Monday, October 17, 2011

Why are Civilian Flaggers not saving the state money?

A Cape Cod Times story runs under the headline "Civilian flaggers not a money saver" with some important points

1. "The $1.8 million contract ... calls for the company to provide flaggers at a rate of $49 per hour."
2. "The state pays a Sandwich police officer working the same detail $41 per hour"

This would lead a typical person, and hopefully a reporter even more so, to question why are less trained flaggers paid more then a police officer? The article mentions state prevailing wage laws in passing, but never actually considers the question.

As we stated in a 2008 report, prevailing wage calculations are methodologically incorrect and exceed BLS surveys of actual wage rates. Massachusetts calculations suffer similar bias in their methodology. If the state actually wants saving from flaggers they would not legally require them to be paid a minimum wage of $49.

Friday, August 19, 2011

BHI’s response to TP’s Climate Progress blogger Michael Conathan’s critique of NJ wind farm study

-- This post was written by Paul Bachman, Director of Research, Beacon Hill Institute, August 19, 2011.

On TP's Climate Progress blog, Michael Conathan, claims that Beacon Hill Institute's recent cost-benefit analyses of offshore wind energy in New Jersey are slanted. Conathan alleges that the BHI study "misses the mark on both sides of the ledger by dramatically overstating the costs and underestimating the economic benefits of offshore wind."

It is actually Mr. Conathan that "misses the mark" in his critique of the BHI study. Mr. Conathan makes baseless claims, reports only partial data and relies on irrelevant studies with no economic value or relevance to offshore wind power in New Jersey. We address his individual critiques below.

Mr. Conathan: "The study dramatically underestimates the economic savings realized from the environmental benefits by assuming a static price for the valuation of reduction of greenhouse gasses - which will inevitably rise over time. "

BHI response: Mr. Conathan bases his claim on speculative assumptions about the future regulations of greenhouse gas emissions and other variables. He assumes that the U.S. government will impose a cap-and-trade system, a carbon tax, or a restrictive E.P.A. regulatory regime. This action by the federal government would raise the cost of greenhouse emissions and in turn the price of coal and other fossil fuels, while at the same time raising the benefits of wind power. However, these greenhouse gas regulations are not even a remote possibility in the current political and economic environment.

Let us take a look at the recent history of CO2 prices over time. The IntercontinentalExchange INC. which runs the Chicago Climate Exchange and Chicago Climate Futures Exchange has decided to shut both down due to a lack of legislative interest. "The U.S. has not enacted carbon cap-and-trade legislation and changes to the EPA acid rain program have reduced trading activity," ICE said in its notice. "Accordingly, volumes are down substantially and the exchange is operating at a loss." It appears that IntercontinentalExchange INC. does not share Mr. Conathan's view that the price of greenhouse gas emissions will inevitably rise over time.

The exchange also lists prices for New Jersey RGGI futures contracts. On June 30, 2011 the price was $2.02 per metric ton for November 2016 delivery and on May 30, 2011 the price was $1.93 per metric ton. In our study we used a real price of $2.04 in 2011 dollars. Therefore, our price is well within the range of futures prices listed at that time. Moreover, if we inflate our current price using a 3.5% annual rate, our $2.04 2001 real price translates into a nominal price of $2.78 in 2020 and $3.92 in 2030. We, in fact, do account for his inevitable price increase over time.

Mr. Conathan: By BHI applies an absurdly high discount rate of 10 percent to the benefits when most economic studies use rates of 3-5 percent. The discount rate mistake alone could lead to underestimating the benefits of offshore wind by as much as 50 percent.

BHI Response: First, Mr. Conathan makes the mistake of comparing our 10 percent nominal discount rate with 3-5 percent real, or inflation-adjusted, discount rates. Using the same 3.5 percent inflation rate assumption as in the previous example would translate our nominal rate into a real discount rate 6.5 percent, not far off from his 3-5 percent range. If we use the recent annual CPI increase of 4.2%, our real discount rate becomes would be 5.8%. Moreover, the White house Office of Management and Budget recommend using this discount rate.

