than market fundamentals would have justified.
The recent recession has imposed a market correction to this industry. However, government policies intending to put off this correction and retain laborers in the construction industry will only perpetuate the imbalance that led to recession.
If lawmakers are intent on using government policy to put displaced construction laborers back to work - beyond the establishment of a favorable tax and regulatory environment - then a far better policy would be to provide job training so that these workers can acquire the skills to work in alternative industries which market fundamentals determine to be more sustainable. I believe that the policy direction currently being discussed will fail to realize the result desired by lawmakers.
Thank you.
Getting jobbed
Here's Geoff Lawrence today on the "Nevada Jobs Fund" scheme, under which legislators want to commit as much as $1 billion for construction projects:
Sen. Horsford claims that for every 100 new construction jobs financed by the state, the increase in demand will create an additional 88 jobs in services, mining and other industries. Using a similar line of thinking, the construction lobby claims that its proposals would generate $3.7 billion in total "economic activity" and create 100,000 jobs.Read Geoff's full commentary here.
What this flawed analysis ignores is that if the construction lobby receives $1 billion today, that amount of money must first be taken from taxpayers and private capital markets. As the higher tax burden would take money from taxpayers over the coming years, consumer demand in the private economy will decline - leading to the destruction of jobs and a negative "multiplier effect" that will more than off-set any proclaimed positive "multiplier effect."
Senate Select Committee on Economic Growth and Employment, Feb. 9
"I WANT YOUR MONEY!"
The first meeting of the Senate Select Committee on Economic Growth and Employment has just begun with Chairman Kihuen declaring that "The #1 job of this legislature is to create jobs." That's not a good sign to kick off a committee on economic development, given that governments don't create jobs, they can only lay the foundations for an economic environment capable of creating jobs on its own. However, government "stimulus" policies can destroy jobs across the economy in order to channel resources into a highly concentrated and visible industry - like construction.
That's what is at the heart of this committee's purpose. The committee today will consider a proposal developed by the construction lobby to issue new public debt in order to finance massive new public construction projects across the state in a government make-work effort. Details are available at the "Building Jobs Coalition" website.
The construction lobby has packed today's hearing with union members bused in from around the state to put pressure on lawmakers to burden the public with new debt for the benefit of this specific interest group.
Lobbyists throughout the legislative building are saying that there are already enough votes in the Assembly to approve legislation implementing the massive make-work "stimulus" project, and that supporters are only two votes short in the Senate. And that's before the hearings and union-pressure machine began. Governor Sandoval has wisely indicated that he does not support the proposal.
If approved, this plan would be a scaled version of the failed federal ARRA stimulus package. The plan calls for the creation of 100,000 new construction, engineering and architecture jobs to be created across the state. However, the model does not appear to account for supply-side constraints. It also accounts for a "multiplier effect" resulting from new dollars circulating in the economy, but fails to account for the off-setting negative multiplier that will result from the higher taxes that would be required to service debt levels. It further ignores all distortions in the capital structure and associated opportunity costs that would result if the plan is implemented.
These, among other major analytical weaknesses, will ensure that this state-stimulus plan will fail to achieve its objectives just as the federal stimulus plan has done.
