Monday, February 28, 2011

David Brooks - Misinformed Cheerleading for Mitch Daniels

David Brooks hearts the governor of Indiana:

Since 2004, the 49 other states in the nation increased their debt levels by an average of 40 percent. Indiana has paid down its debt by 40 percent. Indiana received its first Triple-A bond rating in 2008, and now it is one of only nine states to have the highest rating from all three rating agencies. At the same time, the business climate has improved significantly. Infrastructure spending is at record levels. The state has added jobs at twice the national average.

I was alerted to this fluff piece by Dean Baker who had a neat chart on how this last sentence is just factually incorrect. BLS provides its own neat charts on how employment has fallen and the path of the unemployment rate in Indiana. Where David Brooks got the idea that employment in Indiana has boomed under the tenure of Mitch Daniels is not clear.

Dean also reminded us of the tenure of Mitch Daniels as OMB director. But hey – George Bush was his boss back then. As far as paying down the Indiana debt – I wonder how much of this was from the front loading of receipts from the sale of toll roads:

Leasing or selling a public asset is a classic one-shot—a short-term measure that bolsters the balance sheet today but that can't be repeated … As a result, our tax revenues wind up in Beijing—as interest payments. At the state level, Indiana is relying on foreign companies to lease public infrastructure like toll roads. And under these arrangements, tolls—taxes people pay for driving—are being paid to foreign shareholders of foreign companies.

This is not long-term deficit reduction if the sale price is less than the present value of the lost future tax revenues. But I guess teaching finance to David Brooks will have to wait until he learns to read simple graphs from the Bureau of Labor Statistics.

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