Economy




A Cooked Goose Lays No Golden Eggs

JULY 21, 2015

Gov. Wolf continues to promote a severance tax on natural gas, even as Pennsylvania energy companies report financial losses and job reductions.

This week, Consol Energy projected a second quarter loss—largely because of low energy prices—and said it would record a significant write-down on certain oil and gas assets. Consol stock is down 43 percent over the past three months. It is cutting 470 workers across its coal, gas and corporate operations.

Numerous other energy companies have instituted cutbacks in Pennsylvania operations. Among them are Noble Energy, Chevron Corp., Universal Well Services and Halliburton.

As is often said, those who cannot remember history are doomed to repeat it. Wolf's tax push brings to mind the federal windfall profits tax on oil companies 35 years ago.

Ignoring huge tax receipts routinely generated by the oil industry, politicians reacted to rising gasoline prices with the enactment of the Crude Oil Windfall Profit Tax Act of 1980 to punish "greedy" energy producers.

The tax depressed the domestic oil industry, increased foreign imports and raised only a tiny fraction of the revenue forecasted, according to a 1990 Congressional Research Service study.

The view that energy companies are geese with an infinite supply of golden eggs flies in the face of economic reality, and is refuted by news reports almost daily.

With such a backdrop, a Wolf energy tax won’t bring the fabled golden eggs, but could fatally cook the goose of Pennsylvania's economy. 

posted by GORDON TOMB | 08:13 AM | Comments

Losers Outnumber Winners Under King v Burwell Decision

JUNE 26, 2015

Yesterday’s US Supreme Court decision to uphold taxpayer subsidies on healthcare.gov brought a collective sigh of relief to Pennsylvanians, like Barbara, who depend on subsidies to make health insurance somewhat affordable. But lost in much of the news coverage are the losers, like Mark, who still can't afford his premiums. In fact, there are ten times as many losers as winners thanks to the court's decision.

Had the court ruled federal subsidies illegal, more than 460,000 Pennsylvanians would have been freed of the individual mandate tax due to an affordability exemption. Likewise, employers would have been freed of the employer mandate. The American Action Forum estimated the exemptions would have added 62,693 to the workforce by 2017.

Broadly speaking, no one wins under the Obamacare status quo. Instead of health insurance premiums going down, as promised, they’ve increased. Even Pennsylvanians with highly subsidized exchange plans are bracing for large rate hikes. Some exchange insurers are asking for premium increases of more than 50 percent next year. Add in the burden of high deductibles, and one has to question exactly how the Affordable Care Act is making health care more affordable.

Even people receiving subsidies want to see major changes to the law.

It’s now up to Congress to deliver the type of consumer-centered reforms that will give Pennsylvanians more choices, lower rates and better access to quality care.

posted by ELIZABETH STELLE | 09:39 AM | Comments

30,000 Jobs at Risk

JUNE 23, 2015

Middle class job opportunities are at risk.

We all know that strong middle class employment is at the heart of a healthy economy, but Gov. Wolf’s massive tax increases would dramatically suppress future job creation.

The Commonwealth Foundation analyzed the overall impact of Gov. Wolf’s proposals—and the results aren’t pretty.

Approximately 30,000 jobs would not be created in 2015-16 under Gov. Wolf’s budget proposal, according to an economic modeling program from the Beacon Hill Institute at Suffolk University. To put that figure in perspective, consider that the Bureau for Labor Statistics estimates Pennsylvania added roughly 50,000 jobs over the last 12 months.

Total Employment

Fiscal Year

Without Wolf Taxes

With Wolf Taxes

Jobs Not Created

2015-16

5,764,652

5,735,243

29,408

2016-17

5,815,360

5,777,047

38,313

2017-18

5,866,631

5,829,821

36,810

2018-19

5,918,471

5,882,391

36,080

2019-20

5,970,885

5,935,404

35,481

If one excludes government employment—which would slightly tick up as a result of Gov. Wolf’s government spending increases—more than 39,000 private sector jobs would not be created in 2015-16.

