Thursday, August 25, 2016

CAE MN Economic Report

MP CAE Experiment
"This whole blue team - red team thing is getting us nowhere: so if your intention in reading MinnPost is to find third party rationale to keep cheering for the blue team, read no further. Based on this embarrassing piece, I'm sure we can count on our own, local, Professor Johnston to continue to cheerlead the narrative by cherry picking facts, misrepresenting the whole of an issue to bolster his point, citing dubious sources and representing fifth grade principals of division (the same numerator relative to a smaller denominator will give you a higher rate of change) as insightful economic analyses to keep assuring us that he is right, the right is wrong, and everything is awesome. 
However, if you have the bandwidth to think beyond the binary blue and red and a desire to broaden your outlook, I would encourage you to read the CAE report. Because while our professor would apparently like you to think that this report is the product of a group of Republican activists who sat around and made stuff up, that is simply not true. 
The author is Joe Kennedy, Minnesota JD, Georgetown Econ PhD, former Chief Economist for the Department of Commerce, former officer at the Pew Charitable Trust and long time advisor to Congress and the manufacturing industry. And as Dr. Kennedy points out, and Dr. Johnston misrepresents, the data is all very public and the conclusions not new. The Brookings Institution, DEED, and the Metropolitan Council "all report similar findings, not surprisingly since each analysis relies on the same data sources". The Minnesota demographer’s office shared the risks of our migration trends last year.
This report is comprehensive, and quite interesting. You don’t need to agree with the policy conclusions, but the facts are the facts. They are presented well. If you bother to read the report you can decide for yourself what they mean for the state. 
I am discouraged for our future when I see people blindly chiming in with partisan statements and agreement about something that they haven’t bothered themselves to read. This whole blue team - red team thing is getting us nowhere. Professor Johnston does his readers and the citizens of Minnesota a disservice by his blatant partisanship and by so egregiously misrepresenting what is here." Matthew

"Excellent: Matthew, I am with you, Dr Johnston seems to be playing games here. It seems he is guilty of formulating an opinion against the CAE's paper, and then setting out to prove his opinion.  Just recently the Left was bragging about how great the Dayton/ DFL changes (ie tax increases) were for MN, when in reality they had not been in effect long enough to tell. Now that they have been in effect for 2+ years we are probably beginning to see the consequences. (for better or worse) 
The other pet peeve I have is anyone trying to compare between States without discussing the difference in cost of living. (ie taxes, housing, etc) Trying to compare SD and MN without this data is pointless. 
By the way, here is the link to the actual paper. My recommendation is that folks should push back against their personal bias and read it. That is my plan. CAE Report" G2A

"From the CAE's conclusion: "Minnesota has historically been home to a diverse and competitive economy" and "But if Minnesotans want a better future, they cannot continue the same policies that have led to an erosion of the state’s historic competitiveness." 
I did a little Google search of historic corporate tax rates and found a study of 1939 to 1950 tax burdens, state by state.  And guess what? Drum roll please....
1939 Tied for third on highest corporate tax rate.
1950 Again tied for third on highest corporate tax rate. 
Sorry CAE, we can agree on your first conclusion:  "Minnesota has historically been home to a diverse and competitive economy"  But, on your second:
"But if Minnesotans want a better future, they cannot continue the same policies that have led to an erosion of the state’s historic competitiveness." 
We have been doing the same thing for over 80 years. Are you suggesting we go back to the robber barons of the 1890s to really get things going forward the way you envision?
Tax Foundation Doc 

Conservatives continue to live in the fantasy land that a state can have top ten livability results and have bottom ten tax burdens. One would think our right leaning, ardent capitalist friends, more than anyone else, would understand:
You get what you pay for.
Want a bigger house: pay more.
Want a faster car: pay more.
Want a more luxurious vacation: pay more
Want better schools: pay more.
Want better roads and transportation: pay more.
Want better parks and civic amenities: pay more.
And that is what we have done in this state and that is why it works.
And to the CAE: Don't let the door hit you in the butt on your way out to Mississippi..." Edward

