Wednesday, May 14, 2014

Conservative Politics and Economics Result in Downgrading Credit Ratings, Low Job Growth

 photo ShrinkingDollar.jpgConservatives believe things which are demonstrably false, untrue, factually deficient, and never more so than in their insistence that government spending is bad or that taxation takes money out of the economy or that tax cuts will lead to prosperity and growth, including job growth.

They don't.  They do the opposite, as conservative ideology operates in the real world.

Yesterday, Chris Christie's state of New Jersey, which is facing a serious short fall after enacting his right wing fiscal policies, had its SIXTH credit rating downgrade under his leadership.  SIX credit rating downgrades -- and he was only re-elected to his second term as governor a year ago last November.  From Bloomberg News:
New Jersey Debt Rating Cut by Fitch on Revenue Shortfall
New Jersey’s credit rating was lowered one step to A+ by Fitch Ratings, which cited an $807 million revenue shortfall and Governor Chris Christie’s likely use of one-time measures to plug the gap.
The company cut the state’s general-obligation debt to the fifth-highest investment grade, saying revenue forecasts were “overly optimistic.” Fitch also expressed concern over “both the scale and belatedness” of the shortfall, with two months left in the fiscal year. Fitch maintained a negative outlook on the state’s credit, meaning it may face a further downgrade.
The move affects $2.4 billion in general-obligation bonds and Fitch also cut its grades on $32 billion in other debt. It marked the second time the ratings company has lowered New Jersey since Christie took office in January 2010. Standard & Poor’s has cut New Jersey’s rating twice and Moody’s Investors Service has also lowered its ranking.
“Above-average state debt obligations are compounded by significant and growing funding needs for the state’s unfunded retirement liabilities,” Fitch said in a statement announcing the decision.
Christie, a 51-year-old Republican weighing a White House run in 2016, has said “nothing is off the table” as his administration attempts to close the gap. Most of the shortfall is because of a $700 million drop in income-tax collections.
Remember when Republicans controlled the House and Senate, back in 2010-11 term, and they shut down the government for awhile?  That was the result of the same general era of Tea Party/conservative wave of 2009 and 2010 elections that put Chris Christie into office. Both Fitch and Moody's lowered the state's credit rating back then, although only a little.  You can't lower a credit rating only a little when you do it six times.  According to Bloomberg News:
The three major rating companies have all cited recurring deficits as revenue fails to meet Christie’s projections.
“The downgrade to A1 reflects the weakened financial position resulting from recurring revenue shortfalls and ongoing reliance on non-recurring resources that have deferred structural imbalances into future years,” Moody’s analyst Baye Larsen said in the report. She said the state’s outlook was negative, meaning it may face a further downgrade.
We were lucky, we elected Mark Dayton, not his opposition, inept right wing nut Tom Emmer.
A little reminding of what that was like from Minnesota State News:
On Monday, Moody’s Investor Services lowered the state’s outlook from "stable" to “negative," citing "political intractability" and continued deficits as the reasons for the downgrade.
Despite the negative outlook, the state kept its AA1 credit rating from Moody’s, currently the second highest available rating from the prominent rating agency.
Fitch Ratings lowered Minnesota’s bond rating last month from the highest AAA rating to AA+ in the midst of the state's second government shutdown in six years.
Unfortunately, years of budget uncertainty and short-term budget solutions have been enough to take Minnesota’s credit future down a notch.
Remember the federal government shut down by Republicans and the debt limit fight?  We saw a national lowering of our credit rating thanks to them, as well.
Republicans, nationwide and at the state level, want to duplicate the disastrous tax policies of red states, and no state has done that more completely than Kansas.  Here is what that produced, in addition to lowering their credit rating, according to the Kansas City Star:
Kansas tax revenues fall while other states see rise
Glowing words about the Kansas economy gushed regularly from Gov. Sam Brownback’s administration following deep income tax cuts enacted during the last two years.
But a new report out last week shows Kansas is losing revenue even as tax collections grew in most other states.
Kansas stood among 10 states with revenue declines for the first half of fiscal year 2014, according to a new report by the Nelson A. Rockefeller Institute of Government at the State University of New York.
Of those states, Kansas saw the second-biggest decline. The drop-off followed income tax cuts that began in January 2013.
The news turned worse when April tax collections fell $93 million short of estimates, followed by a slight downgrade in the state’s credit rating. Overall, state revenues are down $480 million for the first three quarters of the current fiscal year. The state’s budget is about $15 billion.
Missouri lawmakers are watching the Kansas experience. Democrats fear the tax cuts approved this week over Gov. Jay Nixon’s veto will eventually leave holes in the Missouri budget.
“Our budget is in real trouble,” said Rep. Stephen Webber, a Columbia Democrat. “Any economic development policy that says, ‘We want to be like Kansas’ is an inherently bad policy.”
Ah, but how important are things like credit ratings and gi-normous revenue shortfalls? Another headline from the Kansas Star sums it up - and this is important, because these Republicans governors are trying to blame the failures of their policies and their right wing legislatures on President Obama:
Under Gov. Sam Brownback, Kansas lags neighboring states and the nation in job growth
The Star compared the Kansas employment statistics with those of six neighboring states as well as the U.S. average. We used the Bureau of Labor Statistics nonfarm employment data, which cover the large majority of jobs in America.
One key takeaway is to look at the percentage of job growth from January 2011 through March 2014:
• Colorado up 8.2 percent (183,000 more jobs)
• Oklahoma up 5.6 percent (88,000 jobs)
• U.S. average up 5.5 percent.
• Iowa up 4.2 percent (62,000 jobs)
• Nebraska up 4.0 percent (38,000 jobs)
• Missouri up 3.7 percent (97,000 jobs)
•  Kansas up 3.4 percent (46,000 jobs)
• Arkansas up 2.2 percent (25,000 jobs)
Keep in mind that the rapid growth in Kansas and all of these states came after a recession that sapped millions of jobs out of the U.S. economy.
Kansas, for instance, lost 58,000 jobs in 2009 alone. Even after four years of growth since the recovery started in 2010, the state is still below its high water mark of jobs in mid-2008. But Colorado, Iowa, Nebraska and Oklahoma all have more jobs than ever.
Read more here:
And, as noted by the Wichita Eagle yesterday:
That message was driven home as new figures showed state revenues fell $92.8 million short of projections for April. Fooling almost no one, the Brownback administration blamed the problem on President Obama’s tax policies. The next day, Moody’s Investors Service lowered the state’s credit rating a notch.

1 comment:

  1. Quick question : What do these three states have in common ?

    •North Carolina: North Carolina reports one of the most rapidly falling unemployment rates in the country, but these improvements are partially superficial. When workers give up and stop looking for work, they no longer count as unemployed – which means they are no longer included in the unemployment count. In North Carolina, 49,400 workers exited the labor market without having found a job over the course of the last year.
    The response from the government ... The state plans to cut unemployment benefits to a maximum of just 14 weeks, the fewest in the nation.

    •South Carolina: Similarly, in South Carolina, 23,900 workers disappeared from the official numbers without having found a position, contributing to the drop in the state’s unemployment rate.

    •New Jersey: In New Jersey, official unemployment numbers also fail to tell the whole story. Almost 80,000 fewer New Jerseyans are counted in this April’s jobs data compared with last year. Preliminary numbers for April suggest that there have been few, if any, net new jobs created in the last year in the state.