As Pennsylvania's primary creeps closer, more and more people will be making delegate predictions. I would like us to focus on what the key values are for the different districts. Using GreenPapers as my starting point, I calculated the following cut-off points for Candidate X to receive Y net pledged delegates by district in Pennsylvania. I am also using the 85% rule so that if a candidate wins 85% of the popular vote in a Congressional District, they win all the available pledged delegates even if using the formula of the larger remainder, their opponent would have been entitled to one pledged delegate. Any errors of calculation are mine and mine alone.
Showing posts with label Pittsburgh PA. Show all posts
Showing posts with label Pittsburgh PA. Show all posts
Tuesday, March 25, 2008
Wednesday, March 19, 2008
Murtha's Endorsement of Clinton
Hillary Clinton's superdelegate endorsement drought ended today when she scored an expected but needed coup in picking up the endorsement of John Murtha, Democratic Congressman who represents PA-12. PA-12 is an Appalachia district that is a bit convoluted in shape as it takes in the eastern and southern reaches of the Pittsburgh city region.
Murtha's district is a five pledged delegate district. It is also a fairly conservative Democratic district with a small African American population, and a small creative class population. It is an area of Pennslyvania that is similiar to the west of I-81 which is where Clinton cleaned up in the Virginia primary. I would be shocked if Obama only loses this district by 18 points which is what he needs to do to hold the district to a 3:2 split for Clinton.
Murtha is throwing his support in the same direction as his distrct. Not a big surprise.
Murtha's district is a five pledged delegate district. It is also a fairly conservative Democratic district with a small African American population, and a small creative class population. It is an area of Pennslyvania that is similiar to the west of I-81 which is where Clinton cleaned up in the Virginia primary. I would be shocked if Obama only loses this district by 18 points which is what he needs to do to hold the district to a 3:2 split for Clinton.
Murtha is throwing his support in the same direction as his distrct. Not a big surprise.
Friday, March 14, 2008
Can Obama win Pennsylvania?
My good buddy Kyle Moore at Comments from Left Field asked me that question this morning via e-mail. I live in Pennsylvania and I think I have a decent feel for Democratic politics around here, and I think it depends on several definitions of winning...
Can Barack Obama accumulate 50%+1 votes --- extremely unlikely, but plausible if Clinton withdraws or meltdowns
Can Barack Obama accumulate 50%+1 pledged delegates --- unlikely but much more plausible than winning the popular vote due to delegate allocation rules.
Can Barack Obama do what he needs to do to maintain his overall edge over Clinton in Pennsylvania --- highly likely.
Can Barack Obama accumulate 50%+1 votes (5% chance)
6 weeks out of the election, Barack Obama is trailing Hillary Clinton by approximately 14 points accordnig to Pollster.com's combined polling measure. He has been closing against Clinton since approximately September/October 2007 where his gradual uptrend inflected to a much greater slope. So can he close the remaining fourteen points in the next five and a half weeks? I don't think so.
We can count on Obama to continue to consolidate his African American base, as Rasmussan has him up 79-13 in this demographic. SurveyUSA has Obama winning the African American vote 76:22. If we project that he continues to win the black vote by roughly 90-10 margins, and that African American voters make up 15% of the Democratic Primary universe, then he can expect to close the 14 point gap by four net points.
He then needs to pick up a net of ten points from white voters. There is significant space for him to grow among self-identified liberal Democrats and voters who consider Iraq and foreign policy the areas of greatest importance. However there is most likely significant overlap within these subgroups. Clinton will roll-up the conservative Democrats in the central part of the state (excluding State College) and do well with the white working class voters in Northeastern and Southwestern Pennsylvania. If she continues to hammer on NAFTA and has the press throwing up its hands in frustration over how confusing the Canadian side of the story is, she'll do very well here, and Obama can not count on making significant in-roads.
I think the most likely outcome is that the Clinton campaign (which is doing a good job of organizing its likely voters in SW PA at least) will break even with Obama's ground game, and grind out a healthy six to eight point win in the state, so my call is 52: 46 with 2 points going to 'other'.
Can Barack Obama accumulate 50%+1 pledged delegates
Unlikely, but plausible (10%-15% chance)--- The distribution of support for Obama and Clinton need to be arrayed in a very precise, heterogenous pattern that is minimally impacted by both campaign's strategic interactions. RuralVotes is projecting a Clinton blow-out, but I don't think this is likely given the make-up of the districts. Chris Bowers is also projecting a Clinton delegate win but by much smaller and to my local eyes, more reasonable numbers. For Obama to win the delegate count, he needs to win Philadelphia by massive margins (PA-1 and PA-2 by 80:20 margins (unlikely, but plausible) to rack up large SE PA delegate counts, win PA-14 by 19 points for a three delegate pick-up, and then run no more than 10 to 12 points behind in all of the even delegate districts and keep it within 15 to 18 in the remaining odd-delegate districts so that the splits are either 2:1, or 3:2 for Clinton. He would need a lot of things to go right, but if we assume a 90/10 African American vote split for Obama, as I did earlier in the post, the base for urban blow-outs is present.
Can Barack Obama do what he needs to do to maintain his overall edge over Clinton in Pennsylvania (90%)
As I see it, he just needs to avoid being blown out in the pledged delegate count, and the popular vote. The schedule becomes more favorable to him after Pennsylvania, and the number of outstanding delegates left to be won is shrinking rapidly. If Michigan and Florida are resolved without a do-over, he'll be leaving May with a string of victories for local momentum and a very solid pledged delegate lead, and at current trends, breaking even with Hillary Clinton in the superdelegate race. He will not have hit the magic number, but he'll be much closer. In Pennsylvania, he needs to do decent and not stick his hand or other appendage into a buzz-saw in order to do what he needs. And given the past history of his campaign, I am confident that a minimized loss operation is highly likely.
Can Barack Obama accumulate 50%+1 votes --- extremely unlikely, but plausible if Clinton withdraws or meltdowns
Can Barack Obama accumulate 50%+1 pledged delegates --- unlikely but much more plausible than winning the popular vote due to delegate allocation rules.
Can Barack Obama do what he needs to do to maintain his overall edge over Clinton in Pennsylvania --- highly likely.
Can Barack Obama accumulate 50%+1 votes (5% chance)
6 weeks out of the election, Barack Obama is trailing Hillary Clinton by approximately 14 points accordnig to Pollster.com's combined polling measure. He has been closing against Clinton since approximately September/October 2007 where his gradual uptrend inflected to a much greater slope. So can he close the remaining fourteen points in the next five and a half weeks? I don't think so.We can count on Obama to continue to consolidate his African American base, as Rasmussan has him up 79-13 in this demographic. SurveyUSA has Obama winning the African American vote 76:22. If we project that he continues to win the black vote by roughly 90-10 margins, and that African American voters make up 15% of the Democratic Primary universe, then he can expect to close the 14 point gap by four net points.
He then needs to pick up a net of ten points from white voters. There is significant space for him to grow among self-identified liberal Democrats and voters who consider Iraq and foreign policy the areas of greatest importance. However there is most likely significant overlap within these subgroups. Clinton will roll-up the conservative Democrats in the central part of the state (excluding State College) and do well with the white working class voters in Northeastern and Southwestern Pennsylvania. If she continues to hammer on NAFTA and has the press throwing up its hands in frustration over how confusing the Canadian side of the story is, she'll do very well here, and Obama can not count on making significant in-roads.
I think the most likely outcome is that the Clinton campaign (which is doing a good job of organizing its likely voters in SW PA at least) will break even with Obama's ground game, and grind out a healthy six to eight point win in the state, so my call is 52: 46 with 2 points going to 'other'.
Can Barack Obama accumulate 50%+1 pledged delegates
Unlikely, but plausible (10%-15% chance)--- The distribution of support for Obama and Clinton need to be arrayed in a very precise, heterogenous pattern that is minimally impacted by both campaign's strategic interactions. RuralVotes is projecting a Clinton blow-out, but I don't think this is likely given the make-up of the districts. Chris Bowers is also projecting a Clinton delegate win but by much smaller and to my local eyes, more reasonable numbers. For Obama to win the delegate count, he needs to win Philadelphia by massive margins (PA-1 and PA-2 by 80:20 margins (unlikely, but plausible) to rack up large SE PA delegate counts, win PA-14 by 19 points for a three delegate pick-up, and then run no more than 10 to 12 points behind in all of the even delegate districts and keep it within 15 to 18 in the remaining odd-delegate districts so that the splits are either 2:1, or 3:2 for Clinton. He would need a lot of things to go right, but if we assume a 90/10 African American vote split for Obama, as I did earlier in the post, the base for urban blow-outs is present.