While Mr. Conathan rails against us for applying such as high discount rate to the benefits, he is silent about the fact that we apply the same discount rate to the costs of the project. Thus, if we are underestimating the benefits of the project by 50 percent, which we do not, then we would be underestimating the costs also.

Mr. Conathan: BHI also artificially inflates the costs of the project compared to fossil fuel generation by failing to account for the reality that as costs go up, people will reduce their consumption thereby partially offsetting the price increase.

BHI Response: Mr. Conathan is describing what is commonly known as a "rebound effect." It is often used to describe the consumers' behavior after the installation of energy efficiency equipment. For example, as consumers witness their winter heating bill drop after making energy efficiency changes, they respond by turning up the thermostat to a more comfortable temperature, and thus negate some of gains of the efficiency gains. However, Mr. Conathan thinks that there is a free lunch to reducing electricity consumption and fails to recognize the two factors in the wind power case. First, consumers incur a cost to reduce the amount of electricity they would have consumed in the absence of the higher price. Either consumers lose the benefit they derive from that electricity consumed, for example less time on one's IPad, or consumers make an energy efficiency investments to reduce their electricity consumption, which also has a cost of lost opportunity to spend the money elsewhere. Thus, our estimates of the price effects include these costs of the rebound effect and do not need to be adjusted.

Mr. Conathan: "Furthermore, the study estimates the cost of natural gas and coal based on historical prices rather than based on forecasts of future market conditions. While natural gas prices are difficult to predict, experts believe coal prices will rise in the future."

BHI Response: Here again Mr. Conathan believes that his and other "expert" assumption of future prices and regulatory regimes are more valid than ours. Only time will tell who is more accurate. However, what we do know is that forecasting future regulations, supply, demand, costs, prices and other variables is extremely difficult and uncertain, and that includes coal prices. This is why we conduct a sensitivity analysis to test the robustness of our assumptions and provide a range of estimates.

Mr. Conathan: "The BHI study entirely fails to account for the jobs that would be created by the wind farm. Meanwhile, according to a 2009 report by the European Wind Energy Association, the wind energy sector in Europe created more than 60,000 jobs from 2004-2008."

BHI Response: Mr. Conathan is wrong again. We report net jobs, which includes 2,400 jobs created in the construction, manufacturing and related industries. These jobs created are simply swamped by the jobs lost in the other sectors that suffer from the higher electricity costs.

Mr. Conathan cites a report from the European Wind Energy Association, hardy an unbiased source. The purpose of the report is to boast the positive employment effects of the industry. However, as an economic study, it makes nonsensical assertions and fails to look at the economy-wide effects of wind energy that is more expensive and less reliable than conventional energy. Manufacturing and other energy intensive industries facing higher costs can move production to lower cost locations or simply shut down.

For example, the study states that the "additional employment effect of including the higher cost (and higher employment per MW installed) of offshore capacity is estimated at 2,800 jobs…" The report associates higher costs and higher employment requirements with offshore wind with economic benefits. The report associates higher costs and less efficient energy sources with more employment in the wind energy industry. Using this logic, the wind power should not be placed just off the New Jersey coast, but rather in the middle of the ocean because it would create many more jobs to construct and maintain the turbines and transmission lines that are much further away from the energy consumer. This is the same logic that would insist that a canal should be dug with picks and shovels instead of machines.

The report, and Mr. Conathan, fail to note that Denmark has the highest concentration of wind power in Europe and the highest electricity rates in Europe. Moreover, Denmark sells its wind power to Germany during the overnight hours at a very low rate, when the wind is blowing most consistently, and buys conventional electricity back from Germany during the daytime at a much higher rate, when their electricity demand is highest.

Mr. Conathan: Furthermore, the study assigns zero value to increased energy independence and vastly underestimates the reductions in greenhouse gas emissions that New Jersey's targeted 1,100 MW of offshore wind energy would produce.

BHI Response: Mr. Conathan displays his ignorance of the composition of the New Jersey electricity market. As we explain in the report New Jersey gets the vast majority of its electricity supply from domestic sources of coal, natural gas and nuclear power. Oil only provides between 0.5 percent and 1.5 percent of state electricity, and fluctuates depending on oil prices. Moreover, because it is unpredictable and unreliable, wind power cannot provide any of the marginal electricity supply. In other words, wind power operators are at the mercy of the current wind conditions and they cannot control their output to meet changes in electricity demand at any given moment in the day. Therefore, wind power must supply the base load on the grid, which means it would displace domestically supplied coal and natural gas and would have no effect on electricity supplied by oil. Therefore, no foreign oil would be displaced by the wind power.

