Friday, November 6, 2015

Friday, November 6, 2015

Incarceration and the family; The digital divide; Laffer Curve’s a laugh and; All about the fundamentals

Incarceration and the family
We know Louisiana has the highest incarceration rate of any state in the country with the highest incarceration rate in the world. But how often do we think of how that reality affects families and children? Pat Nolan with the Center for Criminal Justice Reform and Kevin Kane with the Pelican Institute for Public Policy address the issue in a guest column in The Advocate:


One of the most difficult situations for a child to cope with is the incarceration of a parent. Through no fault of their own, these youngsters are denied the care, guidance and affection of their parent. Tragically, American children experience this fate more frequently than those in any other developed country. And children in Louisiana, which has the highest incarceration rate of any state in our union, suffer most of all. We certainly need prisons for violent and serious criminals who threaten the rest of us. But research shows that thousands of lower-level offenders can be safely and effectively punished in their own communities — at a lower cost, both in human and economic terms, and without breaking up the families. We are overusing prison and the toll on Louisiana’s families is significant.


More than two dozen states have recognized this negative impact on families and changed their policies so that prison space is reserved for dangerous offenders. They have strengthened community based punishments for those who can safely be held accountable at home. These states are breaking old habits and reshaping their criminal justice systems to make them work better for taxpayers, offenders and their families…


Texas was an early pioneer. In 2007, the state decided against building more prisons and instead invested in drug courts and other alternatives proven to reduce re-offending. Since then, the recidivism rate in Texas has dropped 25 percent, crime is down to levels not seen since 1968, and taxpayers have been spared nearly $3 billion in prison costs. Success stories also are unfolding in many other states, including Georgia and Mississippi… Facts tell us there is much to gain from charting a new course — and little to lose. From 2002 to 2012, 23 states reduced their imprisonment rate and their crime rate. During the same decade, Louisiana’s prison population went the other direction, growing by nearly 12 percent.


The digital divide
A decade and a half into the 21st century, a shocking number of low-income Americans still lack access to high-speed internet. The Center on Budget and Policy Priorities explains:


Internet use — especially broadband (i.e., high-speed Internet, which is generally defined as an Internet connection other than dial-up) — has in many ways become central to participating in society.  Yet less than half of low-income households now have high-speed Internet connections in their homes, despite mounting evidence that such connections help people get jobs and do well in school, access health and other services, and make more economical consumer purchases.


Consider broadband’s role in job searches. Unemployed people conducting Internet job searches between 2005 and 2008 found work about 25 percent faster than those with comparable skill levels and other characteristics who did not search online, a study concluded…These Internet access needs extend to education, too…Our report noted how homework increasingly demands the Internet; nearly all school districts serving low-income populations reported that at least some of their teachers assign Internet-based homework.  And most high school students need to use the Internet outside of school to complete their homework. Yet 40 percent of households with school-age children and incomes under $25,000 lack a high-speed connection at home, the Pew Research Center found


Laffer Curve’s a laugh

Some ideas seem to never die, even if they are proven wrong again and again. Take the “Laffer Curve.” Concocted by Art Laffer, the curve theorizes that lower taxes will increase economic activity and thereby make up for the lost revenue of the initial tax cut. The theory has formed the bedrock of countless tax cuts schemes. But as Governing magazine explains, the evidence from a new Urban Institute/Brookings Institution study says the theory is bunk:


About 40 years ago, the economist Arthur Laffer drew a backwards “c” on a napkin to illustrate to his dinner companions — Donald Rumsfeld, then-chief of staff to President Gerald Ford, and Dick Cheney, Rumsfeld’s deputy — the trade-off between tax rates and government tax revenues…But do cuts to income taxes really spur economic growth?…The Urban/Brookings authors…found that relationship turned positive over the past two decades. “States have no good reasons to believe that income tax cuts will bring the desired benefits,” the authors concluded. “Yet, states continue to erode their tax bases in the name of economic growth during a time when few states can afford to cut services.”


To emphasize their point, they also highlight tax cuts across more than a dozen states over the past 30 years, and found that none resulted in higher than average economic output…In more recent examples, the paper singles out Kansas’ income tax cuts in 2012 and 2013. The state has grappled with budget deficits ever since, had its credit rating downgraded, and “failed to keep up with the region’s pace of job growth or increase its job growth relative to the previous period,” according to the paper. Louisiana also enacted income tax cuts following the post-Hurricane Katrina construction boom. Those cuts and a decline in construction are contributing to that state’s projected $1.6 billion deficit, the authors said.


All about the fundamentals
Louisiana has spent billions in taxpayer dollars over the last decade on corporate subsidies in the name of economic development. But while politicians may claim each business expansion as a “win,” it really isn’t clear what return on investment the state has received for all the money it’s given away. That’s because at the end of the day, business decisions are driven by the basics. As the Advocate’s editorial board notes, the recent drop in oil prices has caused ripples of economic pain:


Cancellation of a big upgrade of the Marathon Petroleum refinery in Garyville is one of the latest consequences. And it is a big loss — industrial construction that was expected to cost between $2.2 billion and $2.5 billion…Announced last spring, it was among the stream of major projects driving a boom in industrial construction along the Mississippi River’s petrochemical corridor between Baton Rouge and New Orleans. The St. John the Baptist Parish project would have created 65 new direct jobs, with an average annual salary of $115,000 per year, plus benefits, Louisiana’s economic development department reported in 2014. The project would have supported 3,000 construction jobs.


Marathon’s decision was driven by “market conditions,” according to the editorial. Surely, that is true. Data collected by the watchdog group Good Jobs First shows Marathon Petroleum was approved for an estimated $76 million in industrial tax exemptions over the last seven years. But that wasn’t enough to overcome the fundamentals of supply and demand. If there is any silver lining to recent downturn in energy prices, it might be that politicians learn the lesson of Economics 101: It isn’t tax giveaways, but factors like infrastructure, education, the quality of the workforce, and good old supply and demand the actually drive job growth.
Note: The Daily Dime is taking a short vacation next week. We will return on Nov. 16.


Number of the Day

$45 – The price of a barrel of West Texas Intermediate (WTI) crude, down from $76 a year ago (Source: CNBC)