"I have no problem paying a little more for good parks, roads, transportation, parks, civic amenities, etc. However the idea that one MUST PAY MORE for these sounds like a good explanation of why our local and state governments are so expensive. In my world I like to press the service and product providers to provide more for the same price

And I don't know if you have been to NC, but they have a lot of really nice stuff.   
Now regarding "you get more of what you pay for". We have a very generous welfare and healthcare system, does this mean that we draw more people who are happy living off the taxes paid by the efforts of others?

And this is paid for by higher taxes on people with money / high incomes. Does this mean we are encouraging them to find a less expensive place to call home?

In closing, I did skim the whole document. I do agree that they are a bit inconsistent, however there were also great points in there." G2A
Jerry, Please note that I was not the one insulting Mississippi thins time...   


Anonymous said...

Lot of words there.

Basically, the idea is that Minnesota's is a slow growing economy, because it is already a large and mature economy. It has one of the lousiest business climates in the nation because we have low unemployment and high wages. We don't have the cheap and poor labor pool that benefits subsidizes, other, faster growing economies.

Are these things wrong? Do they need to be corrected? Should Minnesota install a pro growth policy designed to make labor cheaper, and more plentiful?


John said...

Based on this article we do need to attract some different jobs. Maybe those for folks who do not succeed in High School.

We lost the Ford Plant and I can not think of many other low skill low knowledge higher pay jobs that we have added. Manufacturing plants still pay pretty well for capable people who are willing to work. (ie $15+ per hour and benefits)

Often these jobs go to rural MN or out of State though. It is unfortunate that the Unions and State politics keep scaring these big employers away.

John said...

How do we start attracting folks like these?
Wiki BMW Spartanburg
Honda Marysville
Ford Louisville

Anonymous said...

Based on this article we do need to attract some different jobs

The problem is that surfing on the Mississippi is remarkably poor.

In terms of job attraction, Minnesota has it's problems. Businesses are built here, but they move elsewhere. We recently lost Medtronic to Ireland. But do we want to invert our policy? Should our goal be to attract Irish industry here? Do we really want to increase the number of charming pubs in the countryside? Or do we want to accept the reality is that when you create great industries, they will be attractive to other states and countries, who can't create their own, and that when on occasion when we do lose them, that just provides an opening for us to create more.


Sean said...

The State of South Carolina offered BMW a $130 million package of goodies (tax breaks, a $1 annual lease on the land (1,039 acres), infrastructure improvements) to build the Spartanburg plant.

Honda got $91 million for the Marysville factory.

Ford is getting $315 million from Kentucky by 2021 for the Louisville facility.

That's how you get those type of projects.

Sean said...

"We recently lost Medtronic to Ireland."

And from a state perspective, moving the HQ to Ireland has little impact. They didn't pack up the operation and move it to Ireland, and they're still responsible to pay their state taxes. The impact is more on the federal side.

John said...

Simple math:

8,000 employees X $50,000 is $400,000,000 / year in taxable compensation.

Not to mention all the sales taxes, sin taxes, property taxes, taxes on supporting businesses and their employees.. Construction jobs, gas, taxes...

And usually they don't get money... They get tax credits...

So how much money is MN getting from Ford in taxes now that they are gone?

When will MN Liberals stop shooting us in the foot. The world is very globally competitive... Denying this is going to keep costing jobs and tax revenues.

Sean said...

Deals like the ones noted above happened in the 1990s and 2000s when the DFL was nowhere near the governor's office. I don't know if yuo've been paying attention, but Dayton's admin has been doing these sorts of deals (Shutterfly, Amazon, Baxter International).

Anonymous said...

Minnesota workers are highly paid. If you want to grow more, the solution is to impoverish them, or to bring in a lot of aliens. Once you lower the baseline, growth becomes easier.