Contrary to Mr. Conathan's statement that we underestimate the reductions in greenhouse gas emissions the wind power project would produce; the emissions effect is likely negligible for two reasons. First, coal represents 68% of the New Jersey's marginal supply of electricity, so that when the wind suddenly stops blowing at any given moment, coal plants must be cycled up to supply the power lost from the wind plant. The opposite happens when the wind begins to blow again.

Nevertheless, the coal plants cannot be shut down completely when the wind power is operating. That is to say coal power plants are similar to an automobile idling. They are still burning coal and sending some electricity to the grid, but not at an efficient level. When the wind stops blowing the cola plant operator hits the gas petal, if you will, to keep the current electricity supply balanced with the current demand and prevent brownouts and blackouts. While the coal plants are idling, so to speak, they are running at less-than-peak efficiency and produce more greenhouse gas emissions than if they were running at peak efficiency while online. This shifting back and forth between idling coal plant and intermittent wind turbine reduces the emission benefit from wind power.

In addition, the construction of a 1,000 MW wind plant takes much more raw materials, such as steel concrete, aluminum, plastics, transmission wires and land, or in this case water, than a conventional power plant. The production of all these materials also produces greenhouse gas emissions and when we accounted for these greenhouse gas emissions, the wind advantage erodes even further.

Mr. Conathan: This report isn't BHI's first foray into the admittedly complex world of offshore wind. A 2003 report from BHI on Cape Wind's proposal to build America's first offshore wind farm used similarly deceptive tactics, suggesting the project could cost the region $64 million to $134 million in tourism dollars. These findings were included despite polls that showed less than 3 percent of potential tourists would change their plans if the farm were built and despite ample studies of actual tourists' behavior in areas proximate to actual wind farms in Europe.

BHI Response: Mr. Conathan must not have read BHI's report on Cape Wind carefully. BHI did, in fact, conduct a statistical survey of tourists that were on the very Cape Cod beaches where the Cape Wind turbines would be visible. The fieldwork for these two surveys was done under contract with, and under the supervision of, David Paleologos, President, DAPA Research, Inc., an experienced pollster and professor at Suffolk University. The attitudes of European tourists on European beaches, cited by Mr. Conathan, are irrelevant to the Cape Wind project.

Mr. Conathan also fails to cite the recent contract between Cape Wind and the utility National Grid that priced its electricity at 19.4 cents per kilowatt hour in 2016, escalating 3.5% per year for 20 years. This is almost double the current electricity rates for Massachusetts.

Offshore wind power is more expensive, unpredictable, less reliable and less efficient than conventional energy sources. These features make wind power costly to electricity consumers, especially businesses in energy intensive industries. This is why wind power was abandoned as a source of reliable electricity at the dawn of the industrial revolution. These inconvenient economic truths force advocates like Mr. Conathan to resort to "deceptive tactics," half- truths and baseless accusations.

Wednesday, August 10, 2011

Re: Hands off my beer

The Alcohol and Beverage Control Commission (ABCC) has reconsidered its requirement that local brewers use locally-grown ingredients. While this is a welcomed step, the episode raises an interesting (read: disappointing) question about how policy is made in Commonwealth.

The ABCC stated that it:
endeavors to support and enhance the agricultural community, ensure the long-term viability of agriculture, and support farms that protect the common good in many ways including maintaining open spaces in communities.
These are honorable goals; supporting a local industry is always nice, and who would not like more open space? But at what cost? This issue is not presented, or so it seems, even considered.

-How much forest land will have to be converted to farm land to grow all these ingredients?
-Is this the most efficient use of this land?
-Would participating in trade with other states allow state farmers to produce a more valuable crop?
-What are the costs to other industries? ie forestry, craft brewing or other types of farmers.
-What is the revenue effect?