Private Sector Employment

Fiscal Year

Without Wolf Taxes

With Wolf Taxes

Jobs Not Created

2015-16

5,063,968

5,024,759

39,209

2016-17

5,116,985

5,076,586

40,399

2017-18

5,170,557

5,132,299

38,258

2018-19

5,224,691

5,186,636

38,055

2019-20

5,279,391

5,241,433

37,957

This is bad news for thousands of Pennsylvanians looking for work. Families can’t afford to be squeezed between higher taxes and fewer job opportunities.

posted by ELIZABETH STELLE | 03:45 PM | Comments

The Next 1,360 Days

APRIL 30, 2015

Governor Wolf marked his 100th day in office by providing a list of accomplishments. In reality, the memo is more of a status update since many of his initiatives, including the natural gas tax and his budget proposal, are a long way from passage.

But the real question is not what the governor accomplished in an arbitrary 100 days, but what he can do over the next 1,360 days to improve the lives of Pennsylvanians. Here’s a few suggestions based on the governor’s goals for Pennsylvania:

Protect taxpayers to foster "jobs that pay."
Elected officials should pass the Taxpayer Protection Act (TPA) to protect the middle-class from reckless spending and tax increases. The TPA limits future government spending to inflation plus population growth. Reining in government spending is critical to creating an economic climate that attracts jobs—and working Pennsylvanians deserve a government that lives within its means.

Put students first to build "schools that teach."
Our education system is broken. From the commonwealth’s senseless funding formula, to wasteful mandates like prevailing wage, to the need for more school choice, there are many ways for the governor to create an education system that truly serves students. Gov. Wolf should work with the legislature to create a funding formula where dollars follow the students, repeal prevailing wage and remove obstacles to greater school choice, such as creating alternative authorizers for charter schools.

Enhance transparency and accountability to create a "government that works."
The lack of transparency in Harrisburg and special privileges enjoyed by select groups have created a system ripe for corruption and abuse. In his next 1,360 days, Governor Wolf has an opportunity to continue promoting transparency by opening the closed-door union contract negotiation process and ending the government unions’ unique privilege of using taxpayer resources for partisan politics.

These reforms are by no means exhaustive, but they would move our state in a pro-growth direction after years of profligate spending, which have failed to revive our historically weak economy. After decades of focusing on finding more revenue for state coffers, it’s time to restrain excessive government and transform Pennsylvania into a state of opportunity again

posted by ELIZABETH STELLE | 11:30 AM | Comments

Pennsylvania's Economy Ranks a Dismal 39th

APRIL 10, 2015

Is placing 39 out of 50 in any competition acceptable? Most people would say no, which is why a new index published by the American Legislative Exchange Council (ALEC) is so unsettling.

Released on an annual basis, the Rich States, Poor States index ranks states based on their economic performance and economic outlook. In the first category, Pennsylvania performed poorly, ranking 39th. Future economic performance doesn’t look promising either. The authors of the index place Pennsylvania in the bottom ten at 41.

The rankings are based on fifteen different variables that include tax rates, debt service as a share of tax revenue, labor regulations, and tax or expenditure limits. Pennsylvania ranks poorly in nearly all of these areas year after year. As Jana Benscoter of Watchdog points out, Pennsylvania’s economic outlook ranking has never been higher than 33rd.

This isn’t surprising given the dramatic growth of government spending and taxation since 1970 and Pennsylvania’s inhospitable regulatory environment, both of which are roadblocks to job creation and prosperity.

But Pennsylvania doesn't have to continue down this path. If the commonwealth lowers the tax burden on businesses and families, restrains spending growth, and fixes its regulatory climate, we can shed these low rankings and grow an economy that works for everyone.