Lots of poor states are very attractive to business. But have you ever noticed how they still remain poor?


Anonymous said...

"So how much money is MN getting from Ford in taxes now that they are gone?

When will MN Liberals stop shooting us in the foot."

Are you saying Ford closed the Saint Paul Assembly Plant because of taxes?


Sean said...

"And usually they don't get money... They get tax credits..."

There's no practical difference.

John said...

We need jobs for people of all academic and skill levels. That is unless you want the folks with low academic and skill levels trapped working at Jimmy Johns.

There are several reasons why companies may flee MN or not come here. Politicians unwilling to lower their tax rate, not a right to work state, many state regulations and oversight, etc.

As I note above and over and over, incentives are not free money. They are ways in which the government can encourage people and/or companies to behave in certain ways that they deem beneficial. And more importantly, let's remember that "no company = no taxes".

Anonymous said...

We need jobs for people of all academic and skill levels.

Sure, but we have a bad business climate because too many of our workers have high academic and skill levels pushing up their price in the labor market. The way to improve our business climate and increase our appeal to outside businesses is to find a way to lower wages and increase competition among workers for jobs. This is what states like Florida and Texas do, and it's pretty much the goal of Republicans here. They understand that small things grow faster than large things, and by slowing and reducing our economy, ultimately it will grow faster.


John said...

I am not sure where anyone is asking to LOWER wages... The only people I see talking wages are those who want to legislate the raising of them, instead of attracting the jobs that pay more.

The article from what I can tell was about reducing the government mandated burden of operating businesses in MN. Be it the taxes or the law that forces people to join Unions and pay dues.

MN Liberals and Unions keep wanting to see businesses as the enemy to be forced into something, and our least skilled and academically capable citizens are paying for it.
HP Worst Cities for Black People

Anonymous said...

I am not sure where anyone is asking to LOWER wages.

Wages are hard to lower. They are "sticky" in economic terms. But certainly strategies exist to depress wage levels. Business do move from high wage low unemployment states to low wage high unemployment states and countries. The argument that we should be more "attractive" is basically and argument for impoverishing working people.

Note that while Minnesota admittedly has a horrific business climate, it's economy is pretty good. And there is little evidence to the effect that making Minnesota a better place to do business would improve the overall economy.


John said...

You forgot a few of other ways in which wages can be forced down.

- The raising of taxes reduces take home pay. Sin, sales and gas taxes especially hit the low income folks.

- Government encouraging more low knowledge / low skill refugees to settle here if they are not promoting the addition of those kind of jobs.

- Public schools who fail to prepare inner city kids adequately for higher paying professions.

- Not deporting illegal workers.

- Government discouraging companies with those types of jobs from staying or coming here.

And while I agree the MN economy is pretty good for people like me, the article above indicates it is not very good for minorities.

Well it is good that we got Amazon. Though it is in Shakopee.

It looks like the Baxter Intl deal hit a snag.

And Shutterfly in Shakopee is still working on it.

John said...

It is interesting that none of these are in Mpls or St Paul where they really need some good employers. Of course their government's / citizens did get some stadiums, higher sales taxes and are pushing to legislate higher wages... Which should be great for towns like Shakopee and Brooklyn Park.

John said...

By the way in case you didn't peruse that link...

"One of the largest metropolitan areas in the country, the Minneapolis-St. Paul metro area is home to nearly 3.5 million people. It is also one of the worst cities for black Americans. The disparity between the median household incomes of white and black residents is especially stark. The typical white household earns about $73,700 annually, one of the highest incomes in the country. The typical area black household, meanwhile, earns just under $28,000 annually. Low wages often come with high unemployment rates. While only 3.9% of all Twin City residents are unemployed, one of the lowest figures in the country, the unemployment rate among the city’s black residents is 12.8%."