There is not an indication that any of these costs were considered. When only the benefits are considered, and touted, incomplete, and often incorrect, policies are proposed.

We encourage that any policy proposal have a thorough and complete Cost Benefit Analysis preformed. I find it troubling that red tape of this sort is implemented without considering the costs.

Friday, August 5, 2011

Hands off my beer

As a home brewing enthusiast (currently drinking an O.E. clone, Oktoberfest in the bottle, and plans for a double brew of a Black and a Tan in the next few weeks) and craft beer drinker, the recent news about licensing changes has confused and concerned me. The Alcoholic Beverages Control Commission plans to make it difficult for craft brewers, unless 50 percent of their grains and hops are grown in state.

While I'm sure there was deep thought, and a detailed Cost Benefit Analysis of the new proposal, I'm unable to find it.

Increasing costs, and implementing barriers to entry, on an emerging industry, which provides the best regional beers in the US (in my expert opinion) in addition to many local jobs is no way to encourage job growth.

Promoting rent seeking in the agriculture industry, does little to encourage axillary industry boosts, such as tourism.

I think of my daily afternoon lesson on my walk home, presented by the
Duckboat Captains the local version of oral history on wheels, 'the Beantown Pub is the only Pub in the world where you can drink a Sam Adams while looking at his grave.'

Helping the local hops industry, in favor of the local craft brewing industry is down right ridiculous. I have seen many policy proposals that use bad logic and reasoning to justify them, but this policy lacks even that low bar (pun intended). It is on par with the Candlemaker's Petition for trade protections from an unfair foreign power, The Sun.

Wednesday, August 3, 2011

Spending cuts? Not quite.

We could expect to receive $39.084 trillion in revenue between 2012 and 2021.
We could expect to spend $46.055 trillion in outlays in the same period, for $6.971 trillion in expanded deficit. Per the CBO

The bill signed yesterday "calls for up to $2.4 trillion in savings over the next decade."

I'm honestly not sure what will happen to revenue projections for the next ten year. Being a two handed economist, on one hand, lower government spending should leave opportunities for a more efficient private sector to step in. On the other hand, given the uncertainty of the of the federal gov't to pay its bills, markets have frowned. (The S&P 500 is down 1.58% in the last five days).

We can expect spending to decease to $43.655 trillion over the next ten years, and assuming that revenue stays constant, an increased deficit of $4.571.

Is an average annual spending of $4.366 trillion really a huge spending cut, as many popular media sources state? As a comparison, in FY2010 the US spent $3.456 trillion, and the ten years leading up to that year averaged $2.614 trillion. Assuming compounded annual inflation of 3 percent, the average is $2.945 trillion.

Not really the killer spending cuts that you've read about? I suppose when the original spending bar is set so far out of the U.S.'s ability to pay, even large cuts don't bring it back in line.

(HT to: Cafe Hayek for many of the sources.)

Monday, July 25, 2011

Where is my money going?

Even for a numbers geek, such as myself, U.S. spending is a hard thing to wrap my head around. Realizing I indebted myself hundreds of thousands of dollars to buy a house was hard enough.

Reviewing state budgets that throw the word 'billion' around is hard to envision, but possible. ie The state spent more then 5,831 of my houses on Debt Service in 2010. (This is harder to envision when the state does not label, or mislabels data. $1,948 billion, really?)

That is why I love what alot of people are doing with graphical representation of information

Does just that, allowing me to see, on average, where my federal tax dollars are going.

A state level one could be very interesting...

Friday, July 22, 2011

A 25% Massachusetts gas tax hike would mean loss of 1,000 private sector jobs

With gas prices falling in Massachusetts, state leaders are thinking about increasing the gas tax. Just how much the Governor and legislature are willing to raise the tax is unclear.

But assume that the legislature approves a new 29 cents per gallon tax (up from 23.5 cents) representing a 25 percent increase (not unlike the last hike to the state sales tax). What would that mean for the state's economy?

Using its State Tax Analysis Modeling Program, the Beacon Hill Institute estimated that a 25 percent increase would not help the Commonwealth's economy as it tries to add jobs.

