Jobs That Mean Something

In the past several weeks I’ve been getting quite a few campaign emails from Neil Livingstone, who’s running for governor in a crowded Republican field. Livingstone and his running mate, Ryan Zinke, who are usually in high dudgeon about something, were upset last week because they think that Max Baucus, Jon Tester and Brian Schweitzer haven’t done enough to “ensure the continued viability of Malmstrom Air Force Base in Great Falls.” They’re worried that if the United States moves to reduce the size of its nuclear arsenal and eliminate its fleet of intercontinental  missiles, Malmstrom will be in “real jeopardy.”  And they’re fretting about the current proposal by the Pentagon to move the F-15 fighters currently stationed at Malmstrom to California and replace them with C-130 cargo planes. 

Now if you’ve been longing for the day when you no longer have to worry so much about nuclear annihilation, or if you think the Pentagon probably knows best what kinds of planes should be based where, you might wonder what all the fuss is about.  Well, in a word, it’s jobs. Livingstone and Zinke are convinced that reducing or changing Malmstrom’s mission would mean Montana would lose jobs, and they offer some numbers (no source cited) to prove it. Some of the numbers are pretty big and others quite small, but in the end it doesn’t make any difference because, in Livingstone’s words, “The loss of a single job is not acceptable.”

Really?  Does Livingstone really believe that the decision to decommission part of the world’s largest stockpile of nuclear weapons should turn on the loss of a single job? Does he really think that the loss of one job is too high a price to pay to use the nation’s military and fiscal resources more efficiently and effectively?  In his emails, Livingstone promises that when elected he will cut taxes, balance the state budget, and reduce costs.  Does he really think he can do that without cutting a single job?

Well, probably not. Chalk it up to the desperation that comes at the end of a long and not very promising primary campaign.  And understand that what Livingstone is saying is not a lot different from what a lot of other politicians, from both parties, are saying as well.  At times like these, in a recession that we just can’t seem to climb out of, job creation tends to emerge as one of the first, and sometimes the only, things we consider when we’re making decisions about how to manage public resources.  In the process we tend to downplay the other important values at stake in these decisions – after all, it’s jobs that really count – and the result can be that we fail to do right by ourselves.  We forget that it makes a difference what the people with the jobs are producing.

Livingstone may go particularly astray here, but we all do to some degree. In debates about the environment, or natural resource development, or funding education and the arts, or, well, almost anything,  both sides assail each other with claims and counterclaims about jobs gained or lost depending on whether we do one thing or another.  And the fact that human health and quality of life, or climate stability, or civic, social and cultural vitality may be at stake  tends to get lost in the shuffle.

Don’t get me wrong. I shouldn’t have to say this, but just to be on the safe side, I will: jobs and job growth are very, very important. We all want to live in a country where anybody who wants a decent job can find one, and where when a worker does get laid off, it doesn’t take her months to find a new job and get back to work. That’s not the country we have right now. Too many workers are unemployed and too many who have lost jobs stay unemployed for far too long. It’s Americans’ number one concern as we approach the 2012 elections, and they expect government to do something about it.

And government should do something. But the solution lies in firm and effective macroeconomic management. Even Livingstone and Zinke, despite their pledge to be fiscally conservative, argue forcefully  that government can and does  generate job growth through spending.  In fact, almost any kind of spending will do that. But in spending money to stimulate the economy and sustain job growth, we should use our fiscal resources wisely and efficiently.  That means putting people to work in not just any jobs, but in jobs that build a more just, healthy, secure, and prosperous nation.

A Student Loan Driven Education Bubble?

Sen. Art Wittich argues in the May 10 Missoulian that university students will graduate this spring with a mountain of debt because, despite ever increasing state funding, the Board of Regents has tapped into excessive student borrowing to capture new tuition revenue. The Regents apparently used all this money to pay for “esoteric degree” programs and a wasted effort at “being all things to all people.” And students are borrowing so much because the terms on Federally subsidized student loans are so easy (and will continue to be, unless Congressional Republicans are successful in their current attempt to double student loan interest rates). Reminding us of the dreadful specter of imminent financial collapse in Spain and Greece, Wittich asks “Is easy credit for college loans now creating an education bubble?”

Well, Senator, no it isn’t.

As any reasonably well informed legislator should know, over the past 20 years, state support for higher education in Montana failed to keep pace with the combined effect of enrollment growth and inflation. Take a look at this chart, which shows real state support per resident student over the period 1992 to 2012.*

Except during Brian Schweitzer’s first term, real state support fell almost constantly over the period, from $8,185 in 1992 to $5,129 this year, for a net decline of 37%. Given these cuts, the Regents had no choice but to raise tuition to offset the loss of public funding, which went from making up 76% of system revenue to 36% over the same period. In effect, public higher education in Montana was being privatized, which should have tickled Sen. Wittich pink, if only he’d known about it.