About 20% of the area’s black residents have at least a bachelor’s degree, roughly in line with the corresponding national rate. Still, more than 35% of the area’s black population lives in poverty, a significantly higher rate than the 27% of black Americans living below the poverty line."

Sean said...

So, again, we're in the same spot we always are with you. What specific policies, then, would you institute to make Minnesota better for black people?

John said...

#1 Eliminate Teacher tenure and seniority based compensation
#2 Start compensating Teachers based on positional challenge and effectiveness
#3 Put some teeth into the welfare and social work system to ensure that Parent(s) are held accountable for being responsible parents.
#4 Start a State run orphanage if that is what it takes. Half the kids being left behind should be criminal.
#5 Ear mark State funds for more free birth control if possible.
#6 Start offering long term tax subsidies to encourage some large manufacturers / assemblers to Mpls/St Paul. The Democrats can find BILLIONs of dollars for office buildings, stadiums, college buildings, etc. I think they can find a way to let a business move here and not pay taxes for quite awhile.
#7 Pass "Right to Work". The only people who really benefit are the public employees. And when they get paid more than necessary, we get taxed more than necessary.

John said...

I forgot ...

#8 Deport the ~90,000 illegal aliens that are working for lower wages and keeping a downward pressure on them.

Anonymous said...

You forgot a few of other ways in which wages can be forced down.

There are a number of ways to do it, I suppose. One way is by merging a union with a non union company. A very common way to do it is to decrease benefits or increase their cost to the employee. Many people don't understand that there benefits are just as much a part of their compensation as their paycheck, and when they are cut, that's a pay cut.

But in any event, high wages in Minnesota remain a prime factor in Minnesota's horrific business climate. And until we find an effective way to depress them, Minnesota will lose businesses and business opportunities to poorer states and countries. That's just an economic reality.


John said...

You keep saying the wages are high in MN. And yet that is not correct for many Minnesotans. Per Huffington Post.

"The typical area black household, meanwhile, earns just under $28,000 annually. Low wages often come with high unemployment rates."

"the unemployment rate among the city’s black residents is 12.8%."

"more than 35% of the area’s black population lives in poverty, a significantly higher rate than the 27% of black Americans living below the poverty line"

John said...

As for benefits, when their costs increase faster than inflation...

Who should absorb that cost, the workplace or the employee?

That is a good question.

Anonymous said...

You keep saying the wages are high in MN. And yet that is not correct for many Minnesotans.

We just don't have the high level of grinding poverty so beneficial to the business climates of the high growth states Republicans want to emulate.

"more than 35% of the area’s black population lives in poverty, a significantly higher rate than the 27% of black Americans living below the poverty line"

Saying unemployment is low isn't the same thing as saying everyone has a job.


John said...

Hiram, Keep those blinders on, the reality may scare you.

The reality seems to be that Democrats in MN are just fine keeping a dependent voter base that they can tempt with freebies from the government.

I mean if everyone had good jobs and money, why would anyone support the Democratic big government platform.

By the way, the companies I have been noting pay pretty well. And definitely better than Jimmy John's etc.

John said...

And here is Ford

jerrye92002 said...

I think we're losing sight of the message and quibbling over statistics. The State is not doing as well as it could or should economically. Some people are fleeing the high taxes for lower tax states. High taxes and regulation generally create less interest in doing business here and "quality of life" doesn't count that much in that. Besides, government spending does little to improve quality of life; it certainly doesn't create that quality of education for which we are so proud and the "highly educated workforce" that was once our attraction for business.

In simple terms, whatever the exact measure of our economic failures, there are government policies here that are either not productive or even counterproductive of economic progress and growth. The status-quo, business-as-usual politics is no longer acceptable.

Anonymous said...

The State is not doing as well as it could or should economically.

I am sure it isn't. But growth statistics hardly prove that definitively. To get good growth numbers you have to start from a lower base. Trees that have already grown to the sky don't have great growth numbers even if they are quite healthy.