Can Barack Obama do what he needs to do to maintain his overall edge over Clinton in Pennsylvania (90%)
As I see it, he just needs to avoid being blown out in the pledged delegate count, and the popular vote. The schedule becomes more favorable to him after Pennsylvania, and the number of outstanding delegates left to be won is shrinking rapidly. If Michigan and Florida are resolved without a do-over, he'll be leaving May with a string of victories for local momentum and a very solid pledged delegate lead, and at current trends, breaking even with Hillary Clinton in the superdelegate race. He will not have hit the magic number, but he'll be much closer. In Pennsylvania, he needs to do decent and not stick his hand or other appendage into a buzz-saw in order to do what he needs. And given the past history of his campaign, I am confident that a minimized loss operation is highly likely.
Thursday, March 06, 2008
Price Elasticity of Booze in Allegheny County
Warning --- this post is pure geekery --- beware
From a policy analyst perspective, figuring out elasticities and policy impacts is a pain in the ass, especially at low levels of analysis as the substitution effects, non-compliance impacts, and border skipping can be a pain in the ass to fully disaggegate in your data. Furthermore, policies are seldom enacted in isolation and without other incentives being generated. Good analysis can and frequently does occur, but it costs money, takes time, and involves significant head-wall interactions.
I have to love the Allegheny County's 10% poured drink tax that went into effect on Jan. 1, 2008 as this is a great little experiment that naturally isolates a lot of confounding and correlating influences. It only taxes the booze at the point of sale, it is not a tax on the purchase of booze from the wholesaler so there is no buyer substitution effects going on by seeing restaurants buying booze in Butler County instead of Allegheny County for instance. No other major policy changes have occurred in the past three months impacting Allegheny County or any other surrounding counties. This is about as clean as an experiment as you can get if you want a quick and dirty elasticity of demand for restaurant served booze in Allegheny County.
And if you really want it, we have it, via the Tribune Review ---
If we assume that restauranteers have a good ability to project demand into the near future and that storage is expensive, we would expect a just-in time liquor purchase system for most restaurants, or at least just this week/month systems. They want to buy about the amount of booze that they will sell.
So at a wholesale level the crude elasticity of demand is about .35 --- a 10% increase in retail prices will produce a 3.5% reduction in demand. A slightly more sophisticated measure would that if the tax was not enacted, we would expect Allegheny County to pretty much follow statewide trend, so the elasticity of demand is roughly .70 --- a 10% increase in retail prices will produce a 7% reduction in quantity demanded.
Now there are a couple of provisos in here. The first is that it is a single data point, and a better analysis would look at some trend information to narrow the error band. Secondly, this is only for hard alcohol; there is no data to suggest if restaurants, taverns, and bars sold less hard booze (which the state has a monopoly on) but saw some substitution to cheaper beer. Third and most noticably, very few bars raised their prices by exactly 10% to cover the new tax. I know at a downtown bar my coworkers and I occassionally visit for happy hour that my $3.00 Penn Dark is now a $3.50 pint. That is a 16% increase in prices.
But this gives us a quick and dirty maximal number of the short run elasticity of demand for hard booze in the county is no more than .70. Since the elasticity is less than 1.0, the county could probably raise the rate a bit more and still take in more revenue.
From a policy analyst perspective, figuring out elasticities and policy impacts is a pain in the ass, especially at low levels of analysis as the substitution effects, non-compliance impacts, and border skipping can be a pain in the ass to fully disaggegate in your data. Furthermore, policies are seldom enacted in isolation and without other incentives being generated. Good analysis can and frequently does occur, but it costs money, takes time, and involves significant head-wall interactions.
I have to love the Allegheny County's 10% poured drink tax that went into effect on Jan. 1, 2008 as this is a great little experiment that naturally isolates a lot of confounding and correlating influences. It only taxes the booze at the point of sale, it is not a tax on the purchase of booze from the wholesaler so there is no buyer substitution effects going on by seeing restaurants buying booze in Butler County instead of Allegheny County for instance. No other major policy changes have occurred in the past three months impacting Allegheny County or any other surrounding counties. This is about as clean as an experiment as you can get if you want a quick and dirty elasticity of demand for restaurant served booze in Allegheny County.
And if you really want it, we have it, via the Tribune Review ---
The state sold $3.74 million of alcohol to liquor license holders in the
county in January, a nearly 3.5-percent drop from $3.87 million in January 2007,
said Francesca Chapman, a Liquor Control Board spokeswoman. At the same time,
sales to license holders statewide climbed about 4 percent, from $28.54 million
to $29.69 million.
If we assume that restauranteers have a good ability to project demand into the near future and that storage is expensive, we would expect a just-in time liquor purchase system for most restaurants, or at least just this week/month systems. They want to buy about the amount of booze that they will sell.
So at a wholesale level the crude elasticity of demand is about .35 --- a 10% increase in retail prices will produce a 3.5% reduction in demand. A slightly more sophisticated measure would that if the tax was not enacted, we would expect Allegheny County to pretty much follow statewide trend, so the elasticity of demand is roughly .70 --- a 10% increase in retail prices will produce a 7% reduction in quantity demanded.
Now there are a couple of provisos in here. The first is that it is a single data point, and a better analysis would look at some trend information to narrow the error band. Secondly, this is only for hard alcohol; there is no data to suggest if restaurants, taverns, and bars sold less hard booze (which the state has a monopoly on) but saw some substitution to cheaper beer. Third and most noticably, very few bars raised their prices by exactly 10% to cover the new tax. I know at a downtown bar my coworkers and I occassionally visit for happy hour that my $3.00 Penn Dark is now a $3.50 pint. That is a 16% increase in prices.
But this gives us a quick and dirty maximal number of the short run elasticity of demand for hard booze in the county is no more than .70. Since the elasticity is less than 1.0, the county could probably raise the rate a bit more and still take in more revenue.
Wednesday, March 05, 2008
Pennsylvania Democratic Politics Overview
Barring anything shocking happening, Pennsylvania will matter quite a bit this cycle. Shocking!
As Chris Bowers notes, with Wyoming and Misssissippi being highly probable net delegate wins for Obama, the pledged delegate math by the Ides of March is back to where it was Monday morning --- Obama up by a significant margin but with far fewer delegates left to contest. Pennsylvania right now is the only chance Clinton has a blow-out win that has enough delegates to matter. So let's take a quick look at the Pennsylvania Democrats.
1) Pennsylvania is a closed primary state, and it is a hard closure. Non-affiliated/unaligned/independent and registered Republicans voters do not vote in the Democratic Primary.
2) Pennsylvania Democrats are on the whole ideologically about the median national Democrat, at least measured by our House delegation.
3) 'Pittsburgh on end end, Philadelphia on the other, and Alabama in the middle' or Pennsyltucky are two quick and simple ways of describing the state politically as a whole. The rural/mountain regions tend to vote conservative to very conservative while the cities vote liberal and come out in large numbers.
4) Delegate allocation rules can be found at the Greenpapers.
5) Delegate allocation rules significantly favor Obama --- very plausible for him to lose the state by eight to ten points and win the delegate fight.
6) GOTV operations are not that good in SW Pa. The machine Democrats have been fighting a long and slowly losing battle in Allegheny County (Pittsburgh's home county) with the reformer Democrats as the reformers are able to out-hustle the GOTV on lower value races. Endorsements have not been delivering the same type of punch as they used to.
7) In 2006, most regional GOTV was provided by outside organizations; the Casey-Rendell coordinated campaign just sought to flush the Dem supermajority precincts and call it a day.
As Chris Bowers notes, with Wyoming and Misssissippi being highly probable net delegate wins for Obama, the pledged delegate math by the Ides of March is back to where it was Monday morning --- Obama up by a significant margin but with far fewer delegates left to contest. Pennsylvania right now is the only chance Clinton has a blow-out win that has enough delegates to matter. So let's take a quick look at the Pennsylvania Democrats.
1) Pennsylvania is a closed primary state, and it is a hard closure. Non-affiliated/unaligned/independent and registered Republicans voters do not vote in the Democratic Primary.
2) Pennsylvania Democrats are on the whole ideologically about the median national Democrat, at least measured by our House delegation.
3) 'Pittsburgh on end end, Philadelphia on the other, and Alabama in the middle' or Pennsyltucky are two quick and simple ways of describing the state politically as a whole. The rural/mountain regions tend to vote conservative to very conservative while the cities vote liberal and come out in large numbers.