Compared to a baseline of no gas tax increase, the state would have 1,170 less private sector jobs, while adding 600 public jobs in the first year. Riding the brakes would have consequences. At the margin, less employment means consumers will have less money to spend, so while gas tax revenues increase by $152 million, the state would collect $5 million less in sales tax, not to mention that companies will be selling less. Similarly, with 570 total less full time equivalent jobs, state personal income tax collections would decrease by $8 million.

In total , instead of collecting $152 million more in gas taxes, the state would see a total revenue increase of only $116 million, due to dynamic effects. At the cost of lower employment, income, disposable income and investment, raising the state's gas tax is a bad policy at a bad time.

Tuerck: Support "Cut, Cap and Balance"

Having reviewed the House-passed Cut Cap and Balance Act of 2011, I have reached the conclusion that the Senate should adopt this legislation and send it on to the President. The Act provides the only effective solution to the country’s budget crisis, which is to cap federal spending well below current levels. The provision to cap spending at 19.9% of GDP by 2021 would bring spending back toward its historical norm and prevent the kind of binge spending that we have witnessed over the past two years. This is the only way to prevent a repeat of the misspending that has brought us to this point. I urge Senators Brown and Kerry to vote yes.

David G. Tuerck
Executive Director, The Beacon Hill Institute
Professor and Chairman, Department of Economics
Suffolk University

Thursday, July 21, 2011

BHI on the Sales Tax Holiday proposal

CBS-Boston's Jim Armstrong interviews Paul Bachman on the proposed sales tax holiday for August 2011.

Video Link:

Monday, June 20, 2011

Taming the Amazon with taxes

Internet retailers cite a 1992 U.S. Supreme Court decision involving catalog sales, Quill Corp. v. North Dakota, which ruled that states could require only companies that had a physical presence within the state to act as tax collector.
To get around the ruling, some states are expanding what it means to be physically present. For example, an online retailer hiring a marketing firm or owning a subsidiary inside the state would qualify under definitions adopted in some states.

In February, the Texas comptroller demanded that pay $269 million in back sales taxes because a subsidiary operated a warehouse near Dallas. Amazon is appealing the order.

Last year, New York enacted a law that said Internet retailers' practice of paying commissions to marketing agents based within the state constituted a presence. Arkansas, Colorado, Illinois, Rhode Island and North Carolina quickly followed with similar laws.
Bills are pending in Arizona, California, Florida, Hawaii, Massachusetts, Minnesota and Pennsylvania. Texas lawmakers passed such a measure, but Gov. Rick Perry vetoed it. Now legislators are trying to resurrect the bill by attaching it to a larger budget measure. The matter is now before a conference committee.
California estimates it loses at least $200 million a year in uncollected tax from online sales, $83 million from alone. A bill that has passed the state Legislature would force Seattle-based Amazon and others to collect that tax from California residents.

Amazon, and other big Internet retailers cite the Quill decision as their primary defense against collecting sales taxes, but they also argue that collecting tax in the District of Columbia and the 45 states where a sales tax exists would be extremely complex and expensive.

"There are over 8,000 taxing jurisdictions in the United States," said Jonathan Johnson, president of, which has offices only in Utah. "We think it's wrong that states are trying to cause out-of-state retailers to be their tax collectors."

Monday, June 13, 2011

Has the optimal gas tax been identified?

Mass High Tech's Kyle Alspach
In 2007, a study in the Journal of Economic Literature found that the ideal average gas tax for the U.S. would be $2.10 a gallon At the time, the average tax was 40 cents a gallon — 18.4 cents for federal and 22 cents for state (it’s currently 23.5 cents in Massachusetts).

The $2.10 figure takes into account greenhouse gas emissions, local pollution and oil dependency, along with the costs of congestion and accidents.

To make the tax palatable, economists say the government could cut taxes in other areas — say, the income tax for consumers or corporate taxes for businesses.
The tax trade-off seems like a reasonable idea but revenue-hungry politicians would never take up the offer.

In the rush to move toward a Pigouvian tax model, supporters of higher taxes tend to forget that such excise taxes are regressive. More than they did in the past, low-income workers rely more heavily on jobs in the suburbs and most use cars to get there.