Folks do flee Minnesota high taxes. But what they often find is that the states they move to have just as high a tax burden, it's just assessed in different ways. And they also find that despite years and years of excellent growth, somehow those states remain chronically poorer. I spend some time in Florida. Despite it's marvelous business climate, despite it's incredible growth, the people who actually live there remain poor, without ever much prospect of improvement in their economic lives. In so many different ways, that's the economic environment Republicans want to import here, without any understanding at all the terrible price Floridians pay for the wonderful business environment.


John said...

I think you could write that about the minority folk who live in the Twin Cities according to HP article. So where are all our taxes going?
- Public employees?
- Welfare instead of getting them good educations and jobs?

"the people who actually live there remain poor, without ever much prospect of improvement in their economic lives."

jerrye92002 said...

Good question, and there is a nice "statistical" way to look at it. Go back 50 years, and calculate what the State budget would be if it had just kept pace with inflation and population growth. What you find is that the current budget is TEN TIMES what it would need to be to provide that same level of service. So what are all of the wonderful "quality of life" goodies that we now get? I'm not seeing them.

By the way, when I moved here from delightful Mississippi, they gave me a 20% "cost of living" increase. Not sure it was quite enough. Comparing incomes doesn't compare prosperity.

John said...

Been here done this... It is not 10 times...

I agree... It is expensive to live in MN.

jerrye92002 said...

What does your math say the ratio is? Just from memory, the current budget is $38 billion and the "keep up" number was $3.5 billion.

And yes, in MN we have to pay for snowplows and more to heat our homes (though we insulate better). We have sports stadiums to pay for. What else justifies the tremendous cost? I passed up a job in New York because of the cost of living there, and I'm still failing to see much of a difference worth paying for here.

John said...

MMB History
MN Population
CPI History

CPI 29.3
General Fund $528,653
Total Budget $1,048,992
MN Population 3,413,864

CPI 233.7
General Fund $39,587,385
Total Budget $71,288,772
MN Population 5,489,594

1960 General fund in 2015 dollars / population
6,780,408 5.84 times

1960 Total fund in 2015 dollars / population
13,454,181 5.30 times

John said...

I think most of this 5+ times increase came from Medicare, Medicaid, Welfare, Special Education Requirements, Welfare, etc.

MN HHS Report

As US Gov Spend says.. "For FY 2016, the three biggest state government programs are health care, education, and pensions."

jerrye92002 said...

I see the discrepancy. You did it by total change; I did it year-by-year. And is 5.3 times really something to crow about?

Yes, you are probably correct, it is the entitlement programs, plus education, which account for the difference, but what has all that spending "bought" for us? Education today is no better (not having the data in front of me, but it seems obvious) than it was, except it is way more expensive. We have a huge number of people living on the dole in one fashion/degree or the other while returning little or no productive labor. We have government paying for health care while trying to control quality, cost and availability, when it is logically impossible to control more than two. As a result, our "system" suffers in terms of all three and we would be better off if government did NOT spend that money as they do. That Minnesota spends less efficiently than some other states on these things is what matters here. It is NOT a benefit to the state to be brazenly spendthrift.

R-Five said...

Indexing by population is suspect, as many costs like highways are by the acre.

jerrye92002 said...

Yet spending is by whim. The number of acres used by SWLRT is trivial compared to the cost, yet that's where the money goes. We could fix all the roads in the State for that kind of money. Where are simple things like cost-benefit analysis or return on investment or even "greatest good for the greatest number"?

John said...

I think the number and quality of the roads have likely increased more than the 5/3rds by which the population has. We put so many more miles on and the size/weight of the trucks seems substantially more.

jerrye92002 said...

OK, add a "special" amount of spending for roads and bridges not related to population or inflation. Now you are looking at, what, a 9X increase rather than 10X? Or to use your numbers, 4.8X instead of 5.3X? Government does FAR more than build roads. Had they stuck to that we wouldn't have this problem.

