Category Archives: Economy

Listen to CEOs on reducing deficit

Republican members of Congress should listen to leaders of some of our country’s largest businesses on what’s needed to reduce the federal deficit. CEOs from more than 80 major U.S. companies – including Microsoft, AT&T, General Electric and Dow Chemical Co. – are urging Congress to raise taxes and cut spending, including entitlements. The group supports the proposal by the federal deficit-reduction commission that called for about $3 in spending cuts for every $1 in tax increases. But nearly every Republican member of Congress has pledged to never, ever raise taxes, no matter what. According to Grover Norquist’s group, Americans for Tax Reform, every member of Kansas’ congressional delegation except Rep. Kevin Yoder, R-Overland Park, has pledged to “oppose any and all efforts to increase the marginal income-tax rates for individuals and/or businesses.”

‘Fiscal cliff’ already costing jobs

Concern about the “fiscal cliff” already has wiped out nearly 1 million jobs this year, and if Congress fails to act it could result in nearly 6 million jobs lost through 2014, according to a new report by the National Association of Manufacturers. “Everyone is blaming everyone else as the country grinds to a halt,” one manufacturing company executive told the Washington Post. “I don’t think the political leadership in this country has an understanding of how long it could take to turn this boat around.”

Poverty rate highest among the youngest Kansans

“Poverty among children ages 4 and younger was higher than among other age groups,” according to the 2012 Kansas Economic Report by the Kansas Department of Labor. Kansans in the youngest age group had a poverty rate of 22.1 percent, while the poverty rate for Kansans of all ages is 13.5 percent. Shannon Cotsoradis, president of Kansas Action for Children, told the Topeka Capital-Journal that higher poverty among very young children is especially troubling because “we know that’s the most critical period for child brain development.”

Obama gets boost with new unemployment numbers

President Obama got some needed good news Friday after his flat and ineffective debate performance Wednesday. The U.S. jobless rate fell below 8 percent, declining from 8.1 to 7.8 percent. Republicans responded that 7.8 percent isn’t good enough. “This is not what a real recovery looks like,” Mitt Romney said in a statement.

Political rhetoric doesn’t match budget realities

Neither presidential candidate is being honest about the federal deficit and debt, columnist Robert Samuelson wrote. President Obama largely ignores the need for entitlement reform, instead implying that raising taxes on the rich will solve most of the problem. Though Mitt Romney is talking about the need to reform Medicare, his call for cutting taxes ignores the reality that the government can’t balance its budget through spending cuts alone. “What defines this campaign, in part,” Samuelson wrote, “is a yawning gap between the political rhetoric and the country’s budget problems.”

State revenue, unemployment news improving

It was encouraging that state tax collections in September were $28 million more than expected. The August receipts had come in $14.9 million less than anticipated, putting the state in a budget hole even before Gov. Sam Brownback’s tax cuts kick in. The unemployment rate is also improving slightly. The seasonally adjusted unemployment rate for August was 6.2 percent, down from 6.3 percent in July and 6.7 percent in August 2011. However, part of the unemployment improvement was due to a decline of about 5,000 people in the Kansas labor force (most of whom were older than 55).

Bair still speaking out about big banks, regulators

Kansas native Sheila Bair stood out during her five-year term as chairwoman of the Federal Deposit Insurance Corp. for her early warnings about high-risk lending and her willingness to take on the big banks. She is still speaking out in her new book, “Bull by the Horns,” which was released Tuesday. Bair, who grew up in Independence and graduated from the University of Kansas, blasts bankers she blames for the crisis and criticizes Treasury Secretary Timothy Geithner for being an apologist for Wall Street and opposing financial reforms, the New York Times reported.

Pro-con on Federal Reserve’s latest ‘monetary easing’

If the economy falters from here on out, it will be difficult to blame the Federal Reserve. Ben Bernanke, the Fed chairman, and all but one of the other members of the Fed policy committee, took decisive steps on Thursday to spur the economy, pledging to buy $85 billion worth of assets each month until the end of the year and to continue pumping money into the economy until the job market improves “substantially.” The open-ended nature of the plan and its linkage to jobs are welcome changes from previous interventions. Will the latest approach work? No one knows for sure because each new round of strong monetary easing is to some degree experimental. What is known is that fiscal policymakers – that is, Congress – have failed to step forward with stimulative policies, largely because Republicans have refused to even consider measures to hire teachers, rebuild schools and otherwise create jobs. The economy needs more help than the Fed can provide. But the Fed is to be applauded for doing what it can. – New York Times