4) Delegate allocation rules can be found at the Greenpapers.
5) Delegate allocation rules significantly favor Obama --- very plausible for him to lose the state by eight to ten points and win the delegate fight.
6) GOTV operations are not that good in SW Pa. The machine Democrats have been fighting a long and slowly losing battle in Allegheny County (Pittsburgh's home county) with the reformer Democrats as the reformers are able to out-hustle the GOTV on lower value races. Endorsements have not been delivering the same type of punch as they used to.
7) In 2006, most regional GOTV was provided by outside organizations; the Casey-Rendell coordinated campaign just sought to flush the Dem supermajority precincts and call it a day.
Friday, February 29, 2008
Pittsburgh fiscal vulnerability assessment
This is the second in an indeterminate series of municipal finance stress testing posts. Yes, exciting, I know! I'm looking at locally controlled revenue streams and how a stagnant or recessionary economy could impact the Pittsburgh budget. Again, everything here is back of the envelope, and should not be construed as a forecast of doom or a gold star for fiscal rectitude.
Pittsburgh has its budget on the web, and it is very thorough although it has far fewer convienent graphs and summary tables that collapses information in a blogger friendly fashion. I'll survive. Pittsburgh has more short term downside exposure to its projected revenues than Allegheny County because a higher proportion of its locally controlled tax base is on shiftable consumption patterns. I'll be using the recently published 2008 budget for this analysis.
Locally controlled levies make up 62% of the revenue. Property taxes make up about 46% of that 62% of locally controlled levies. The rest of the locally controlled revenue comes from a variety of real estate transaction, income, employment, business and parking taxes.
Property values are downwardly sticky due to psychology and the negative equity disencouragement for people who don't need to sell to keep their homes off the market. Furthermore, as I alluded to in the Allegheny County post, the county and thus the city assessment system is a fiasco that has no viable political incentive structure to fix. The county is the city's assessor, and since the county has decided to use 2002 as their base year, the city is using 2002 as their base year. Property taxes should be stable and near projection. There is a decent probability of increased deliquencies and non-recoverable amounts as foreclosed homes are increasing in the city, and the original mortgage payers have no incentive to continue paying their property taxes. But the estimates in this scenario should not be under significant stress.
Property taxes are the backbone of the city's locally controlled revenue and it is relatively strong. However the rest of the fiscal framework seems to be pro-cyclical in that revenue should be significantly higher in decent to good times, and lower in a recessionary/stagnant environment.
For instance, the deed transfer tax is 5% of locally controlled revenue. The city receives 2% of the value of a deed when a property is transferred. In a normal or above normal real estate market, there are significant number of transactions occurring from which the city derives revenue.
In a housing bust like we are in now, transaction volume decreases. And here is the problem for the city as the budget assumes transaction volumes will be similiar to a five year trending average when it is fairly evident that there is a discontinuity in trend.
Payroll preperation, income taxes, and the $52 per worker emergency service tax are all dependent on employment levels while the first two are also dependent on wage levels. The city is vulnerable here on three counts. The first is if we are in a recession or stagnation environment, employment is flat or decreases. Furthermore in a slow economic environment, wages don't increase. Both of these counts will lead to lower tax revenue. Further more as a macro trend, what real compensation gains are occuring are occuring in non-cash compensations such as health insurance premium payment. The city can not tax real compensation, only actual cash wages are taxable under the currently allowable tax structure.
Finally, the last big chunk of city controlled revenue is sales tax revenue, both general and specific. The city does not have a directly controlled sales tax; instead it receives funding from the Regional Asset District that controls the funds from the 1% Allegheny County sales tax. If consumer spending decreases, sales tax revenue decreases. The directly controlled sales tax revenue is the amusement tax. As you can assume from its name, it taxes truly discretionary spending. Movie tickets, Pirates tickets, for profit arts exhibitions are taxed. This is truly discretionary spending which is the first spending that will be cut when people become cash and credit constrained. I don't need to go to the Pirates game, but I do need to buy gas to go to work will be the format of the individual level decision matrix.
Pittsburgh is at risk on seeing downside surprises for the tax revenue that the city directly controls if we are in a regional or national recession or significant stagnation. The majority of the city tax revenue streams are based on pro-cyclical factors. Property taxes are the most likely group of taxes to meet their revenue projections.
Pittsburgh has its budget on the web, and it is very thorough although it has far fewer convienent graphs and summary tables that collapses information in a blogger friendly fashion. I'll survive. Pittsburgh has more short term downside exposure to its projected revenues than Allegheny County because a higher proportion of its locally controlled tax base is on shiftable consumption patterns. I'll be using the recently published 2008 budget for this analysis.
Locally controlled levies make up 62% of the revenue. Property taxes make up about 46% of that 62% of locally controlled levies. The rest of the locally controlled revenue comes from a variety of real estate transaction, income, employment, business and parking taxes.
Property values are downwardly sticky due to psychology and the negative equity disencouragement for people who don't need to sell to keep their homes off the market. Furthermore, as I alluded to in the Allegheny County post, the county and thus the city assessment system is a fiasco that has no viable political incentive structure to fix. The county is the city's assessor, and since the county has decided to use 2002 as their base year, the city is using 2002 as their base year. Property taxes should be stable and near projection. There is a decent probability of increased deliquencies and non-recoverable amounts as foreclosed homes are increasing in the city, and the original mortgage payers have no incentive to continue paying their property taxes. But the estimates in this scenario should not be under significant stress.
Property taxes are the backbone of the city's locally controlled revenue and it is relatively strong. However the rest of the fiscal framework seems to be pro-cyclical in that revenue should be significantly higher in decent to good times, and lower in a recessionary/stagnant environment.
For instance, the deed transfer tax is 5% of locally controlled revenue. The city receives 2% of the value of a deed when a property is transferred. In a normal or above normal real estate market, there are significant number of transactions occurring from which the city derives revenue.
In a housing bust like we are in now, transaction volume decreases. And here is the problem for the city as the budget assumes transaction volumes will be similiar to a five year trending average when it is fairly evident that there is a discontinuity in trend.Payroll preperation, income taxes, and the $52 per worker emergency service tax are all dependent on employment levels while the first two are also dependent on wage levels. The city is vulnerable here on three counts. The first is if we are in a recession or stagnation environment, employment is flat or decreases. Furthermore in a slow economic environment, wages don't increase. Both of these counts will lead to lower tax revenue. Further more as a macro trend, what real compensation gains are occuring are occuring in non-cash compensations such as health insurance premium payment. The city can not tax real compensation, only actual cash wages are taxable under the currently allowable tax structure.
Finally, the last big chunk of city controlled revenue is sales tax revenue, both general and specific. The city does not have a directly controlled sales tax; instead it receives funding from the Regional Asset District that controls the funds from the 1% Allegheny County sales tax. If consumer spending decreases, sales tax revenue decreases. The directly controlled sales tax revenue is the amusement tax. As you can assume from its name, it taxes truly discretionary spending. Movie tickets, Pirates tickets, for profit arts exhibitions are taxed. This is truly discretionary spending which is the first spending that will be cut when people become cash and credit constrained. I don't need to go to the Pirates game, but I do need to buy gas to go to work will be the format of the individual level decision matrix.
Pittsburgh is at risk on seeing downside surprises for the tax revenue that the city directly controls if we are in a regional or national recession or significant stagnation. The majority of the city tax revenue streams are based on pro-cyclical factors. Property taxes are the most likely group of taxes to meet their revenue projections.
Allegheny County fiscal threat assessment
Yesterday I highlighted a the general problem that most Southwestern Pennsylvania municipalities are operating on budgetary thin ice. Today and probably tomorrow, I will look at some of the bigger units of government and see if they could face revenue side problems if the economy significant slows down. All of my statements will be back of the envelope statements and should not be construed as an endorsement of doom or a gold star for fiscal rectitude.
I'll start with Allegheny County's 2007 budget as a decent baseline for where the money comes from and where it goes. The budget office has a good website, and I'm pulling everything from the Budget Summary. Here are last year's revenue sources:
Allegheny County is not particularly vulnerable to a temporary slowdown for its locally derived revenue. Few taxes are being levied on high substitution, voluntary goods such as alcohol. In this case people if they are feeling the pinch do not need to drink at a bar, as they could drink much more cheaply at home, or they can downshift their consumption at a bar. For instance instead of order two four dollar Troegs and generating $0.80 in tax revenue for the county, the same person could have ordered two two dollar Yuenglings, generating $0.40 in tax revenue for the county. The poured drink tax and the car rental tax are probably the most variable taxes that are dependent on the economic environment and mood.
