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Welcome to Kansas, the bastion of how not to run a state, but claim things are just dandy.  I noted in a prior blog that Kansas has no reserves.  And apparently a $350 million deficit in 2016, a continuing trend for a number of years now.  And bigger deficits to come.  Kansas is the poster child of why cutting taxes a lot does not work.

How did they get here?  The state governor and legislature decided that cutting taxes spurs economic growth.  So if you cut a lot of taxes, you get lots of growth. They cite the Laffer curve, a  totally discredited economic tool drawn on the back of a napkin  by Arthur Laffer at a 1974 dinner to argue why Gerald Ford should not raise taxes.  On the face of it it makes no sense but that has not stopped supply side politicians from using it for nearly 40 years  to cut taxes.  The problem, it is wrong.

Cutting taxes does not spur enough economic growth to make up for the loss in taxes when you go down the Kansas role.  If you s cut them too much, it is really hard to raise them if you run short.  The result is that  economic growth in most of Kansas will be stunted for years due to the lack of investment in Kansans.  Now you would think that Kansans would be up in arms about the poor stewardship by elected officials. But no.  See if you get constant bad news, just stop reporting revenues and deficits.  No news is good news right?  Welcome to Kansas!

http://www.governing.com/topics/finance/gov-kansas-connecticut-budget-news.html

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The troubling aspect of that is that Governing magazine reports that many state are likely to see less revenue in 2017 vs 2016.  Governing‘s analysis of projected 2017 budget data from the National Association of State Budget Officers shows shows states now have a median 4.9 percent of annual expenditures saved for the fiscal year, down from 5.1 percent the previous year.  Illinois, Nevada, New Jersey and North Dakota have no reserves as of 2017.  They add to Kansas, Oklahoma, Arkansas, and Montana who had no reserves last year.  And Alaska that is burning though theirs.  Economic and tax policies are to blame.  The Kansas solution to cut taxes to create economic growth has not worked.  The state continues to get farther behind and it is becoming harder to pretend all is well.  Having no reserves is a crazy bad idea.  It is hard to explain just how crazy bad this idea is – it means that if a negative economic issue occurs, these states are in huge trouble unless they start cutting education and other essential services.  The best way to get out of a budget hole is not cutting education – the one thing needed to dig out and attract new economic activity.  Clearly these officials did not learn from 2008-2011 when there reserves were depleted to address the economic downturn. That makes no sense and dooms their residents to a repeat of 2009/2010, only worse.

 


As 2017 gets rolling, we are set to swear in a new President.  The politics are already interesting.  The question is what will change, when and how.  For example there has been an ongoing discussion of infrastructure bills, but aside from WITAF approval, little clear direction has been forthcoming.  We only know that private sector participation will be encouraged.  Of course virtually all projects constructed in the public sector are constructed by private contractors, so how/if that will change is unclear.

It is also unclear which industries will be affected.  There are already comments about not pursuing he renewable energy opportunities  – China sees 13 million jobs in the coming 5 years as their economy cranks up to meet the needs.  They are contributing $360 billion to enhance this sector.  I have previously blogged about potential opportunities in the US to grow renewables.  But they are just like recycling in the 1970s.  Recycling needed to be subsidized until such time as the facilities and processes were in place to make it competitive.  Now for steel and aluminum, it is less costly than virgin iron or bauxite.  That has several benefits to the economy and the environment.

I have previously suggested that those who do the research, develop the solutions and control the patents tend to rule the economy.  The US did in throughout the 20th century.  Energy is the 21st century opportunity and I would hope we don’t cede that elsewhere due to politics.  13 million jobs would really help places in rural America and place like Detroit and Flint which have the workers.  It may be that instead of the federal government doing much in this arena, the state and local officials will lead the charge.  California has been successful to a degree in this regard.  Let’s see if making money will “trump” the politics of oil. That would be good for a lot of local governments that have workers and factories, but not jobs.  That would help people like those in Flint.  And it would help their utilities.  Let’s work on this with our local officials


The election and post-election discussions have included some concepts about funding for infrastructure.  While this may have been more focused had Clinton been elected, it remains a discussion topic in the Trump White House.  How it would be manifested is a question, with Trump’s faction discussion private cash influxes to make this happen.  The Senate seems to view infrastructure as DOA, which means nothing might occur.  However, in any instances, there needs to be a definition of the word infrastructure and what would qualify for funding.  There are three basic types of infrastructure – public, private and regulated private.  Most SRF programs limit recipients of funding to public entities.

The infrastructure in the public arena falls into three categories which have vastly different types of infrastructures:

Local – water, sewer, stormwater/drainage, local roads, limited bridges.  In larger communities, rail and airports might be included, but the latter is mostly federal subsidies.  Much of water and sewer infrastructure is over 50 years old and is showing signs of weakening.  Buried pipelines are the most at risk.  This would include the 6 million lead services lines in place.  Sewer lines are primarily vitrified clay, also 50+ years old and likely cracked.  Stormwater is corrugated metal and concrete.  Roadway bases in most communities are historical and do not meet today’s standards.  Hence ASCE rates these a D or D-.  Municipal buildings in older communities may also have lead services, asbestos, wood and galvanized pipelines, and other issues to address. The majority of infrastructure under this definition is under local control.

State – highways and bridges – much of America’s commerce depends on these roadways.  25% of bridges need work, 10% are deficient.  Funding for rail and airports is a need from a state perspective.  States may spend more money on transportation that all other infrastructure combined.

Federal – these are very large scale projects like dikes, dams, reservoirs and water transmission systems.  It also includes national parks ($11 billion deficiency), and federal buildings.  The dikes in New Orleans are an example.  However a lot of the funds for these projects are disseminated to locals (like New Orleans), so the actual use may be unclear.

