Mid-Term Elections and the Economy
The mid-term elections last week resulted in a substantial overhaul of Congress. Though certainly not unprecedented, the preferences of the voters could result in changes in vital legislative actions and even have some impact on the nation’s economy.
With the change in leadership scheduled for January, many officeholders are now participating in their final session of Congress. In some cases, the actions of these lame ducks, as they take another quack at it, could be of significant importance. More likely, however, many major decisions will be delayed until next year while political maneuvering and orientation takes place, and while refresher programs on ethics are offered in efforts to eliminate scandals which undoubtedly had some part in the election of some new members to Congress.
There are those who consider the November 7 elections to be a referendum on the war in Iraq, particularly in regard to policy direction and exit strategies. As a result, efforts are now underway in various corners to effect changes in the principles and procedures that have guided US activities and actions in that part of the world over the past four years.
Some who cast their ballots may now be fearful that their hopes and plans will somehow be lost due to the power shift and the logistical changes normally associated with periods when the House and Senate are controlled by one political party and the Executive branch administered by the other.
There is some validity to both concepts, but perhaps of more importance for the future of our nation is the manner in which the two parties govern over the next year or two, especially in those areas relating to the economy.
The US economy, of course, is still expanding, but the rate of growth has been slowing slightly over the past two quarters. There is some optimism that this dip is temporary as profit margins remain strong and capital goods data continues to be positive. However, actions taken within the Washington Beltway could have some impact on their future direction.
Will our legislative and executive branches be guided in the future by “partisan politics” where our elected officials overcome the potential for gridlock and work together to develop appropriate plans and programs or by the goose-and-gander retribution philosophy? While it may be difficult to know at this point, we can be aware of the many important issues they will be considering, several of which are associated with the economy.
As a result of the mid-term elections, the probability of minimum wage legislation has increased. On the other hand, a notable change in tax policy would likely run into a Presidential veto.
Although the ongoing war in Iraq took center stage in much of the pre-election debates, it is an issue which is almost certain to take years to resolve. However, the fallout for the economy is minimal barring an unforeseen escalation.
Irrespective of political considerations related to immigration, the US economy is dependant on the immigrant workforce. Finding effective ways to make the process of immigration more efficient while maintaining security is vital to future prosperity.
A few other issues on tap for our government leaders to consider include how to reduce the budget deficit, overhaul Social Security and Medicare, alleviate rising health care costs, eliminate dependency on foreign energy sources, make adjustments to regulatory matters, and improve international trade, especially the imbalance. The list is much more extensive, but space precludes my including more.
Oftentimes, elected officials in DC look at situations through partisan-colored glasses. On special occasions, they don a-political spectacles and thereby seem to govern more effectively and efficiently. The manner in which the legislative and executive branches work together in the future will reveal the vision of our nation’s leaders. What they see and how well they act together can have long lasting impact on our daily lives.
The Value of Higher Education
Education has played a pivotal role in Texas history. In fact, the Mexican government’s failure to provide funds for this purpose in the early 19th century was a major facet of the platform Texans proffered in their desire for independence in 1836.
Soon after the Republic was constituted, public education programs for children began to be developed, and by 1840, the first institution of higher education had been established.
The value of education has never diminished, and today, with the requirements for a highly skilled workforce, its need and significance are more important than ever before. Those who complete high school and continue their formal training are more likely to obtain higher paying jobs, and many positions are only open to those who successfully complete specific higher education programs.
This fact is not lost on today’s youth, and our state’s institutions of higher education continue to experience increases in enrollment even as the cost of education similarly escalates.
Preliminary data for Texas shows that the number of students taking college courses this semester exceeds last fall’s enrollment by more than 27,200. The 1.21 million currently in colleges and universities, both public and private, is about 2.3% more than in the fall of 2005.
Approximately 80% of aggregate enrollment growth this fall is in two-year schools. Public community/state/technical colleges and independent junior colleges added 19,793 students. These institutions now provide more than 48% of the higher education opportunities throughout Texas.
Among the public colleges, enrollment ranges from 49,738 (University of Texas at Austin) to 968 (Sul Ross State University Rio Grande College). Student body size in independent institutions varies from 14,040 (Baylor University) to 44 (College of St. Thomas More).
Some 678 individuals have started taking courses in the various medical, dental, and health-related entities available across the state to raise enrollment to 16,228 in public institutions and 2,769 in private schools.
Numerous studies completed through the years invariably note the positive impact of higher education on both the state and local economies. General revenue and local property taxes provide the public higher education system approximately $6 billion annually. The Texas Comptroller of Public Accounts estimates that for every $1 spent by the State to educate our youth beyond the high school level, returns to the Texas economy about $5.50. However, even this large return only tells part of the story.
The spending and re-spending of salaries, as well as the monies made available by students, endowments, grants, research, and health care provide about one-third of the more than $33.2 billion the state economy receives each year through higher education. The remainder is generated by the greater earnings and productivity of graduates. In addition to these positive effects, the state also benefits from the far lesser likelihood that persons with college degrees or other certifications will ever require expensive social services provided by the State (such as Medicaid or food assistance programs).
Higher education is also proving advantageous to individuals as the National Association of Colleges and Employers has recently reported that businesses are expecting to hire 17.4% more college grads in 2007 than in 2006. Entry-level salaries are also increasing in many fields, particularly in the five best “money-making” majors—chemical engineering, electrical engineering, computer engineering, mechanical engineering, and computer science.
Traditionally, liberal arts graduates enter the workforce at a lower pay scale than those with technical degrees. However, the opportunities are expanding for individuals with diplomas in subjects such as English, history, and psychology, and most graduates with critical thinking skills, regardless of the major, are often the best candidates to eventually move into management positions.