The county does not significantly rely on sales taxes for revenue. It receives some money through the general 1% sales tax administered by the Regional Asset District, but this is a small source of funding. The sales tax is vulnerable to drops in consumer spending, but there is a rough baseline of staples that people must buy. A drop or decrease in growth for this revenue stream is very plausible, but it should not be severe.
The dominant tax under county control is the property tax. This tax should produce nearly constant revenue streams for at least FY-08. This will be the case for a couple of reasons. First Pittsburgh as a market has not been deflating as fast as the bubble markets because we really did not see the bubble. Secondly, and more importantly, no one at any level of politics who faces frequent election wants to touch the assessment debacle with a forty foot pole. Currently the county is assessing property taxes based on 2002 assessed values and dealing with appeals on a case by case basis. There is no likelihood of changing the assessment to see which homes increased and decreased in value in the past six years. This is stable for a year or two, although if significant number of people are underwater, growing political pressure will create strong incentives for county leadership to do something.
Overall, the revenue that the county controls should be fairly resilient for a single bad year with some slight decreases in trend lines and growth rates from the sales taxes. The county is still very dependent on state and federal appropriations but that is another post for another day.
I'll start with Allegheny County's 2007 budget as a decent baseline for where the money comes from and where it goes. The budget office has a good website, and I'm pulling everything from the Budget Summary. Here are last year's revenue sources:
- Property Taxes (45%)
- Passed through sales taxes (2%)
- Fees for services etc (7%)
- State Transfers (25%)
- Federal Transfers (16%)
- Other (interest earnings, foundation grants etc) 4%
Allegheny County is not particularly vulnerable to a temporary slowdown for its locally derived revenue. Few taxes are being levied on high substitution, voluntary goods such as alcohol. In this case people if they are feeling the pinch do not need to drink at a bar, as they could drink much more cheaply at home, or they can downshift their consumption at a bar. For instance instead of order two four dollar Troegs and generating $0.80 in tax revenue for the county, the same person could have ordered two two dollar Yuenglings, generating $0.40 in tax revenue for the county. The poured drink tax and the car rental tax are probably the most variable taxes that are dependent on the economic environment and mood.
The county does not significantly rely on sales taxes for revenue. It receives some money through the general 1% sales tax administered by the Regional Asset District, but this is a small source of funding. The sales tax is vulnerable to drops in consumer spending, but there is a rough baseline of staples that people must buy. A drop or decrease in growth for this revenue stream is very plausible, but it should not be severe.
The dominant tax under county control is the property tax. This tax should produce nearly constant revenue streams for at least FY-08. This will be the case for a couple of reasons. First Pittsburgh as a market has not been deflating as fast as the bubble markets because we really did not see the bubble. Secondly, and more importantly, no one at any level of politics who faces frequent election wants to touch the assessment debacle with a forty foot pole. Currently the county is assessing property taxes based on 2002 assessed values and dealing with appeals on a case by case basis. There is no likelihood of changing the assessment to see which homes increased and decreased in value in the past six years. This is stable for a year or two, although if significant number of people are underwater, growing political pressure will create strong incentives for county leadership to do something.
Overall, the revenue that the county controls should be fairly resilient for a single bad year with some slight decreases in trend lines and growth rates from the sales taxes. The county is still very dependent on state and federal appropriations but that is another post for another day.
Thursday, February 28, 2008
Municpal Government Distress
All of the big financial bloggers are chasing down bankruptcy rumors of Vallejo, California, but I want to focus a little closer to home to an area that has already had several effective municipal bankruptcies handled by the ACT 47 law. the rest of the region is also in trouble.
The University of Pittsburgh is finishing up an analysis of regional governmental financial capacity and it is not pretty. The Post-Gazette is reporting most of the region has some bad spending habits:
I would imagine given the froth of the housing bubble that if you replaced 2000 with 2006, the number of communities running a single deficit and multiple deficits would decrease by a small amount. The analytical period in question had a short recession that had minimal real impact on real estate values but a decent impact on wages and then several years of decent to good times where the cyclical flow of funding/expenditures should lead to short term surpluses if a municipality has a structurally balanced to structurally surplus budget.
Between the bursting of the real estate bubble and continous rational voter pandering against re-assessing real estate at near market values, the region's governments will be facing a tough couple of years. Budgets will be cut, services reduced, and maitenance on the locally decrepit infrastructure will be deferred or minimized.
Pittsburgh and its city region may have more severe cuts and contraction than most regions as this area has an older population, lower income growth which means less wage tax income for municipalities, and a declining population so fixed costs are higher on a per capita basis as time progresses. However the same basic squeezes that will be impacting this region today and in the future, namely declining real estate values, declining sales and income tax revenue, higher costs of borrowing and higher employee costs due to healthcare will be impacting most municipalities.
Retrenchment will occur as most if not all local governments have balanced budget constraints of varying strength. Retrenchment is pro-cyclical which means it will make the current trend of slow growth or recession more severe. And since local governments rely heavily on a revenue source (property taxes) that is bound to get hammered with a secondary dependence on income taxes, this trend will be severe and potentially self-reinforcing.
The University of Pittsburgh is finishing up an analysis of regional governmental financial capacity and it is not pretty. The Post-Gazette is reporting most of the region has some bad spending habits:
The analysis was produced by a team at the University of Pittsburgh Graduate School of Public and International Affairs.
Between 2000 and 2005, the latest data year, 58.5 percent of the region's municipalities had two or more deficits and 80.2 percent had at least one....
Professor George W. Dougherty, who directed the study. "Healthy communities run a small annual surplus that allows them to build a rainy day fund and budget for long-term capital and infrastructure needs. Governments that run regular deficits, commonly defined as two or more annual deficits in a five to six year period, show significant signs of fiscal distress."
I would imagine given the froth of the housing bubble that if you replaced 2000 with 2006, the number of communities running a single deficit and multiple deficits would decrease by a small amount. The analytical period in question had a short recession that had minimal real impact on real estate values but a decent impact on wages and then several years of decent to good times where the cyclical flow of funding/expenditures should lead to short term surpluses if a municipality has a structurally balanced to structurally surplus budget.
Between the bursting of the real estate bubble and continous rational voter pandering against re-assessing real estate at near market values, the region's governments will be facing a tough couple of years. Budgets will be cut, services reduced, and maitenance on the locally decrepit infrastructure will be deferred or minimized.
Pittsburgh and its city region may have more severe cuts and contraction than most regions as this area has an older population, lower income growth which means less wage tax income for municipalities, and a declining population so fixed costs are higher on a per capita basis as time progresses. However the same basic squeezes that will be impacting this region today and in the future, namely declining real estate values, declining sales and income tax revenue, higher costs of borrowing and higher employee costs due to healthcare will be impacting most municipalities.
Retrenchment will occur as most if not all local governments have balanced budget constraints of varying strength. Retrenchment is pro-cyclical which means it will make the current trend of slow growth or recession more severe. And since local governments rely heavily on a revenue source (property taxes) that is bound to get hammered with a secondary dependence on income taxes, this trend will be severe and potentially self-reinforcing.
Wednesday, February 27, 2008
The value of Pennyslvania's potential relevance
I just got a forward from a good buddy and political contact of mine who is an Obama supporter. He lives just north of Pittsburgh and is getting inundated with Obama campaign material including most interestingly confirmation of paid field organizers who are hitting up the list of local highly connected activists for a Saturday training, canvassing and voter registration event. That is the first time I have ever seen a Presidential campaign hit up Pennsylvania before the Pennsylvania primary.
And this is why I think the ongoing race is a good thing. I was at Pittsburgh Drinking Liberally last night and besides catching up with some old buddies, listening to their new wives dish dirt and enjoying a good burger and wings, we talked politics and watched the debate. Everyone within this self-selected group of self-identifying liberals and progressives were reasonably happy with both candidates. Almost everyone had a preference but the other candidate was acceptable. And we were all excited that Pennsylvania may be relevant, and that the organizing that either/both campaigns unleash will be reinvigorating.
Right now the Southwestern Pennsylvania Democratic machine is the best organization out there for Democratic GOTV. In either narrowly cast elections with favorable demographics, or secondary elections (judgeships for instance) the progressive/reformer coalition is not that far behind, but the Democratic machine is still a superior organization.