Chairman Ben Bernanke and his music men at the Fed’s Open Market Committee put on their party hats Thursday and unleashed an unlimited program of monetary easing. The move exceeded even Wall Street’s expectations, but whether it will help the real economy in the long term is doubtful. This is the Fed’s third round of quantitative easing (QE3) since the 2008 panic, and the difference this time is that Ben is unbounded. The Fed said it will keep interest rates at near-zero “at least through mid-2015,” which is six months longer than its previous vow. The bigger news is that the Fed announced another round of asset purchases – only this time as far as the eye can see. Bernanke forswore any partisan motives on Thursday, and we’ll give him the benefit of the personal doubt. But by goosing stock prices, and thus lifting the short-term economic mood, the Fed has surely provided President Obama an in-kind re-election contribution. The irony is that, with this historic and open-ended easing, Bernanke is also tacitly admitting how lousy the Obama-Bernanke economy really is. – Wall Street Journal

Koch versus ‘corporate cronyism’

Charles G. Koch, chairman and CEO of Wichita-based Koch Industries, penned a Monday commentary in the Wall Street Journal headlined “Corporate Cronyism Harms America” pointing to such government policies as “affordable housing” quotas, the Community Reinvestment Act and the “Federal Reserve’s artificial, below-market interest-rate policy” as causes of “the dreadful condition of our economy.” Koch wrote: “Far too many businesses have been all too eager to lobby for maintaining and increasing subsidies and mandates paid by taxpayers and consumers. This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.” Koch acknowledged that some of the energy subsidies and mandates benefit Koch Industries but called for an end to such “distorting” and “corrupting” policies, concluding: “If America re-establishes the proper role of business in society, all kinds of benefits will accrue. Our economy will rebound. Our liberties will be restored. And when President Obama tells an entrepreneur ‘You didn’t build that,’ everyone will know better.”

What grade should Obama get on economy?

While acknowledging that presidents have limited influence on the economy, Washington Post columnist Robert Samuelson gave President Obama a C-plus on his handling of the economy. He said Obama deserved an A-minus for his first six months in office, when he and Congress worked to keep the economy from going over the cliff. But for Obama’s remaining time in office, Samuelson gave him a C-minus or D. He faulted Obama for shifting focus to health care reform, which Samuelson said fanned policy uncertainty and undermined recovery. “His mistake was assuming he could pursue his political agenda without compromising the recovery,” Samuelson wrote.

NetApp expansion boosts Wichta’s spirit

Beaten down by all the aircraft layoffs, Wichita needed some good economic news. And it got it Thursday with NetApp’s announcement that it plans to add 400 jobs at its Wichita facility. These are good-paying jobs – averaging $73,000 a year – that will help diversify Wichita’s economy. Congratulations to local and state economic development officials for helping make this expansion happen, and thanks to NetApp for believing in Wichita. We needed the boost.

Nation’s fiscal gap is huge and growing

The nation’s fiscal gap is much bigger than the official deficit and debt. “The fiscal gap is the present value difference between projected future spending and revenue,” economist Laurence Kotlikoff and columnist Scott Burns wrote. It includes both “official” and “unofficial” spending commitments, which is a more realistic projection of spending. According to their calculations using Congressional Budget Office forecasts, that fiscal gap is now $222 trillion. And growing fast.

Arts are an economic driver for states

Gov. Sam Brownback’s reversal on arts funding was highlighted in a article on how states are recognizing the economic benefit of the arts. Brownback vetoed state funding last year, which also caused the state to lose about $1.2 million in federal and regional arts grants. But this past session, he supported the creation of the Creative Arts Industries Commission. Nationwide, states increased funding an average of 8.8 percent this fiscal year, according to estimates by the National Assembly of State Arts Agencies. Michigan’s state budget director called his state’s large increase in arts funding an investment in the future. “In order to have a robust economic climate you’ve got to have a robust quality of life, and the arts are a big part of that,” John Nixon said. But the article noted that Kansas likely will miss out again this year on federal and regional arts grants, and that some local organizations, including the Junction City Arts Council, won’t survive the wait for funding.

‘Taxmageddon’ would hit Kansas, nation hard

How big would the tax increase be if the Bush tax cuts expire on Jan. 1, 2013? “The increased tax payments of all the families in Kansas’ 4th District put together totals a staggering $1 billion, $4.2 billion from all Kansans, and $494 billion nationwide,” wrote Rep. Mike Pompeo, R-Wichita. “The tax increase would target Kansas families, low-income workers and retirees – and it would be the largest tax hike our state has ever had to endure.”