Wednesday, June 8, 2011

BHI releases study on education spending in Massachusetts

The Commonwealth of Massachusetts could cut more than a billion dollars from education spending without measurably affecting the performance of public schools. This is a finding of a study released today by the Beacon Hill Institute and entitled, Why Massachusetts Should Spend Less on Education. Read more.

Complete study is available at

Monday, June 6, 2011

Video: David Tuerck testifies on H.R. 735

Testimony from BHI Executive Director David G. Tuerck begins at approximately 22:00 into this recording.

Text of BHI testimony in PDF is here.

Friday, June 3, 2011

Beacon Hill Institute testifies before U.S. Congress

Full testimony is available at BHI's website

David G. Tuerck
Department of Economics and Beacon Hill Institute
Suffolk University, Boston
June 3, 2011

Testimony Relating to the Government Neutrality in Contracting Act (H.R. 735) Before the Subcommittee on Technology, Information Policy, Intergovernmental Relations and Procurement Reform, Committee on Oversight and Government Reform, U.S. House of Representatives

Chairman Lankford, Members of the Subcommittee, I am Professor and Chairman of Economics and Executive Director of the Beacon Hill Institute at Suffolk University in Boston. I appreciate the opportunity to submit this testimony.

I will direct my comments at “H.R.735, and Project Labor Agreements: Restoring Neutrality to Government Construction Projects.” H.R. 735 effectively nullifies a February 2009 executive order from the Obama Administration “encouraging” federal agencies to consider using PLAs on construction projects costing $25 million or more.

My comments are my own and do not represent the sentiments my employer, Suffolk University. Nor do they represent my support for any organization or private interest that might stand to benefit from the passage of H.R. 735.

I would like to offer my strong support of this measure, subject to just one caveat. The caveat is that “neutrality” falls short of what is called for. What would be better is an outright ban on PLAs of the kind that was in force during the Administration of President George W. Bush, who forbade the use of PLAs on federal construction projects.

This subcommittee already knows how PLAs work. The adoption of a PLA amounts, in effect, to the conferral of monopoly power over the supply of construction labor on a select group of construction unions. The putative reason for adopting a PLA is to assure labor “stability.” But the real reason is to confer monopoly power on a select group of unions and to discourage bids from contractors who use other unions or nonunion labor.

The construction unions use the word “stability” as a euphemism for promising not to cause trouble. But the threat of trouble is mostly an empty one. A genuine worry arises only when an owner uses nonunion labor, in retaliation for which it has to put with antics of the kind for which Boston’s International Brotherhood of Electrical Workers is famous. But Boston building owners are on to the IBEW and are showing increasing willingness to say no to intimidation.

In my written testimony I provide the core argument against PLAs: PLAs are supposed to correct for a problem for which the best correction is simply not to adopt a PLA. The problem is that certain contractors – the PLA-union contractors – are so burdened with collective bargaining agreements that they would have a hard time performing a job on time and on budget, but for the PLA. The adoption of a PLA, however, amounts to a needless rescue operation for the PLA unions and their contractors. The best way to avoid cost overruns and delays is to encourage, not discourage, bids from contractors, whether unionized or not, who are able simply to bypass the collective bargaining agreements that hobble the competitiveness of the PLA-union workers and their contractors.

That’s the crux of it. A ban on PLAs is not an anti-labor measure. I am personally involved in a New York case in which the plaintiff contractor is suing because its union has been excluded from PLAs that are being foisted on the City of New York by a different union organization and a complicit mayor. And, anyway, there is nothing pro-labor about a practice that is aimed at protecting the jobs and wages of 13% of the construction workforce at the expense of the other 87%.

The research entity I direct at Suffolk found that PLAs increase school construction costs in two states by 12% to 18%. Reliable hard estimates of this kind are rare because the disparity between construction projects makes it difficult to get statistically significant results from sample data. Fortunately for policy makers grappling with this question, however, it is possible to dispel the case for PLAs merely by pointing out the fatuous reasoning on which that case is predicated.

Adopting a PLA serves no purpose other than to put the PLA-union fox in charge of the project chicken coop. Fortunately, and as I observe in my written testimony, there is growing recognition even on the part of union-friendly observers that the argument for PLAs, and to mix my metaphors, never held water in the first place.