However better does not mean 'good.' I know when I worked for America Votes in the fall of 2006, we were canvassing Democratic voters who had never been canvassed, never been GOTV-ed called and had not realized that there were other Democrats who lived six houses down from them or the next cul de sac over. Due to funding, manpower, and legal constraints (AmericaVotes PA could only work to directly support state legislaturers due to the legal underpinnings of the organization) we could only target a narrow geographic stretch in three or four swing State House districts around Pittsburgh. There is plenty of untapped Democratic strength that a primary campaign with sufficient resources should be able to unearth.
And this is why I think the ongoing race is a good thing. I was at Pittsburgh Drinking Liberally last night and besides catching up with some old buddies, listening to their new wives dish dirt and enjoying a good burger and wings, we talked politics and watched the debate. Everyone within this self-selected group of self-identifying liberals and progressives were reasonably happy with both candidates. Almost everyone had a preference but the other candidate was acceptable. And we were all excited that Pennsylvania may be relevant, and that the organizing that either/both campaigns unleash will be reinvigorating.
Right now the Southwestern Pennsylvania Democratic machine is the best organization out there for Democratic GOTV. In either narrowly cast elections with favorable demographics, or secondary elections (judgeships for instance) the progressive/reformer coalition is not that far behind, but the Democratic machine is still a superior organization.
However better does not mean 'good.' I know when I worked for America Votes in the fall of 2006, we were canvassing Democratic voters who had never been canvassed, never been GOTV-ed called and had not realized that there were other Democrats who lived six houses down from them or the next cul de sac over. Due to funding, manpower, and legal constraints (AmericaVotes PA could only work to directly support state legislaturers due to the legal underpinnings of the organization) we could only target a narrow geographic stretch in three or four swing State House districts around Pittsburgh. There is plenty of untapped Democratic strength that a primary campaign with sufficient resources should be able to unearth.
Thursday, February 21, 2008
Pennyslvania Primary Update
Right now with Obama closing hard in Texas and Bill Clinton stating in the New York Times that he believes that Hillary Clinton needs to win both Texas AND Ohio to be the nominee, Pennsylvania is receding slightly in its chance to be the decisive state. But there are still a few tidbits.
First it looks increasingly likely that short of a massive gaffe/flub/case of potty mouth, Obama should win Pennsylvania if it is a contested state. Recent polling and trends at Pollster.com are showing that Obama is beginning to close the large Clinton lead that had been held mainly be inertia and institutional power. Today's Franklin and Marshall poll has him down twelve which is well within striking distance if both campaigns camp out in Pennsylvania for six weeks straight. Combine a better ground organization with the defensive wielding of the Teamsters and other 'tough' union endorsements to defuse some cultural resistance to voting for Obama, and this state is looking good for Obama. He would lose if voting was held tomorrow, but he has eight weeks to make up ground, and he has been a better mid-distance runner than Clinton.
Second, my Congressman Mike Doyle had an extended conversation with the Pittsburgh City Paper concerning his role as a super-delegate:
I am surprised that Congressman Doyle has not been aggressively lobbied by the Obama campaign as I think that Congressman Doyle should be a categorized as at least a 2 on a five point persuadable scale based on Iraq and environmental record, as well as his District's primary electorate demographics. They favor Obama in my opinion. Clinton's campaign in this case is the aggressive, competent and well run campaign even if they are categorizing Doyle as a tougher than median 'get.' They are making an extensive effort and as anyone in politics knows,the best way to get someone's vote is to actually ask for it.
First it looks increasingly likely that short of a massive gaffe/flub/case of potty mouth, Obama should win Pennsylvania if it is a contested state. Recent polling and trends at Pollster.com are showing that Obama is beginning to close the large Clinton lead that had been held mainly be inertia and institutional power. Today's Franklin and Marshall poll has him down twelve which is well within striking distance if both campaigns camp out in Pennsylvania for six weeks straight. Combine a better ground organization with the defensive wielding of the Teamsters and other 'tough' union endorsements to defuse some cultural resistance to voting for Obama, and this state is looking good for Obama. He would lose if voting was held tomorrow, but he has eight weeks to make up ground, and he has been a better mid-distance runner than Clinton.
Second, my Congressman Mike Doyle had an extended conversation with the Pittsburgh City Paper concerning his role as a super-delegate:
Gov. Ed Rendell and Philly Mayor Nutter are backing Clinton, while U.S. senators Ted Kennedy and John Kerry are for Obama. (Doyle himself says he's undecided.)....
Anyone who thinks we can't wait to chomp on our cigars and get in a smoke-filled room and make a deal, that's crazy," he says. "We want to leave unified," and that means making it clear "somebody won fair and square."....
Still, Super Mike has been enjoying his moment in the sun. He's been phone-tagging with Hillary, and he got a call from Hillary's Super Hubby, who was hanging out on Super Bowl Sunday with Super Mike's previous favorite, New Mexico Gov. Bill Richardson. "They first called a few hours after Richardson had dropped out," Doyle says. "That's how good they are."...
Super Mike has not received a call from Obama. He says he might be influenced if there's a big tilt among primary voters in his district. He says he might be influenced by a candidate's commitment to getting out of Iraq soon. Doyle had the balls to vote against the war in the first place, unlike a certain White Chick.
I am surprised that Congressman Doyle has not been aggressively lobbied by the Obama campaign as I think that Congressman Doyle should be a categorized as at least a 2 on a five point persuadable scale based on Iraq and environmental record, as well as his District's primary electorate demographics. They favor Obama in my opinion. Clinton's campaign in this case is the aggressive, competent and well run campaign even if they are categorizing Doyle as a tougher than median 'get.' They are making an extensive effort and as anyone in politics knows,the best way to get someone's vote is to actually ask for it.
Friday, February 15, 2008
Masloff's hierarchy of needs
Sophie Masloff, a highly respected former mayor of Pittsburgh and the grand dame of Pittsburgh Democratic politics is hedging her bets on her DNC superdelegate vote. She orginally endorsed Sen. Hillary Clinton, now she has moved herself into the undecided column... interesting:
Very interesting. One thing that has always been said about Sophie is that she is not an idiot on either policy or political grounds. She has influence within the Allegheny County Dem. machine, not as the dominant force but as a respected voice, so my guesstimate that Obama could break even or win in PA-14 which contains the city of Pittsburgh has been slightly strengthened with this news.
Interesting....
PS --- Fellow Hoggers ---please stop me from making bad psychology puns in my titles again
Two other superdelegates, Sophie Masloff of Pennsylvania and Nancy Larson of Minnesota, are uncommitted, having dropped their earlier endorsements of Clinton.
Very interesting. One thing that has always been said about Sophie is that she is not an idiot on either policy or political grounds. She has influence within the Allegheny County Dem. machine, not as the dominant force but as a respected voice, so my guesstimate that Obama could break even or win in PA-14 which contains the city of Pittsburgh has been slightly strengthened with this news.
Interesting....
PS --- Fellow Hoggers ---please stop me from making bad psychology puns in my titles again
Tuesday, February 12, 2008
Virginia Exit Polls and Pennyslvania
Midwest Progressive in comments earlier today asserted that Obama has to be the favorite in Pennsylvania. I disagreed as the Congressional districts in SW PA are dominated by beer track Democrats. Given the new information from the Virginia exit polls, I think that I am wrong.
Clinton's generic winning formula so far has to been to win the white vote by fifteen to twenty points against Obama, avoid being blown out like a Republican within the African American vote, and win the non-white, non-black groups by twenty to twenty five points. That is her generic success story.
The Virginia exit polls are showing that Obama has basically tied her in the white vote, and is treating Clinton as if she was a Republican in the African American vote, winning this group by a 90:10 margin. They are splitting the small Latino vote about even.
Furthermore, there are very few splits in the exit polls where Obama does significantly worse than his aggregate totals, so it seems that the Democratic Party in Virginia at the very least acted in an information cascading fashion and have begun to coalesce around him.
IF THESE RESULTS ARE GENERALIZABLE, Clinton is in serious trouble before she gets to Pennsylvania as her basic formula is under serious threat. Even assuming she makes it to Pennsylvania, I am re-evaluating my opinion of her probabilities of winning majorities in the three SW Pennsylvania Congressional Districts that I am most familiar with (PA-4, PA-14, PA-18).
Right now I would project that Barrack Obama would win PA-14 which encompasses Pittsburgh and its immediate eastern suburbs on the basis of a dominant win within the African American community as well as dominant wins within both the Dean/Clark/Peduto/Hans-Greco activist base as well as the tens of thousands of college students.
