Planning Decisions, Inc.

THE BOTTOM LINE FROM CHUCK LAWTON

Why Should We Invest?

Published Sunday May 11, 2008

Looking back over the past two decades in the Maine economy, two dominant trends emerge—slow growth and structural change.

Between 1990 and 2006, total employment in Maine—full and part time, from all sources—grew at an average annual rate of 1.1 percent. The equivalent growth for the U.S. as a whole was 1.6 percent, nearly 50 percent faster. Over the same period, the average earnings per worker in Maine increased at an average annual rate of 2.9 percent, 20 percent more slowly than the national average rate of 3.7 percent. At least in part because of these relatively slower rates of growth of employment and average earnings, Maine’s population grew only one third as fast as the nation as a whole—averaging an increase of only 0.4 percent per year compared to the national average of 1.1 percent.

Maine’s Potential for Energy Savings

Published Sunday May 4, 2008

The Muskie School at USM and the Margaret Chase Smith Center at the University of Maine recently released a joint report on the gains Maine could enjoy from greater energy efficiency—Energy Efficiency, Business Competitiveness and Untapped Economic Potential in Maine, prepared for the Governor’s Energy Summit, April 3, 2008. The report’s most striking finding is not that we can gain from increasing energy efficiency (that applies to everyone, after all), but rather that ours is such an energy intensive economy. Maine ranks 24th among the 50 states plus Washington, D.C. in terms of energy used per dollar of Gross State Product and 20th in terms of energy used per resident.

Treating Public Spending as an Investment

Published Sunday April 27, 2008

So what, exactly, does it mean to treat public spending as an investment? Rob Grunewald and Art Rolnick, two economists from the Federal Reserve Bank of Minneapolis, give us an example by describing the results of a study of 123 children from low-income families in Ypsilanti, Michigan. Back in the 1960’s, the children were randomly divided into two groups. One attended a special preschool program involving daily sessions with trained teachers and weekly home visits. The second, or control, group. had no pre-school program. Both groups were tracked through age 40. The results were remarkable.

Investment and the State Budget

Published Sunday April 20, 2008

Is the glass half empty or half full? Most of the talk about taxes and the state budget revolves around the concept of “burden.” What percentage of income or earnings does the state “take” and how does that affect people’s behavior? Do they not invest in Maine, not come to Maine, or leave Maine because of this “burden?” State taxes and spending in this context are seen as entirely negative.

Policy Simulation Game: The Long-term Short-term Paradox in Augusta

Published Sunday April 13, 2008

It is more than slightly ironic that all of the budget decisions in Augusta are made in the short term and all of the reasons supporting them can be known only in the long term.

Human Capital and Public Policy

Published Sunday April 6, 2008

One of the most fundamental insights of economics is the concept of investment—spending more money today for the purpose of gaining even more tomorrow. The concept is readily understood for machinery—we spend more today for solar panels or windmills with the expectation of paying less for electricity over the life of the machinery. And enough less to more than offset the higher immediate cost of replacing our old generators with the newer, less oil dependent versions. Whether these investments ultimately pay off depends on the future prices of oil, natural gas and coal. In short, investment is a bet that a new way of doing something will, over some future time span, prove superior to the current way.

Oil Tank Farms, Creativity and Growth

Published Sunday March 30, 2008

The Maine Center for Creativity kicked off its signature event this week—an international competition to solicit designs for painting the Sprague oil tanks in South Portland. Sprague’s operational manager, the state’s tourism director, South Portland’s city manager and Portland’s mayor all gushed rhapsodic about creating a beautiful landmark at one of our region’s most visible gateways. Over the years, millions of auto and air travelers will remember their entry into Maine by whatever strikingly different appearance the soon to be repainted oil tanks assume. Talk of an unforgettable, “world-class” destination attraction filled the room. My head was spinning with visions of the Colossus of Rhodes, the Sydney Opera House, the Guggenheim Museum in Bilbao, Spain.

Margin Calls Are Coming for Everyone

Published Sunday March 23, 2008

If nothing else, the last several weeks have given both ends of the income spectrum a harsh lesson in the dangers of playing with other people’s money. Billionaire currency speculators on Wall Street and special needs children in Wilton have both been getting margin calls.

Where Have All the Migrants Gone?

Published Sunday March 16, 2008

One of the central themes of The Brookings Report was the apparent discrepancy in Maine between fact and attitude. While our population was growing as a result of people from away “voting with their feet” by moving to Maine, we were “stuck: surprisingly pessimistic about [our] future.” We didn’t seem to appreciate the advantages we enjoyed.

Tax Burden and the Private Sector

Published Sunday March 9, 2008

I’ve been thinking, over the past several weeks, about the relationship between state and local tax burden and economic growth. Proponents of cutting taxes argue that a high tax burden—measured as taxes and fees collected as a share of personal income—leads to slower economic growth, meaning growth in jobs and income. But examination of the data for the fifty states over the past two decades showed that such a simple relationship doesn’t hold true. This is in part because of the immense complexity of the economic development process—there are so many factors involved that it is virtually impossible to isolate the impact of one alone—and in part because a substantial portion of the tax burden is in fact income, most importantly Medicaid and retirement payments.