We're at a watershed moment, with a choice between the largest tax hike in Pennsylvania's history or reducing government spending to leave more in the pockets of Pennsylvanians. It's a choice between prosperity or economic stagnation.

posted by BOB DICK | 02:43 PM | Comments

Video: Debating Gov. Wolf’s Costly Budget

MARCH 23, 2015

Last week, CF President & CEO Matthew Brouillette appeared on PCN’s Call-In Program with Steve Herzenberg, the Executive Director of the Keystone Research Center, to discuss Gov. Wolf’s costly budget proposal. While Herzenberg defends Wolf’s budget proposal, Matt points to some of the hard realities it will bring to every family in Pennsylvania

Even though Gov. Wolf campaigned on a promise to not raise taxes on middle class families, his budget proposal would hit them with the largest tax increase in the state’s history

In attempt to soften the blow of this broken promise, Gov. Wolf wants to implement property tax rebates. Matt explains that even this will fail to help Pennsylvanians since, over the next two years, less than $0.30 of every dollar in new state taxes will be used for property tax rebates.

Rather than put a heavier burden on Pennsylvania’s taxpayers, Matt explains that the government’s focus should be on “creating opportunities for everyone and reduc[ing] the burden of entry into the workplace and the middle class that are trying to grow businesses.”

Watch the full discussion on PCN’s Call-In Program.

posted by JONATHAN REGINELLA | 02:46 PM | Comments

Marcellus Shale Successes Continue

FEBRUARY 10, 2015

Pitfalls of Natural Gas Tax

The stories continue: more jobs, increased tax revenue and cheap energy, all from the free-market production of Marcellus Shale gas.

Take last week's report from the Central Pennsylvania Business Journal: A study commissioned by Sunoco Logistics says two of its pipeline projects will produce more than 30,000 jobs across Pennsylvania, including as many as 400 permanent positions once the project is complete. The projects are also projected to generate $23 million in personal income tax and contribute $4.2 billion to the state’s economy.

The pipeline project is just one isolated example:

  • Dura-Bond’s Steelton plant “plans to add 150 jobs after being awarded a contract to produce $400 million worth of pipeline for the 540-mile Atlantic Coast Pipeline in West Virginia, Virginia and North Carolina,” according to PennLive. The work at the Dauphin County facility is expected to extend through March 2017.
  • Sunoco Logistics’ Marcus Hook Industrial Complex — an 800-acre energy hub for the processing, storage and export of natural gas products — continues to expand and add jobs as Delaware County officials work to identify additional business opportunities for it, reports the Philadelphia Inquirer. Sunoco Logistics’ pipelines serve the complex.
  • New Jersey’s largest gas and electric utility will decrease the typical residential gas bill by 31 percent in February and March, according to NorthJersey.com. Public Service Electric & Gas “has repeatedly cut the cost of gas to its lowest rate in 14 years as a result of low-cost gas from the Marcellus Shale formation in Pennsylvania and surrounding states,” the website said.

A new tax on Marcellus Shale drilling could put at risk these jobs and countless future projects. The economic benefits from a revived natural gas industry are impressive. Marcellus Shale counties saw more than double the employment growth of non-Marcellus counties last year. While government programs continue to hand out individual grants and loans, they can't compare to the industry's track record of improving employment for entire counties with zero cost to taxpayers. Government programs simply pale in comparison to the revitalization spurred by natural gas. 

posted by GORDON TOMB | 02:15 PM | Comments

Former Pennsylvanians Voted with their Feet

JANUARY 5, 2015

Moving out of Pennsylvania

Residents continued their exodus from Pennsylvania in 2014.

The latest Census population estimates, released last month, show that Pennsylvania gained 5,913 in total population between July 2013 and July 2014. This increase was driven by natural causes—13,400 more births than deaths—and international migration (a net of 29,000).

However, on the negative side, the state lost 31,400 residents to other states in net domestic migration. Only New York, Illinois, New Jersey and California lost more.