The Regents raised tuition largely to make up for lost appropriations, and there’s no evidence to support the notion that they jacked up tuition revenue so they could add unneeded or impractical programs to the University curriculum. On the contrary: Montana now has just about the leanest university system in the country. In 2010, Montana got by with total revenue per student 19% below the national average and only three states - Florida, California and Washington – managed to make do with less.**

Given these limited resources, the University system should receive greater public support and offer a broader and richer curriculum. We owe it to our children not just to train them so they can get jobs in Montana and satisfy the labor force needs of Montana businesses. Rather, we should educate them so that they can compete and prosper anywhere in a rapidly changing world, and contribute creatively to the social, political, cultural and civic life of their communities.

*State support here is expressed in real (2012) dollars and equals ongoing general fund appropriations plus revenue from the six mill levy.  One-time-only appropriations are not included. Figures are from the Office of the Commissioner of Higher Education, Montana University System.

** Revenue here is the total of tuition and state and local appropriations. Figures are from the State Higher Education Executive Officers.

Balanced Budget Blunder

I, and I assume a lot of other state legislators, have been getting a slew of emails lately from an outfit called the Balanced Budget Amendment Taskforce.  What these folks want is for state legislatures around the country to call for a national convention to amend the United States Constitution to require that the Federal budget be balanced.  It takes 34 states to call a convention to amend, and it’s never happened so far, so the Taskforce has its work cut out for it.  And we’d better hope that it falls flat on its face, because requiring the budget to be balanced on an annual basis is really not a good idea.

I don’t mean by that that we should ignore large deficits or unbridled growth in the national debt. But when debt hawks throw around the big, scary numbers, it’s important to keep things in perspective. So consider, for example, the startling fact that between 1945, as WW II was ending, and 2011, the national debt held by the public grew by a factor of 43, from about $235.2 billion to $10.1 trillion! That sounds pretty bad, but it’s important to remember that in relation to the size of the economy, the national debt is smaller today than it was 67 years ago.*  

The chart below shows the Federal debt held by the public as a percentage of GDP over those 67 years. What it shows is that during most of the post WW II era, the Federal government has been able to reduce its indebtedness. The chart also shows that despite that long term trend, the debt has risen sharply since the Great Recession, although the increase really started in 2000, when George Bush took office. But that has happened before.  During the Reagan and first Bush administrations, the debt grew from 25% to 50% of GDP.  But then it fell, to 33%, during Bill Clinton’s presidency. The point is that while we should be concerned about the growth of the debt, history indicates that we we’ve been able to keep that growth under control. And we haven’t needed a balanced budget amendment to do it. 

But so what? Isn’t balancing the budget a good idea anyway?  How can we possibly benefit from running a deficit? Well, take a look at the next chart. It shows Federal government revenues and outlays from 2000 to 2011.**  You can see that Federal revenues (the blue line) are pretty sensitive to the level of economic activity: with the recession of 2001 revenues fell somewhat (although the much discussed Bush tax cuts had something to do with it as well) and during the Great Recession of 2007 they fell a lot.

During both these recessions, outlays (the red line) continued to rise. That increased  spending, which after 2009 was due in part to the ARRA stimulus plan,  meant that we began to run deficits. But more spending also kept the recessions from getting a lot deeper.  If the balanced budget amendment had been in place, expenditures would have had to fall, along with revenues, as the economy went south. The red line would have to lie on top of the blue line. Rather than increasing spending to buffer the downturn, the Federal government would have had to decrease it. And that would have made the downturn a lot worse.

Sound fiscal management means running deficits when necessary to stabilize the economy in the short run, but keeping the debt from outgrowing the economy and becoming unmanageable in the long run. Our experience since 1945 shows that it can be done. But not if the budget always has to be balanced.

However ill-advised it may be, don’t expect the movement calling for a balanced budget amendment to go away any time soon. For one thing, Steve Daines, the Republican frontrunner in the US House race, has endorsed the idea.  For another, ALEC, the outfit pushing conservative legislation in state houses all across the country, is apparently backing the amendment as well: it has published a handy-dandy guide for state legislators, penned by one-time UM Law School professor and conservative activist Rob Natelson, on how to draft convention call legislation.  And if ALEC likes it, there’s no doubt somebody will be giving it a whirl in the 2013 Legislature.

*  The numbers I cite here and used to prepare the first chart come from the Office of Management and Budget, Historical Tables, Table 7.1, ”National Debt at the End of Year: 1949-2017,“ http://www.whitehouse.gov/omb/budget/Historicals/.

** Data for the second chart comes from the same source, Table 1.3, ”Summary of Receipts, Outlays, and Surpluses and Deficits (-) in Current Dollars, Constant (FY 2005) Dollars, and as Percentages of GDP:1940-2017”