The literature suggests that public investments in infrastructure create at least a 4:1 return.  Good infrastructure is necessary for a vibrant economy.  Deteriorating infrastructure leads to …. Flint, New Orleans after Katrina, and a host of obvious failures.  The impact of climate on communities, particularly sea level rise, can be partially addressed with infrastructure improvements.  Large scale construction can secure jobs both immediately and for the foreseeable future.  The question then is how to secure finding that will lead to jobs, lead to economic development and return on those investments, and will make notable improvements.  That is the challenge at all three levels.  The easiest to address from a sill perspective is state roads and local infrastructure.  From a state perspective the work is focused on highways and transportation.  Locally, the benefit is the local labor force that requires no travel or added overhead.  Just training.  So the question is whether an infrastructure bill can/should have a jobs component built in?


I have been saying this for a number of years – China, Indonesia, Japan, Korea and Immigrants didn’t take our jobs.  Robots did.  And now Paul Wiseman agrees:

https://www.pressreader.com/usa/richmond-times-dispatch-weekend/20161106/282969629631569

We make more cars in the US today than in the 1970s, with 1/3 of the labor force, mostly with robots.   We make more steel in the US today that in the heyday of the steel towns of Pittsburgh and Bethlehem because of robots and small scale recycle pug mills.  What’s more, industrial experts think the US, not China, will be the most manufacturing competitive country in the world because the costs to manufacture are cheaper due to automation (a fancy word for robots).

Ok, wait, isn’t unemployment now under 5% and we have had 70+months of continuous job increases?  How is that possible?  Companies want to cut costs.  Labor is easy when that labor can be replaced by robots. The trend will continue.  Automatic driving trains are real.  Automated trucks are coming – billions are being put into truck automation to reduce the 1.4 million truckers to as close to zero as possible, saving 1/3 the cost of transportation.  But automation does not mean less jobs – there are needs for higher tech jobs to maintain the robots.  And the ability to cut costs in one area means more income to spend on others, increasing jobs in other areas. So in reality there are more, higher skill jobs out there.

More to come, but  maybe we are now starting to understand what is meant by the “new” economy and how that might transfer to the water industry..

 


Every water body will be different but in southeast Florida there are a couple options for Lake Okeechobee’s waters.  One option has been in discussion for years – buy back the EAA lands and restore the Everglades flow.  That has two benefits – improved water quality, and less potential for east-west releases.  The downside is cost.  But the sugar industry knows that the muck layer is decreasing and there are plans to develop the EAA into hundreds of thousands of housing units.  That was not the intention in the 1940s when the EAA was created, but trying to stop someone from developing land, especially when the lake communities are challenged economically, is difficult.  Buying the land would remove it from production, but decrease tax revenues.  And it would need to be managed with no guarantee that it would cleaned up quickly.

The alternative?  The South Florida Sun-Sentinel had a front page article that is a little scary.  The figure below is reproduced from that article.  The discussion was if there is no conservation/public purchase of land, Florida may look very different.  The impact of not buying the land is development.  More people.  More taxes.  More stormwater.  The fertilizer does not go away – it now fertilizes lawns and golf courses.  Add wastewater, and human activities.  We find that urban living and farming can have similar impacts from a nutrient perspective.  So development may exacerbate the problem and given that our modeling indicates that sea level rise imperils inland communities from groundwater, this is not a solution to coastal risk.  Given limitations with local governments inland, it may create a larger crisis.  All there things need discussion, but the question is – will the algal issues on the coast improve?

graphic-of-development

http://www.pressreader.com/usa/sun-sentinel-palm-beach-edition/20160916/281479275879132/textviewer worse?


The most important parameters regulating algal growth are nutrient quantity and quality, light, pH, turbulence, salinity and temperature. Light is the most limiting factor for algal growth, followed by nitrogen and phosphorus limitations, but other nutrients are required including carbon. Biomass is usually measured by the amount of chlorophyll a in the water column.  Water temperature influences the metabolic and reproductive rates of algae. Most species grow best at a salinity that is slightly lower than that of their native habitat,  The pH range for most cultured algal species is between 7 and 9, with the optimum range being 8.2-8.7. Through photosynthesis, algae produce oxygen in excess of respiratory requirements during daylight hours. Conversely, during low light or nighttime periods algae respire (consume) dissolved oxygen, sometimes depleting water column concentrations. Thus, high algae concentrations may lead to low dissolved oxygen concentrations.

A common solution for algae is copper sulfate.  Copper Sulfate works to kill the algae, but when it dies, it settles to the bottom of the water body where it becomes a carbon source for bacteria and future algae.  One will often see shallow ponds with rising algae.  But there is significant concern about copper in coastal water bodies.  Copper is toxic to marine organisms so USEPA and other regulatory bodies are considering the limits on copper use.  Such a limitation would severely limit options in dealing with algal blooms near coastal waters.

Mixing is necessary to prevent sedimentation of the algae, to ensure that all cells of the population are equally exposed to the light and nutrients.  So oxygenation can help (it also mixes the water.  The depth of south Florida water bodies is problematic (shallow and therefore warmer than normal).  But oxygen will help microorganisms on the bottom consume the carbon source on the bottom, which might slow algal growth.  Analysis is ongoing.

Two other conditions work against controlling blue-green algae outbreaks: climate change and political/regulatory decision-making.  Lake Okeechobee has routine algal blooms from the nutrients introduced from agriculture and runoff around the lake, which encouraged an artificial eutrophication of the lake years ago.  It continues today.  Warmer weather will encourage the algal blooms in the future.  The decisions to discharge the water without treatment is a political one.  From a regulatory perspective, algae is seen as a nuisance issue, not a public health or environmental issue.  But algal blooms consume oxygen and kill fish, so the ecosystem impact is considerable – it is not a nuisance .

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