Pro-con: Should online retailers collect sales tax?

Retailers compete with one another every day on price, service, convenience and selection. But under the current system, the law gives remote sellers a singular advantage that brick-and-mortar stores can’t match because they aren’t required to collect sales tax. As stores have lost business, communities have lost much-needed jobs. In Ohio, for example, a recent study found that leveling the playing field for local retailers could add 15,000 jobs to the state’s economy. Forcing online retailers to collect sales tax also would provide revenue for cash-strapped state and local governments – more than $23 billion this year nationally, according to the National Conference of State Legislatures. In the Senate, Democrats and Republicans sponsored a bill called the Marketplace Fairness Act that would require online retailers to comply with state sales-tax laws. To avoid burdening smaller merchants with compliance costs, the bill exempts online retailers with less than $500,000 in annual sales. In other words, casual sellers just looking to make a few extra bucks on eBay would have nothing to fear. During this time of economic challenge, Main Street businesses across America already have paid their fair share. Now online retailers should, too. – Matthew Shay, National Retail Federation

There is no “sales-tax exemption” for out-of-state vendors. State and local sales taxes are owed by consumers, not producers. If the good or service is provided by an in-state firm, that firm must collect the applicable sales tax from the consumer. If the stuff comes from a “remote” seller that has no contact with the consumer’s state, the sale is not “tax-free”: The consumer owes a “use tax” equivalent to the local sales tax. However, state and local governments would rather not trouble their own citizens with enforcing that rule. Thus they demand a federal law that would allow them to impose collection and remittance obligations on out-of-state sellers whose goods or services happen to be demanded in, and therefore end up in, the local jurisdiction. What we have here is not a tax or equity problem but an enforcement problem. And no one, including the state officials and federal legislators who yelp about “fairness,” seriously believes that problem warrants a central solution. – Michael S. Greve, American Enterprise Institute

Kansas should be hard to miss at Farnborough

Good for Gov. Sam Brownback and Commerce Secretary Pat George for planning to join representatives of the Greater Wichita Economic Development Coalition in promoting Kansas-made aircraft at the Farnborough International Airshow in England Monday through July 15. Wichita’s aircraft makers are Kansas’ biggest exporter, representing more than 18 percent of all exports from the state. The bigger and more prominent the presence of Wichita’s planemakers at such an international air show, the louder the message will be about how the Air Capital of the World can serve the world marketplace for aircraft.

Private-sector comment could cost Obama

President Obama’s comment last week that “the private sector is doing fine” could be costly in the coming election. Though Obama quickly tried to explain what he really meant to say, the comment is manna for Republicans eager to portray Obama as out of touch. Chris Cillizza of the Washington Post noted: “The problem for Obama is that his remark plays directly into the story that Republicans are trying to tell about him – that he is a big-government liberal who thinks the answer to all problems is expanding the federal bureaucracy and who lacks even a basic understanding of how the private sector works.”

A Romney-Bair ticket?

If Mitt Romney wants a running mate to counter the impression that his interests mirror those of a financial sector “that has run roughshod over the nation and practically brought the nation’s economy to its knees,” he should pick former Federal Deposit Insurance Corp. Chairwoman Sheila Bair (in photo), argued Huffington Post blogger Raymond J. Learsy. He wrote of the native Kansan: “Bair, a moderate Republican and holdover appointee from the Bush administration, fought unstintingly against the crony capitalism that had overtaken our government.” Most recently, Bair argued in a Fortune commentary that JPMorgan Chase is too big to manage, let alone regulate, and that CEO Jamie Dimon should take steps to downsize. “The best way for Dimon to provide a better return to his investors is to recognize that his bank is worth more in smaller, easier-to-manage pieces,” Bair wrote.

Racial divide on which candidate would help middle class

Middle-class white voters who are struggling financially favor GOP presidential candidate Mitt Romney over President Obama by 58 to 32 percent, according to a new Washington Post-ABC News poll. Middle-class nonwhite voters prefer Obama by a better than 3-1 majority. Among all voters, 50 percent think that Obama would do more to advance the economic interests of middle-class Americans, compared with 44 percent who think Romney would do more. Of those surveyed, 68 percent think Romney would do more to advance the interests of the wealthy.

South Wichita won with Southfork vote

It was a long time in coming, but the neglected south side of Wichita won big with Wednesday’s 3-2 vote by the Sedgwick County Commission to support a tax-increment financing district for developer Jay Maxwell’s Southfork project. TIF districts carry risk and need to be carefully vetted. But Southfork passed muster at the city and county governments for a reason – it will transform 72 acres near I-135 and 47th Street South, including land now in a floodplain, and put a mix of retail and office space, hotels and restaurants in a part of town overdue for economic development.