Monday, May 16, 2011

NABE revises GDP estimates downward

Economy will grow more slowly than expected.
NEW YORK Economists are dialing back their expectations for U.S. economic growth this year.

A survey from the National Association for Business Economics predicts GDP will grow 2.8 percent this year - down from the group's February prediction that it would grow 3.3 percent. Their outlook for consumer spending and the housing market also weakened, in part because they expect oil prices to remain above $100 a barrel through 2012.

In a survey that the NABE releases Monday, a panel of 41 economists also said they "remain highly concerned" about the growing federal deficit, and said that growth in the first three months of the year had been weaker than expected.

The predictions of the economists reflect the jitteriness of a public that is still recovering from the financial crisis and now getting squeezed by rising prices for gas, groceries and other household items. Retailers of all stripes are paying more for the raw materials they need to make and transport their products, such as fuel, cotton and wood pulp, and saying they have no choice but to pass along the price increases to customers.

Read more:

Tuesday, May 3, 2011

State tax collections surge

DOR: "Total tax collections of $16.860 billion are up $1.927 billion or 12.9 percent, $732 million over benchmark" for April.

It's all about the entitlements

Jeffrey Miron explains the very big elephant in the room.

Thursday, March 31, 2011

Google to NE: No Google broadband for you!

Boston won't be getting the Next Big Google Thing, super-fast broadband. Kansas City, Kansas is the search engine giant's pick to deploy the new service. Boston's high-tech savvy wasn't enough apparently.

Bill Oates, the chief information officer for Boston, said last year that Boston would be a strong contender because of the variety of types of use it could offer - from large-scale government housing projects to wealthy townhouses to very tech-savvy businesses. “We think we provide a really good mix for what Google wants,” Oates said at the time.

Google said in its blog that it would be able to begin offering the 1 gigabit-per-second broadband to Kansas City sometime in 2012. By comparison, the average broadband speed in 2009 in United States was 4.8 megabits per second. No details were released on pricing plans or how much of Kansas City would be covered.
That's a big upgrade. Good luck to Kansas City, Kansas. With all that speed they probably won't even see us in the rear view mirror!

Wednesday, March 30, 2011

Massachusetts 10th in the nation in Tax Freedom Day

Massachusetts ranks tenth in the nation in terms of how long its residents must work to pay off the federal, state and local tax man according to the Tax Foundation. Mass taxpayers toil to raise the taxes to pay all governments through April 14, one day before the official federal income tax filing deadline. (Thanks to the holiday Massachusetts taxpayers have until April 19 to file this year).

Overall, American taxpayers will recognize their freedom on April 12.

High-income Connecticut finished first. Its taxpayers will see the light of day on May 2. Mississippi ranked last with a Tax Freedom Day of March 26.

To learn how Tax Freedom Day is calculated visit the Tax Foundation.

Tuesday, March 29, 2011

It seemed like a good idea at the time

A stunning conclusion from the Kauffman Foundation by way of Mass High Tech:
The financial industry’s dizzying growth prior to 2008’s credit crisis may have stifled entrepreneurship by stealing talent that otherwise would have gone to innovative new companies.

That’s the conclusion of a new Kauffman Foundation report, which found that the financial industry recruited scientists, mathematicians, and engineers from graduate schools to create new financial instruments, such as the collateralized debt obligations that led to the financial crisis.

"Their talents have made them well-suited to the design of these complex instruments, in return for which they often make starting salaries five times or more what their salaries would have been had they stayed in their own fields and pursued employment with more tangible societal benefits," the study stated.

"Because these new hires are often the very individuals who otherwise would have comprised the most robust pool of prospective founders of high-growth companies, the financial-services industry’s steady rise has had a cannibalizing effect on entrepreneurship in the U.S. economy," said Paul Kedrosky, the study’s co-author and a Kauffman senior fellow.

At MIT, for example, nearly 25 percent of all graduates went to work in the financial sector in 2006, up from 18 percent in 2003.
File under: "Engineers blow things up."

Full report available at the Kauffman Foundation.