PA-18, in the South Hills is a split district with a slight current Clinton lean as there are more Reagan Democrats, and the one area of hope in tonight's numbers for Clinton was she won the Virginian foothills to the Appalachians. That area has significant commonality with significant portions of Washington and Westmoreland Counties. PA-4 to the north is another toss-up, but I think Obamaa can quickly capitalize on a unified progressive activist base while the powerful unions are split up north.
Clinton's generic winning formula so far has to been to win the white vote by fifteen to twenty points against Obama, avoid being blown out like a Republican within the African American vote, and win the non-white, non-black groups by twenty to twenty five points. That is her generic success story.
The Virginia exit polls are showing that Obama has basically tied her in the white vote, and is treating Clinton as if she was a Republican in the African American vote, winning this group by a 90:10 margin. They are splitting the small Latino vote about even.
Furthermore, there are very few splits in the exit polls where Obama does significantly worse than his aggregate totals, so it seems that the Democratic Party in Virginia at the very least acted in an information cascading fashion and have begun to coalesce around him.
IF THESE RESULTS ARE GENERALIZABLE, Clinton is in serious trouble before she gets to Pennsylvania as her basic formula is under serious threat. Even assuming she makes it to Pennsylvania, I am re-evaluating my opinion of her probabilities of winning majorities in the three SW Pennsylvania Congressional Districts that I am most familiar with (PA-4, PA-14, PA-18).
Right now I would project that Barrack Obama would win PA-14 which encompasses Pittsburgh and its immediate eastern suburbs on the basis of a dominant win within the African American community as well as dominant wins within both the Dean/Clark/Peduto/Hans-Greco activist base as well as the tens of thousands of college students.
PA-18, in the South Hills is a split district with a slight current Clinton lean as there are more Reagan Democrats, and the one area of hope in tonight's numbers for Clinton was she won the Virginian foothills to the Appalachians. That area has significant commonality with significant portions of Washington and Westmoreland Counties. PA-4 to the north is another toss-up, but I think Obamaa can quickly capitalize on a unified progressive activist base while the powerful unions are split up north.
Friday, February 01, 2008
Hafer's weak 4th Quarter
I have been curious as to how Bethany Hafer did in the 4th quarter fundraising as her campaign seemed to have fallen off the face of the earth in December and early January. Her year end report has been filed and it was at best a mediocre quarter, as she took in roughly $25,000 in primary election money, and a couple of big donations for the general election fund. Interesting, and this may be an FEC data entry glitch, there does not appear to be any disclosable, $250+ donations in the 4th quarter. She spent more than she raised in the quarter, and was out-raised by at least one self-funding primary challenger, and by the incumbent Republican Tim Murphy. Over the course of the primary cycle, she has raised a little less than $100,000 in primary funds, which is more than Chad Kluko, the Democratic challenger in 2006 raised in the entire cycle.
This district is heating up with another Fighting Dem challenger entering the race earlier this month in Wayne Dudding and Dan Wholey dropping out of the primary race. Two Political Junkies recently attended events with Dudding and Hafer and has a good update on the coalition Hafer is trying to build:
Hafer is sending off the right markers and signals for Pittsburgh's progressives to support and fund her campaign. I know when I worked on Tom Kovach's campaign this was something that we tried to catalyze, but was unable to do so in an effective manner. I think she is right that this is a tough but winnable campaign for an aggressive Democrat; Murphy does a good job of blurring his and his party's sharper edges and his constituent service and outreach is not bad; not the best but not a net negative. But if she wants to be that Democrat, she needs to do better this quarter which is the last full quarter before the primary.
This district is heating up with another Fighting Dem challenger entering the race earlier this month in Wayne Dudding and Dan Wholey dropping out of the primary race. Two Political Junkies recently attended events with Dudding and Hafer and has a good update on the coalition Hafer is trying to build:
Ok, so I went to this meet and greet thing with Beth Hafer this evening at the Shadow Lounge. A more than respectable number of what I assumed to be mostly eastside progressives tucked into a dark room just across the street from the East Liberty Presbyterian Church....
City Councilman Bill Peduto hosted the event and before it began, I asked him about his connection to Beth Hafer's campaign. He said he was there to offer her support and to help out networking with some of the leaders of Pittsburgh's progressive community....
On the race, she said she was optimistic she could win it. There are more Democrats than Republicans in the district. And a sizeable number of independents. She's got a union endorsement: The Communications Workers Union. Going door-to-door she said she learned that even Republicans are upset with the way things are going. It's winnable, she said.
Hafer is sending off the right markers and signals for Pittsburgh's progressives to support and fund her campaign. I know when I worked on Tom Kovach's campaign this was something that we tried to catalyze, but was unable to do so in an effective manner. I think she is right that this is a tough but winnable campaign for an aggressive Democrat; Murphy does a good job of blurring his and his party's sharper edges and his constituent service and outreach is not bad; not the best but not a net negative. But if she wants to be that Democrat, she needs to do better this quarter which is the last full quarter before the primary.
Wednesday, January 30, 2008
2nd Order Impacts of Housing
Pittsburgh has escaped the worst of the first order effects of the bursting of the housing bubble as the city and region never really experienced the bubble. Good homes in decent school districts were and still are available for less than twice the area median household income. Pittsburgh is not alone in escaping the burst, as other Rust Belt cities never saw the boom:
However the second order effects of the bubble burst are being felt in Pittsburgh even if this region never got too frothy. The Post-Gazette reports today of the real estate industry job losses:
These are decent to well paying jobs; I interviewed for a couple of them in 2003 and 2004 and they were paying above median wages for people straight out of college. Pittsburgh is doing better than other Rust Belt cities but job growth has been slowing down in the region faster than the national slow down.
Ahh, the joys of integrated national economies so even when a region did not go crazy, the second order effects impact the region anyways.
Median sales prices for single-family homes in Pittsburgh increased 6.1 percent from a year ago, while some cities in Florida and California posted double-digit declines in sale prices during the same period, suggesting that home prices have fallen most dramatically in areas where the speculative frenzy was hottest.
"Pittsburgh doesn't have a hangover because it wasn't at the party," said Dr. Marc Louargand, president of the American Real Estate Society and a principal with Saltash Partners LLC in Hartford, Conn.
However the second order effects of the bubble burst are being felt in Pittsburgh even if this region never got too frothy. The Post-Gazette reports today of the real estate industry job losses:
The U.S. mortgage meltdown is roiling Pittsburgh's western suburbs in unexpected ways. Jobs, not homes, are being lost.
Pittsburgh-area companies eliminated 1,590 mortgage-lending and consumer finance positions between the end of 2005 and the end of 2007 -- the 10th highest drop among any metro area in the country, according to Moody's Economy.com.
Many of those layoffs occurred along the Parkway West, in towns such as Moon and Robinson, Coraopolis and Green Tree, where companies have aggregated to provide appraisals, title insurance, closing and deed preparation services for mortgage lenders nationwide.
These are decent to well paying jobs; I interviewed for a couple of them in 2003 and 2004 and they were paying above median wages for people straight out of college. Pittsburgh is doing better than other Rust Belt cities but job growth has been slowing down in the region faster than the national slow down.
Ahh, the joys of integrated national economies so even when a region did not go crazy, the second order effects impact the region anyways.
Wednesday, January 23, 2008
Update on the Hafer Campaign
I've been trying to get in touch with the Hafer campaign to follow up on my post asking what was going on with the low level of activity. I have a second order connection with the campaign manager via previous political work and LinkedIn and e-mailed him about a week ago, and also went through the website. So far I have heard nothing back. However, it looks like the campaign is active again after taking most of a month off from public events.
At least some events are being hosted in the next couple of weeks, and the phone number is the campaign office number. Good to see. The next thing I want to see if the 4th Quarter fundraising which should be released within the next week or so.
At least some events are being hosted in the next couple of weeks, and the phone number is the campaign office number. Good to see. The next thing I want to see if the 4th Quarter fundraising which should be released within the next week or so.
Tuesday, January 22, 2008
Categorizing Unemployment and Policy Responses
About a week ago, I wrote in response to a remarkably venal column by an economics professor the value of seeking Pareto improvements in deals and paying off the losers from the additional surplus society has gained:
The Washington Post had an interesting article this weekend concerning long term unemployment and how even in a 'good' labor market that we had until recently as measured by the unemployment rate, structural unemployment has been increasing:
So what are the appropriate policy responses to unemployment? What are the different types of unemployment that need to be considered? A gliberterian response is nothing is the appropriate policy response and the markets will clear once an individual's reservation price drops low enough, and if that price is below minimum wage, we should abolish minimum wage laws. Now that I am done beating that strawman to death, let's look at different types of unemployment.