John said...

I don't disagree. Look at the Chart

Healthcare, Pensions and Welfare making up 60% of the MN budget is incredible.

And yet how many of us want Mom and Dad to move in with us?

I am thinking most Americans are happy that the State is caring for Mom and Dad in their elder years.

John said...

Now the 18% for Education is somewhat interesting. Of course Education MN is thankfully that the cost per older Teacher is as high as it is... Not sure the tax payers are happy that we

- don't get more Teachers for the money
- don't pay Teachers based on difficulty / responsibility of the position, and the Teacher's performance.
- or get the same questionable results for less money

jerrye92002 said...

I don't think we're happy that "Uncle Sugar" is taking care of Mom and Dad; I think we've been told that it is not our responsibility and that our politicians will do it "fairly" and of course efficiently and compassionately, all impossibilities and canards.

Education also suffers from the liberal belief that government can override the laws of human nature and require reality to be what they want it to be rather than what it is.

John said...

I am sorry, I disagree. I think the American Modern Family is made up of generations who strive to be independent of one another. Thankfully my Parents are financially set because though I love them... There is no way that they are coming to live with me.

I will happily check them into a kindly assisted living center when it becomes necessary, just as they did with my Grand Mothers. Fortunately for my Grand Fathers, both of them dropped dead before that step was required.

Personally I think Liberals and Conservatives can be equally delusional. Somehow the Conservatives think K-12 schools can make up for poor / irresponsible Parenting. Even though the school only has the children for ~16,000 waking hours, and the Parents/Society have them for ~92,000 waking hrs. And the school has almost no access to the kids for the first 5 years which are most important.

jerrye92002 said...

There is a vast difference between living apart from your parents (on either end of that relationship) by choice and having the government subsidize that choice. If you can afford to put your parents in assisted living, or if they can afford it themselves, great wonderful. If you can't, why take from me so that you can?

Nice to see, however, that you believe all people "strive" to be self-sufficient, rather than the notion that some simply cannot succeed because of their demographic.

And I simply have to ask: Why, since the public schools are doing such a bang-up good job with K-12, wold you entrust them with the kids even earlier? Already there is no evidence that Head Start kids do any better than kids without it.

John said...

"generations who strive to be independent of one another" and "all people "strive" to be self-sufficient" are very different things.

In our society, parents helping adult children and children helping adult parents comes with a lot of angst for many. That is why many seem happier getting help from Uncle Sam. The help does not come with any lectures, power plays, guilt, shame, etc.

As for why should society pay for the care of the elderly poor, and others... That is what our society apparently agreed to.

Now as for kids, it is the people who have them the 92,000 hrs that are the vast majority of the problem... Whatever we can do to decrease that number and bring up the 16,000 is bound to help. Especially during the first 5 years.

Regarding Headstart, it is unlikely the change in total hours was too small to overcome the poor home and social influences for many.

jerrye92002 said...

Of course many seem happier "getting help from Uncle Sam" or "Uncle Sugar." It's completely an abdication of your family and personal responsibility and it's morally corrupt. It OUGHT to be shameful and only accepted with no real alternative. If you're badly ill and can't work, and your parents are gone so you can't live in their basement, maybe somebody-- preferably private charity-- should help you.

The whole idea of Head Start was to educate around those demographic handicaps. It has been a total waste of the billions spent on it. To turn around and suggest more of the same does not seem reasonable. Now if you want to suggest pre-school vouchers for PRIVATE schools, which DO work, or vouchers for K-12 kids to attend private or public schools who adapt to their students with longer days, more tutoring, better discipline, whatever, I'm all for it. Just blaming the parents and offering no solutions doesn't solve the problem. It will be interesting to see if Trump elaborates on his promise to the black community about "great education" as the "civil rights issue of our time." Wonder if he could talk Jeb Bush into Secretary of Education?