Wednesday, March 16, 2011

Small steps toward progress

Lost the apocalyptic news cycle, a little progress little noticed. "U.S. life expectancy has hit another all-time high, rising to about 78 years and 2 months."

Tuesday, March 15, 2011

Kotkin: "Why North Dakota Is Booming"

Joel Kotkin on North Dakota:
Oil also is the principal reason North Dakota enjoys arguably the best fiscal situation in all the states. With a severance tax on locally produced oil, there's a growing state surplus. Recent estimates put an extra $1 billion in the state's coffers this year, and that's based on a now-low price of $70 a barrel.

North Dakota, however, is no one-note Prairie sheikdom. The state enjoys prodigious coal supplies and has—yes—even moved heavily into wind-generated electricity, now ranking ninth in the country. Thanks to global demand, North Dakota's crop sales are strong, but they are no longer the dominant economic driver—agriculture employs only 7.2% of the state's work force.

Perhaps more surprising, North Dakota is also attracting high-tech. For years many of the state's talented graduates left home, but that brain drain is beginning to reverse. This has been critical to the success of many companies, such as Great Plains Software, which was founded in the 1980s and sold to Microsoft in 2001 for $1.1 billion. The firm has well over 1,000 employees.

The corridor between Grand Forks and Fargo along the Red River (the border between North Dakota and Minnesota) has grown rapidly in the past decade. It now boasts the headquarters of Microsoft Business Systems and firms such as PacketDigital, which makes microelectronics for portable electronic devices and systems. There are also biotech firms such as Aldevron, which manufactures proteins for biomedical research. Between 2002 and 2009, state employment in science, technology, engineering and math-related professions grew over 30%, according to EMSI, an economic modeling firm. This is five times the national average.

While the overall numbers are still small compared to those of bigger states, North Dakota now outperforms the nation in everything from the percentage of college graduates under the age of 45 to per-capita numbers of engineering and science graduates. Median household income in 2009 was $49,450, up from $42,235 in 2000. That 17% increase over the last decade was three times the rate of Massachusetts and more than 10 times that of California.
Here's a case of great minds thinking alike: Last year, North Dakota topped the BHI's Annual State Competitiveness Index with its strong showing in our Government and Fiscal Policy, Infrastructure and Environmental Policy measures.

The complete 2010 State Competitiveness Report is available here.

More than a quarter decline in MA construction since 2007

The Boston Business Journal reports:
The Bay State’s construction sector has shed 34,200 jobs on a seasonally adjusted basis since January 2007, with some of the commonwealth’s largest metropolitan areas having lost more than a quarter of their jobs in that span.

Nationally, 317 of the country’s 337 largest metros shed construction jobs since the downturn commenced, with some markets, particularly in the southwestern portion of the country, contracting by as much as 65 percent.

In Massachusetts, construction firms employed 92,500 people on a seasonally adjusted basis at the end of January, off 27 percent from the 126,700 workers in the sector four years earlier, according to The Associated General Contractors of America.

The Boston-Cambridge-Quincy region reported the state’s largest decline in total jobs lost, falling by 15,100 positions during the period studied. That brought the area’s total construction employment to 43,100 jobs at the end of January, off 26 percent over four years.

On a percentage basis, New Bedford and Peabody tied for the state’s largest decline, sliding 30 percent. New Bedford’s drop included 800 jobs, while Peabody’s affected 1,100 positions.
What will it take to get the industry moving again?

Tuesday, January 18, 2011

The elusive quest for green jobs

Edward L. Glaeser: picks apart the green jobs myth. Key takeaway:
Failed public investments, like the money spent in Devens, reflect the fact that public officials are rarely skilled venture capitalists and that governments pursue many objectives that lead them away from solid investments. It’s easy to see why any governor would be excited about a green-energy manufacturing plant in a less prosperous area of his or her state. But the same forces that made Devens political catnip meant that it was unlikely to be a long-term success.

Friday, January 14, 2011

The BHI record on estimating state tax revenues in Massachusetts

At the December 14 revenue hearing, the Institute was asked by the Joint Ways and Means Committee to provide an accounting of the comparative success of the Beacon Hill Institute (BHI) in predicting tax revenues. This memo is our response to that request.

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