The first is incidental/voluntary unemployment when someone leaves a job on their own free will and with no co-ercion on the part of the employer, management or co-workers. For instance when I was a dishwasher at a local bar, I left after I received a student loan windfall that was sufficient to cover my expenses for the rest of the year. The correct policy resopnse is to do very little here in my opinion unless there is clear evidence of co-ercion, discrimination or harassment, and then legal channels for dispute resolution and restitution are the proper channels.
Frictional unemployment will exist as people shift between jobs, people enter and leave the labor force, and people wait for work to get started. If there is high certainty that work will be starting in three weeks, the cost of finding and starting a temporary job for two weeks tends to be high enough to deter that course of action.
The next type of unemployment is cyclical unemployment. This is predictable unemployment where jobs temporarily go away in the field where an individual has a high degree of investment, skill, training and human capital. The classic example is the two week shutdown at a large steel mill during the summer for preventive and recurring maintenance. The plant sees 90% of its work force idle but everyone knows that in two weeks the plant will be back at full capacity. In this short term cyclical unemployment, minimal intervention is usually required as everyone knew about it in advance, and were able to plan around it. Frequently this planning includes taking voluntary or mandatory paid vacation or other compensation shifting. Another cyclical example is when companies cut back as revenue comes in under estimates. The job may disappear at that particular company but the job is still somewhere within the regional/national economy and there is just a matching problem. The public policy response is often very limited unemployment benefits as most states have at least a one week elimination period before anyone qualifies for benefits.
Policy becomes much more involved at longer term cyclical unemployment. My dad has worked in the construction industry for almost his entire adult life, and this is something that we have experienced several times as a family. The industry as a whole is down for a while, and there is no hiring, and no big projects are in the immediate pipeline. However, in the long run, there is work available and projects will start (eventually it seems at times). Bridging the gap between nothing now and plenty of work in the future takes the form of extended unemployment benefits, training for other opportunities to thin out the sector specific labor market. The goal here is to ameliorate pain as well as even out the labor pool so that there are sufficient people available for the boom times so that wage inflation does not take off.
Sometimes long run cyclical unemployment turns into structural unemployment where an individual's skill set and human capital do not map onto any locally available work at anything vaguely approximating their previous wage and permanent income assumptions. This is where significant policy intervention, in my mind, is justified. Retraining assistance, health-care subsidies and bridge programs as well as cash assistance will be appropriate. Wage insurance as a bridging program would be a good idea as people would have the resources to look for a new career. Society as a whole has a massive risk leveling ability that any individual does not have, especially if we assume that structural unemployment is a non-homogenous event and concentrates in specific localities at specific points in time. If we assume this, then local communities and individuals within these communities will be hit with systemic shocks that personal and local reserves will have a very difficult time covering.
Structural unemployment is very expensive for individuals and regions to bear. For instance Pittsburgh looks like it may soon be bottoming out from the structural loss of the integrated steel industry and this region has taken on massive per-capita debts and seen mediocre generational wage and job growth. A steel worker laid off in the massive waves of the early to mid-80s saw one of his main assets, his house, depreciate at the time that he needed access to his accumulated savings to change jobs, change careers and probably change locations.
There are other sorts of unemployment, and plenty of other means of policy intervention including the use of the disability insurance system as a means of reducing the labor force during tough times, as well as increased early retirements/buy-outs. And then there is the gray and black markets as unemployment responses such as working under the table, cash only to sweatshops manned by immigrants. But these basic types of unemployment cover most situations and describe the basic policy arrangements.
the cost of unemployment due to structural outsourcing from the combination of direct wage losses, direct re-training/job seeking expenses and indirect future losses due to the combination of a lower base wage and lower future trend growth
The Washington Post had an interesting article this weekend concerning long term unemployment and how even in a 'good' labor market that we had until recently as measured by the unemployment rate, structural unemployment has been increasing:
An unusually large share of workers have been out a job for more than six months even as overall unemployment has remained low....In November, nearly 1.4 million people -- almost one in five of those unemployed -- had been jobless for at least 27 weeks, the juncture when unemployment insurance benefits end for most recipients. That is about twice the level of long-term unemployment before the 2001 recession....
Once concentrated among manufacturing workers and those with little work history, education or skills, long-term unemployment is growing most rapidly among white-collar and college-educated workers with long work experience, studies have found, making the problem difficult for policymakers to address even as it grows more urgent.
The growth in long-term unemployment has occurred even as displaced workers have taken bigger pay cuts to reenter the job market. A 2004 study found that workers who lost a job in 2001 to 2003 took an average pay cut of 17 percent in their new jobs, more than double the average cut of those displaced in the late 1990s
So what are the appropriate policy responses to unemployment? What are the different types of unemployment that need to be considered? A gliberterian response is nothing is the appropriate policy response and the markets will clear once an individual's reservation price drops low enough, and if that price is below minimum wage, we should abolish minimum wage laws. Now that I am done beating that strawman to death, let's look at different types of unemployment.
The first is incidental/voluntary unemployment when someone leaves a job on their own free will and with no co-ercion on the part of the employer, management or co-workers. For instance when I was a dishwasher at a local bar, I left after I received a student loan windfall that was sufficient to cover my expenses for the rest of the year. The correct policy resopnse is to do very little here in my opinion unless there is clear evidence of co-ercion, discrimination or harassment, and then legal channels for dispute resolution and restitution are the proper channels.
Frictional unemployment will exist as people shift between jobs, people enter and leave the labor force, and people wait for work to get started. If there is high certainty that work will be starting in three weeks, the cost of finding and starting a temporary job for two weeks tends to be high enough to deter that course of action.
The next type of unemployment is cyclical unemployment. This is predictable unemployment where jobs temporarily go away in the field where an individual has a high degree of investment, skill, training and human capital. The classic example is the two week shutdown at a large steel mill during the summer for preventive and recurring maintenance. The plant sees 90% of its work force idle but everyone knows that in two weeks the plant will be back at full capacity. In this short term cyclical unemployment, minimal intervention is usually required as everyone knew about it in advance, and were able to plan around it. Frequently this planning includes taking voluntary or mandatory paid vacation or other compensation shifting. Another cyclical example is when companies cut back as revenue comes in under estimates. The job may disappear at that particular company but the job is still somewhere within the regional/national economy and there is just a matching problem. The public policy response is often very limited unemployment benefits as most states have at least a one week elimination period before anyone qualifies for benefits.
Policy becomes much more involved at longer term cyclical unemployment. My dad has worked in the construction industry for almost his entire adult life, and this is something that we have experienced several times as a family. The industry as a whole is down for a while, and there is no hiring, and no big projects are in the immediate pipeline. However, in the long run, there is work available and projects will start (eventually it seems at times). Bridging the gap between nothing now and plenty of work in the future takes the form of extended unemployment benefits, training for other opportunities to thin out the sector specific labor market. The goal here is to ameliorate pain as well as even out the labor pool so that there are sufficient people available for the boom times so that wage inflation does not take off.
Sometimes long run cyclical unemployment turns into structural unemployment where an individual's skill set and human capital do not map onto any locally available work at anything vaguely approximating their previous wage and permanent income assumptions. This is where significant policy intervention, in my mind, is justified. Retraining assistance, health-care subsidies and bridge programs as well as cash assistance will be appropriate. Wage insurance as a bridging program would be a good idea as people would have the resources to look for a new career. Society as a whole has a massive risk leveling ability that any individual does not have, especially if we assume that structural unemployment is a non-homogenous event and concentrates in specific localities at specific points in time. If we assume this, then local communities and individuals within these communities will be hit with systemic shocks that personal and local reserves will have a very difficult time covering.
Structural unemployment is very expensive for individuals and regions to bear. For instance Pittsburgh looks like it may soon be bottoming out from the structural loss of the integrated steel industry and this region has taken on massive per-capita debts and seen mediocre generational wage and job growth. A steel worker laid off in the massive waves of the early to mid-80s saw one of his main assets, his house, depreciate at the time that he needed access to his accumulated savings to change jobs, change careers and probably change locations.
There are other sorts of unemployment, and plenty of other means of policy intervention including the use of the disability insurance system as a means of reducing the labor force during tough times, as well as increased early retirements/buy-outs. And then there is the gray and black markets as unemployment responses such as working under the table, cash only to sweatshops manned by immigrants. But these basic types of unemployment cover most situations and describe the basic policy arrangements.