Even though higher education enrollment continues to increase, this year’s hike, while about twice the gain from 2004 to 2005, is less than the growth rate the state experienced annually during the 2001 to 2004 years. Greater numbers of students will need to enroll in the more than 140 higher education opportunities in the future if we are to reach the Lone Star State’s Closing the Gaps by 2015 higher education annual participation goal of 1.6 million students.
It’s a most worthy objective and will invariably prove beneficial to Texans and the Texas economy.
posted @ 08:17 AM CST [link]
Friday, November 3, 2006
The Trans-Texas Corridor: An Idea Worth Pursuing
The ability to move people and things in an efficient manner is essential to competing in a global environment. Economic and population growth have strained many aspects of Texas’ transportation infrastructure, particularly in urban areas. Congestion not only decreases safety, it also reduces economic efficiency, raises transportation costs, and otherwise hampers the competitiveness of the state economy.
With the growing population and expanding economy of Texas, transportation constraints and congestion will only worsen over the coming decades. In fact, the Texas Department of Transportation (TxDOT) projects that road use will rise by 214% during the next 25 years. Although TxDOT engages in an active program (spending several billion dollars each year in State and federal funds) of maintaining and upgrading existing roadways and extending capacity, it is estimated that traditional approaches and resources can only meet about 36% of significant needs. It is obvious that something must be done.
The Trans-Texas Corridor (TTC) is a proposed statewide network of multi-use transportation routes that will significantly expand transportation capacity. The TTC is vital to relieving congestion, increasing safety, enhancing efficiency, and improving the prospects for economic development and trade. In fact, such infrastructure will serve as a significant incremental stimulus to the future prosperity of the state economy.
Funded through innovative public-private partnerships, various routes are to be completed as justified by traffic patterns and economic feasibility, beginning with the TTC-35 route. The TTC-35 is approximately 800 miles long and a maximum of 1,200 feet (less than ¼ mile) in width and runs basically parallel to I-35.
My firm recently completed a study of the TTC entitled Moving Into Prosperity: The Potential Impact of the Trans-Texas Corridor on Business Activity in Texas. Here are some of the key findings from our analysis.
The economic stimulus associated with development of the TTC system is substantial. Over the next 25 years, the cumulative overall benefits of the TTC-35 are conservatively estimated to be $1.429 trillion (in constant 2005 dollars) in Gross State Product ($845.5 billion on a net present value basis) and 14.829 million person-years of employment. These benefits would continue to grow, and other corridors, such as the proposed TTC-69, would generate substantial additional effects.
Construction and development of the Trans-Texas Corridor stands to fundamentally shift the Texas economy into a more competitive position. TTC development will stimulate business activity and investment in the areas along the corridor routes. Because the TTC enhances efficiency, improves logistics, and reduces transportation time and costs, it increases the ability of companies within the region to expand intrastate trade and operations, and, thus, increases market size and market share on a global basis. These factors improve competitiveness and profitability across a broad spectrum of industrial sectors, and the strategic position of Texas as a site for corporate locations and expansions is enhanced.
The activity generated by the TTC also provides investment, job opportunities, and increased tax revenues to municipalities and other local governments throughout the relevant areas. Moreover, at project maturity, local government revenues from other sources (such as sales and occupancy taxes) will rise by about $1.4 billion per year (in constant 2005 dollars). These amounts can be used to enhance public services and other infrastructure to better meet existing needs and accommodate the higher levels of business activity and prosperity.
Rural areas also benefit, and the net taxable value of agricultural land along the TTC-35 Corridor is expected to rise by a minimum of 8.1% based on aggregate receipts (net of land removed for right-of-way). Even using maximum reductions in agricultural production, the annual gains to farmers and ranchers from enhanced efficiency and development exceed the losses by a ratio of 39.4 to 1 in the TTC-35 area. Under the conservative value capture scenarios for intracorridor and external trade, the agriculture sector enjoys a net gain of $1.7 billion per year (in constant 2005 dollars at maturity) and 10,927 jobs along the TTC-35 route. Even in the absence of intracorridor and external trade gains, the net impact on the agriculture sector remains positive.
Individuals within the corridor areas would enjoy reduced travel times, more cost-effective purchasing options, and increased job opportunities. Local residents also benefit from lower levels of congestion, greater public safety, and improved environmental conditions. These quality-of-life effects are notable; traffic congestion is an important factor in the perceived desirability of living in various areas. Enhancing Texas highway infrastructure will better position the state to attract firms with large concentrations of knowledge workers and other desirable forms of economic development.
By leveraging private resources, the State is able to increase overall competitiveness and the business climate. At maturity, the activity generated with the TTC-35 brings an annual increment to State revenue of approximately $6.9 billion per annum (in constant 2005 dollars), while the TTC-69 offers a yearly revenue enhancement to the State of about $3.2 billion.
The TTC provides much-needed transportation capacity to meet the long-term growth requirements of the Lone Star State. The enhanced system of transportation will increase productivity and earnings of companies operating within the state, and strengthen the attractiveness of Texas as a location for other businesses. Decreasing congestion also has a positive impact on quality of life.
In short, the TTC improves the competitive position of Texas in the national and international marketplace. Change is always difficult, and new ideas often face substantial concern and controversy. Election season doesn’t do anything to help the situation. Nevertheless, infrastructure to support economic growth is essential to achieving long-term prosperity, and the TTC represents a fundamental new concept that will enhance the prosperity of Texas and Texans in both absolute and relative terms for generations to come.
posted @ 07:41 AM CST [link]