United Van Lines data supports this, putting Pennsylvania among the top 10 "outbound states" (again, New York, New Jersey, and Illinois top the list).

This is the continuation of a long-term trend: Pennsylvania lost 89,000 to other states since 2010, more than 40,000 from 2000-2009 and more than 250,000 during the 1990s in net state-to-state moves.

But it's part of a larger trend as well. State residents have been fleeing from high tax states to lower tax states. Indeed, while a net loser on the whole, Pennsylvania has gained population from residents fleeing higher-taxed New York, New Jersey, and Maryland.

That residents "vote with their feet" must be considered in any discussion of increasing Pennsylvania's tax burden.

posted by NATHAN BENEFIELD | 05:12 PM | Comments

Economic Freedom Key to a Prosperous Pennsylvania

DECEMBER 2, 2014

Pennsylvania Economy

Pennsylvania is the 27th freest state in America according to the Fraser Institute's annual Economic Freedom of North America report, which is hardly news to be celebrating.

States were ranked based on their size of government, level of taxation and labor market restrictions. Texas and South Dakota topped the US list, while Maine ranked last.

Why is economic freedom important? Higher levels of economic freedom directly correspond with more job opportunities and a higher standard of living.

According to the study, the most-free states averaged $55,000 per-capita in 2012 gross domestic product compared to roughly $48,000 for the least-free states. In other words, more economic freedom translated to a $7,000 boost in income per person.

When you consider the entire continent, Pennsylvania ties for the 30th freest state or province. Texas is the only US state to make the top five (the rest are Canadian provinces). Over the past decade, economic freedom has declined in both the United States and Canada, but the decline has been more gradual in Canada.

If Governor-elect Wolf and the new state legislature truly seek a fresh start for the commonwealth, they must take steps to restore economic freedom.

posted by ELIZABETH STELLE | 04:45 PM | Comments

EPA Rule Would Increase PA Energy Bills by $1,000

NOVEMBER 26, 2014

The war on coal will be a catastrophe for consumers, according to a new analysis of energy prices under new U.S. Environmental Protection Agency (EPA) regulations.

According to an Energy Ventures Analysis report, combined annual gas and electricity bills in Pennsylvania will increase by more than $1,000, or 46 percent by 2020 compared to 2012.  Industrial power rates alone will increase by 62 percent.

The November report—"Energy Market Impacts of Recent Federal Regulations on the Electric Power Sector"—says that Pennsylvania is among five states that "would bear the greatest increases in annual residential power bills." The others are Texas, Mississippi, Maryland and Rhode Island.

Commissioned by Peabody Energy, a St. Louis-based coal company, the report calculates state-by-state effects of a number of EPA regulations, including the Clean Power Plan to reduce carbon dioxide emissions.

Nationally, gas and electricity costs for all customers will increase by $284 billion, or 60 percent, says Energy Ventures.

The increase will result "in large part due to an almost 135 percent increase in the wholesale price of natural gas" as EPA regulations force coal out of use and drive up the demand for gas, says the report.

Numerous business groups and politicians are objecting to the Clean Power Plan, including Pennsylvania’s Democratic senator, Bob Casey, who says that the proposed rule for CO2 emissions, "imposes a disproportionate and unfair burden on Pennsylvania." And the Supreme Court recently announced it will review the regulations in the spring.

Energy Ventures also takes into account the economic effect of rules recently implemented to regulate ozone and particulate matter, the interstate transport of air pollution, mercury, and haze in public parks.

"Our analysis is the first to fully examine the combined economic impacts of the EPA's long list of proposed and finalized regulations on the electric power industry," says Seth Schwartz, Energy Ventures president. The Clean Power Plan is based on flawed assumptions, he says.

From skyrocketing energy bills to killing green jobs to raising manufacturers' cost, the EPA’s actions are harming all Pennsylvanians.

posted by GORDON TOMB | 00:13 PM | Comments

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