Friday, January 18, 2008
Ambac and Pittsburgh
Fitch Ratings downgraded municipal bond insurance company Ambac from AAA to AA. The downgrade is most likely the first of many downgrades as the value of the Ambac guarantee is becoming extraordinarily questionable.
The City of Pittsburgh has used AMBAC as a bond insurer for at least the 2002 general obligation debt offering but went to other insurers for the 2005 and 2006 restructurings. If the 2002 offering was structured similiarly to the 2005 and 2006 offerings, this insurance downgrade will not have any immediate impact as those two bond offerings did not have any clawback mechanisms.
The 2002 Ambac insured bond issue is similiar to the 2005 and 2006 structures. The most significant difference is that the city's fiscal health was slightly better in 2002 than in later years, so it was able/willing to borrow money over long terms. The balloon payments for this tranche of bonds do not start until 2012 instead of the 2010/2011 for the 2005 issue and 2008 and 2009 for Series A of the 2006 issue. The big chunk of 2006 is in Series B where the worrying times are after 2013.
With the municipal bond insurance market significantly weaker and a previous relationship now valueless, Pittsburgh has some breathing room in 2008 and 2009, but will need to issue a large refinancing/rollover bond by late 2010.
Credit rating agency Fitch Ratings downgraded bond insurer Ambac Financial Group Inc. to "AA" from "AAA" on Friday, which could force the company to stop writing new insurance....
The rating also remains on negative credit watch for a further downgrade.
The City of Pittsburgh has used AMBAC as a bond insurer for at least the 2002 general obligation debt offering but went to other insurers for the 2005 and 2006 restructurings. If the 2002 offering was structured similiarly to the 2005 and 2006 offerings, this insurance downgrade will not have any immediate impact as those two bond offerings did not have any clawback mechanisms.
The bonds were sold as AAA with insurance and anything that happens after that which impacts the ratings is borne by the new bond holders. That means there is no short term fall-out.
The intermediate term fallout and increased expenses for the city will come when the bonds start to balloon mature in 2009 to 2011 from these two tranches. The city will not have enough cash to pay those maturing bonds off, so they'll have to rollover the debt or at least a significant portion of it
The 2002 Ambac insured bond issue is similiar to the 2005 and 2006 structures. The most significant difference is that the city's fiscal health was slightly better in 2002 than in later years, so it was able/willing to borrow money over long terms. The balloon payments for this tranche of bonds do not start until 2012 instead of the 2010/2011 for the 2005 issue and 2008 and 2009 for Series A of the 2006 issue. The big chunk of 2006 is in Series B where the worrying times are after 2013.
With the municipal bond insurance market significantly weaker and a previous relationship now valueless, Pittsburgh has some breathing room in 2008 and 2009, but will need to issue a large refinancing/rollover bond by late 2010.
Tuesday, January 08, 2008
What's Up with the Hafer campaign
In the 2006 cycle, I did a little bit of volunteer work in the Democratic primary for Pennyslvania's 18th District, currently held by incumbent Republican Tim Murphy (R-Upper St. Clair). Congressman Murphy rolled up an easy win in a lean GOP district that is definately flippable. This was his third straight token opposition victory in a district that should be contested. The ideological ground is no worse, in my opinion, than the 4th Congressional District which was taken by conservative Democrat Jason Altmire away from Santorum ally Mellisa Hart in 2006.
Democrats have offered fairly weak candidates in the past with minimal funding. Candidates have not had either the pre-exisiting social and political networks that could put in a reasonable amount of early viability cash, OR had the charisma, luck and grit to raise the initial viability cash.
This time around, Bethany Hafer, a member of a regional political family through her hat into the ring to contest the Democratic nomination, and through the 3rd Quarter of 2007, had shown decent fundraising; pulling in roughly $75,000 or slightly less than what the Democratic general election candidate could raise during the entire election cycle in 2006.
Going through the disclosed donor list, she is pulling an interesting collection of donors. There are establishment Democrats, office holders and Friends of XYZ committee donations that show the good ole boy's network support, and also a couple of reasonably influential local progressive activists have donated at least $250.
Checking out the disbursement data, the campaign manager, or at least the only person who was routinely getting paid for 'consulting services' has a recent success running an effective GOTV program that pushed a progressive candidate over the top in a local primary. I still think this race is a tough pick-up opportunity for Democrats, but the early viability building blocks are in place.
And then I checked on her website and there is a problem here:
Nothing scheduled for most of the past month. Where are the meet and greets? Where are the Westmoreland County Democrats Hot Cocoa and Membership Meetings? Where are the hand shakes at the Peters Township High School basketball games? Furthermore, there is no mention of her or her campaign on Google News:
What's going on here? Murphy is beatable, but it will take an active and energetic candidate to do so, and I am not seeing that right now. What am I missing here?
Democrats have offered fairly weak candidates in the past with minimal funding. Candidates have not had either the pre-exisiting social and political networks that could put in a reasonable amount of early viability cash, OR had the charisma, luck and grit to raise the initial viability cash.
This time around, Bethany Hafer, a member of a regional political family through her hat into the ring to contest the Democratic nomination, and through the 3rd Quarter of 2007, had shown decent fundraising; pulling in roughly $75,000 or slightly less than what the Democratic general election candidate could raise during the entire election cycle in 2006.
Going through the disclosed donor list, she is pulling an interesting collection of donors. There are establishment Democrats, office holders and Friends of XYZ committee donations that show the good ole boy's network support, and also a couple of reasonably influential local progressive activists have donated at least $250.
Checking out the disbursement data, the campaign manager, or at least the only person who was routinely getting paid for 'consulting services' has a recent success running an effective GOTV program that pushed a progressive candidate over the top in a local primary. I still think this race is a tough pick-up opportunity for Democrats, but the early viability building blocks are in place.
And then I checked on her website and there is a problem here:
Nothing scheduled for most of the past month. Where are the meet and greets? Where are the Westmoreland County Democrats Hot Cocoa and Membership Meetings? Where are the hand shakes at the Peters Township High School basketball games? Furthermore, there is no mention of her or her campaign on Google News:
What's going on here? Murphy is beatable, but it will take an active and energetic candidate to do so, and I am not seeing that right now. What am I missing here?
Thursday, December 27, 2007
Pittsburgh Bond Risk Assessment
I've been worried about the turmoil in the bond insurance market as Pittsburgh has massive amounts of debt that it will need to roll over in the reasonably near future. I have spent some time over the Christmas break reading through the 2005 and 2006 bond reports and a little more digging, so when I saw this story at Calculated Risk this morning, I was able to breathe a little easier:
Fitch is basically saying that they don't trust the value of the insurance on these bonds, which given what has gone on in the credit markets makes a whole lot of sense. However, when I went through the two most recent general obligation bond reports, the city does not have any clawback mechanisms on the interest rates as confidence building measures for bond holders. The bonds were sold as AAA with insurance and anything that happens after that which impacts the ratings is borne by the new bond holders. That means there is no short term fall-out.
The intermediate term fallout and increased expenses for the city will come when the bonds start to balloon mature in 2009 to 2011 from these two tranches. The city will not have enough cash to pay those maturing bonds off, so they'll have to rollover the debt or at least a significant portion of it. At that point the city's recent slightly improved credit rating of BBB comes into play if the guarantee value of bond insurance is near nil. At that point the city will be paying significantly higher debt service costs.
Fitch Ratings on Wednesday said it may cut its ratings on certain residential mortgage-backed securities insured by MBIA Inc, Ambac Assurance Corp, FGIC Corporation and Security Capital Assurance.
Fitch said it may cut 87 MBIA-insured mortgage bonds, 64 Ambac-insured bonds, 35 FGIC-insured bonds and 19 SCA-insured bonds.
Fitch is basically saying that they don't trust the value of the insurance on these bonds, which given what has gone on in the credit markets makes a whole lot of sense. However, when I went through the two most recent general obligation bond reports, the city does not have any clawback mechanisms on the interest rates as confidence building measures for bond holders. The bonds were sold as AAA with insurance and anything that happens after that which impacts the ratings is borne by the new bond holders. That means there is no short term fall-out.
The intermediate term fallout and increased expenses for the city will come when the bonds start to balloon mature in 2009 to 2011 from these two tranches. The city will not have enough cash to pay those maturing bonds off, so they'll have to rollover the debt or at least a significant portion of it. At that point the city's recent slightly improved credit rating of BBB comes into play if the guarantee value of bond insurance is near nil. At that point the city will be paying significantly higher debt service costs.
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