Things looking up for Cessna

It’s good news for Wichita and its aviation workforce that Cessna Aircraft Co. is recalling or hiring about 150 employees and increasing its sales force. Though Cessna’s hiring won’t offset the latest 350 layoffs at Hawker Beechcraft, it is one welcome indicator that the market for general aviation is showing signs of renewed life. Cessna also has seen recent upticks in orders, deliveries and revenue, helping boost owner Textron in potential investors’ eyes.

Officials quick to reaffirm safety of beef

The state’s political leaders were quick to reaffirm the safety of beef after the announcement this week that mad cow disease was discovered in a dead dairy cow in California. No meat from the cow was ever headed for the food supply, and the disease isn’t transmitted through milk, experts say. Sen. Pat Roberts, R-Kan., issued a joint statement with Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., saying the fact “that we’re hearing about this discovery and that there was never any threat to consumers in this case shows that the mechanisms in place for protecting our food supply worked as intended.” Sen. Jerry Moran, R-Kan., and the state’s four U.S. representatives also said in a statement that the announcement “reaffirms the fact that our food-safety system works.” Gov. Sam Brownback said Tuesday that consumers should remain confident that beef and milk in Kansas are safe, adding that he “had beef for lunch.”

Economy remains weak spot for Obama

President Obama’s overall job approval rating is back to 50 percent, according to a Washington Post/ABC News poll. And he has an 8 percentage point lead over Mitt Romney. But those polled said that Romney would do a better job with the economy and the budget deficit. Obama also got low marks for his handling of gas prices, though a majority blamed other countries and U.S. oil companies for the high prices. Romney’s biggest challenges are with women and with likability (Obama leads Romney on likability by 38 points).

Property taxes are reason for poor ranking, not income taxes

The first speaker at Wednesday’s economic development conference in Wichita, sponsored by the Kansas Policy Institute, discussed how Kansas is the 47th best state to run a mature business and 48th for starting a new company, according to a recent Tax Foundation study. But Kansas ranked poorly in that study because it has high property and sales taxes, not because of its income taxes. Gov. Sam Brownback’s tax plan would worsen this disadvantage by making permanent the state’s temporary sales-tax increase. And his school-finance plan would lift the lid on local property taxes. It’s also worth noting that Texas, which Brownback and others point to as the model for Kansas, ranked 42nd for new businesses.

Pro-con: Should Congress raise minimum wage?

There are numerous ways to address the issue of economic inequality – an issue that has gained traction as the Occupy movement has spread beyond Wall Street. I believe we can do something to raise the wages of our lowest-paid workers right now. I recently saw a chart that demonstrates what’s been going on in the economy: The rich are getting richer, and the rest of us are getting poorer. It showed that the ratio of CEO pay to worker pay was 42-to-1 in 1980 – with the average CEO making $1.6 million. That ratio climbed to 107-to-1 in 1990 – with the average CEO making $3.3 million. By 2010 that ratio had soared to 325-to-1 – with the average CEO making $10.8 million. In 1968, the federal minimum wage stood at $1.60 an hour. If workers were earning the same amount in today’s dollars, adjusting for inflation, they would be paid more than $10 per hour, not the current $7.25 per hour. During that same time, median household income has risen roughly 14 percent while the value of the minimum wage has fallen by 30 percent. The solution is obvious: Congress should restore the minimum wage to its historic purchasing power by raising it to $10 per hour. It would enable low-wage employees to be rewarded for their hard work. It also would help boost the economy by getting income into the hands of those most likely to spend it, thereby creating additional demand that businesses sorely need during this shaky economic recovery. – Don Kusler, Americans for Democratic Action

When economic times are tough, it’s tempting to want to push for an increase in the minimum wage. Supporters see it as giving the deserving poor a badly needed raise. If we only mandate that employers raise the pay floor for their employees, those who earn the least will see a nice pay bump. And if there were no unintended consequences from government-mandated minimum wages, perhaps it would be a fine idea. But there are harmful knock-on effects that hurt some of the economy’s most vulnerable participants: young workers and those with few skills. Minimum-wage laws do not help reduce the number of families living at the poverty line. In fact, the minimum wage may harm low-income families by reducing the number of jobs available for which they are qualified. Given that difficult labor-market picture, it’s a mistake to enact any regulations that make it harder for employers to hire. – Nick Schulz, American Enterprise Institute