Monday, December 15, 2008

What should you expect in the MN economy? 

The DFL leadership has decide unsurprisingly to blame Republicans for "a significant lack of jobs problem".

When state finance officials released their latest economic forecast last week, they predicted Minnesota will lose another 58,000 jobs by the end of the current recession.�

"We have a significant lack of jobs problem going on in this state," said DFL House Speaker Margaret Anderson Kelliher.

Kelliher has taken note of the numbers and, along with other Democrats, is now stressing a job-creation theme when discussing the state budget deficit.�

During a recent MPR interview, Kelliher said it's time to reexamine the state's economic development efforts.�

"The loss of jobs over the last few years would tell us we're not doing as well as we could," Kelliher said.�

DFL Senate Majority Leader Larry Pogemiller also wants another look at jobs programs. But Pogemiller has already made up his mind about the need for big changes.�

"I think it's pretty clear that our economic development strategy that we're on has been a failure, and I think we need a total revamping of that," Pogemiller said. "And frankly, I think we need some new leadership there."

Pogemiller is specifically targeting the Department of Employment and Economic Development and its commissioner, Dan McElroy, a former Republican state representative from Burnsville. McElroy also served as state finance commissioner and chief of staff to Gov. Tim Pawlenty.

Many states are already approaching the incoming Obama administration for a big stimulus check, which is just shifting the deficit spending from the states to the federal government. �Chris Edwards points out that nationally 7.6% in 2007 and 7.0% in 2008; such money is supposed to be spent on infrastructure for the states, but we've already had taxes imposed by the DFL for more of this, and nationally that level of infrastructure spending is 2.4% of GDP. �About of third of this is coming from state governments, as shown in the last graph in this CBO presentation last May.

As to job creation, Kelliher and Pogemiller seem to be unaware of the difficult national environment in which the Minnesota economy exists. �The state economy has 16.5% of its employment in the goods-producing areas (largely construction and manufacturing, plus some forestry), all of which has taken a beating in recent years. �This is 1.5% more than the national level (as of 2008). �Indeed, in 2008 the decline in goods production in MN has been better than for the country as a whole; the decline in area construction accounts for most of the decline in 2006-07, which does not have roots in the policies of DEED, Governor Pawlenty or anywhere else. �It certainly is not the case that causality runs from Minnesota to the national figures. �It's that the state economy is being dragged along by the national. �

Most of my presentations to local economic groups in the last year have emphasized this particular point: �Forget about the housing issue; track manufacturing. �If it does well nationally, Minnesota will be OK. �If we can get some forestry employment back that's better, but that's likely to come later, when the housing surplus nationally comes off the market.

If you wanted to use state policies to try to move the economy forward in Minnesota, providing for productivity increases in the goods sector -- by allowing capital development to face light taxes, for example -- would be much more productive than scapegoating.

Labels: ,