Friday, November 05, 2010

Will killing train kill jobs?

Here's a shirttail to my post on the future of high-speed trains. A company that opened in Milwaukee to manufacture and maintain high-speed train cars says if Wisconsin cancels its proposed high-speed rail project between Madison and Milwaukee, it will have to leave.

Talgo, the Spanish-owned company, is working on an order for Oregon trains. The piece in the Daily Reporter of Milwaukee says:

“We were hoping to stay in Wisconsin and we were expecting our business to grow,” said Nora Friend, a Talgo spokeswoman. “But once the order for the Oregon trains are done, we would have to shut down the facility. I don’t think that’s what the new governor wants.”

The trains to fulfill an order from Oregon are to be completed by the spring of 2012. Talgo recently hired 40 workers and expects to eventually employ 125, she said.

Gov.-elect Scott Walker has opposed the project, for which Wisconsin received an $810 million federal grant. On Wednesday the Wisconsin DOT suspended all work, although it has already signed an agreement with the federal government for use of the money. What happens next is not clear.

21 comments:

Anonymous said...

Complaining about the loss of these POTENTIAL jobs which are funded with the equivalent of stimulus money is laughable. How many HUNDREDS OF MILLIONS of dollars to create 125 lousy jobs? Better to spend the money more productively; better still not to spend it AT ALL.

Anonymous said...

PS: Regarding the phrase "federal grant"... when exactly did the Federal government get a job and start earning its own money?

News flash: Every dime dispensed to states in the form of "federal grants" is either (a) extracted from the states themselves, (b) borrowed at great cost to future generations, or (c) both. Anyone who celebrates about receiving a "federal grant" clearly has no concept of how to properly earn a buck.

cytomitch said...

How many private sector jobs were aborted, i.e. never created, by the Federal consumption of 25% of our GDP? Every dollar spent by the Gov is a dollar sucked out of a private pocket (or printed!) Henry Hazlitt, in "Economics in One Lesson" directly addresses the fallacy of the 'big thing' you see versus the thousands of little things you don't see...because are never created due to the transfer of funds to the Fed.

Better question for Mary: how many OTHER jobs will be created because we are not appropriating billions dollars from the productive private sector? Hard to measure, because they never post big orange signs next to the dry cleaner who hired two more employees with the profits he got to keep.

Anonymous said...

You people leaving comments are so small minded, so tunnel visioned, it's beyond belief. How about this: I'm going to bump gas up to $7 per gallon; and you commute from the 'burbs to the city 40 miles each way. Oh, but you could have saved all the time and trouble by using public transportation, aka-light rail. Stop thinking old school, that times aren't changing and everything's just going to stand still, just like it was in 1957. DA's, how much longer do you ignore the issues with gas, congested highways (which costs billions to build, repair and replace), polluting the air with increased rush hour traffic, more deaths on the road (vs. using rail). Why is it the Europeans are so forward-thinking, yet Americans walk around like they are so technologically advanced. We, as U.S. citizens, must think outside the box and realize things must change. The grants, development of rail and and other forms of public transportation creates more than 125 jobs. In Charlotte, a rail from UNCC to uptown creates more tha just a few jobs. Again, unless you really have taken courses about the urban sprawl and development, you only are thinking about how it affects (or doesn't affect) you. That's the way; adopt that "Me Generation" thinking.

Anonymous said...

Mary,

Why haven't you answered the questions in the first comment on your previous post?

Anonymous said...

5:40,

Bernanke is going to bump gas to $7 all by himself by monetizing the deficit. Did you notice that ALL COMMODITY AND RAW MATERIALS PRICES ROSE (including wheat, corn and oil) when Bernanke announced that he was going to devalue the dollar via "quantitative easing"?

Mary Newsom said...

Anonymous 5:57:

Because I have been busy today and yesterday researching and writing an op-ed column plus an editorial that must both be finished by 6:45 p.m. today. The blog is not my major job duty; I have to do it in myu "spare time" between other job duties.

Sorry for not being able to be more attentive.

Anonymous said...

For anonymous at 5:40: exactly how are economic issues working out for our more forward thinking European brethren right now? Don't get me wrong, I love traveling by train in Europe but let's face it, it's much more compact than the U.S. And as for light rail solving all of our problems--what percentage of the population do you think these trains would hold during commuting time? Also, where do you get the 40 miles each way figure? I know some people do that but the vast majority have much shorter commutes. I'm still waiting for Mary to tell us where the "19 miles average commute for Charlotteans" that she included in a previous blog came from (or at least to tell us whether that's one way or round trip). I appreciate that you are very busy, Mary, but if you print something as fact that seems questionable and people inquire about it I would hope we'd eventually have our questions answered. Or could you at least tell us that you are not going to pursue the source of the statement.

Anoynemouse said...

How about an article called "Will ending war(s) kill jobs?" - and we can bring to light how much on MY tax payer money is spend waging wars-for-oil and political-geographical interest. Then I can rant until my face is blue about how it's a "waste" and a "boondoggle." And I can rally to elect a politician who ISN'T a warmonger to end war-spending - "will ending war(s) kill jobs?" Yep.

Bréanainn Séaghdha said...

I'm going to attempt to answer Anonymous's 3 questions to save Mary some trouble:

1. No state gets more money in federal grants than it pays in taxes, so the argument that any state is "taking" the money of another state is absurd. At most federal grants amount to an intrastate tax refund of less than 100%.

2. Transportation spending makes up 2% of federal discretionary spending, so it is safely guaranteed that our debt has nothing to do with trains.

3. The FED's $600 billion dollar purchase of Treasury bonds is a nightmare that actually has little to do with the US debt. The point of doing this (crudely, you can call it printing money) is to generate currency inflation.

The inflation rate has continued falling and has recently dropped below 2% inflation, a warning sign to economists that deflation (or a negative inflation rate) is not far off. Deflation is bad, because it incentivizes hoarding cash (no one is going to spend/invest/loan a dollar today if its purchasing power is going to be better tomorrow, and even better the next day, etc.) And with deflation comes a depression, where people stop spending altogether, supply of goods increases drastically and their price drops drastically and everyone gets laid off en mass because the market drys up.

A positive increase in the consumer price index is the exact reaction that the FED was trying to provoke. To incentivize borrowing money now to purchase goods today instead of not borrowing and waiting for the prices to reach lower and lower levels. And when goods move out of warehouses, people stay employed.

Cato said...

In some sense every economic decision strengthens jobs among one set of employers and weakens them among others. If I decide to buy a Coke, in some minute way, I've weakened the prospects for employment at Pepsi. Why? because both my demand and budget for soft drinks is limited.

Anonymous said...

Bréanainn,

Nice parroting of Bernanke's misreading of the Great Depression. But, as was noted recently on Bloomberg News, writing a term paper on a subject doesn't make Ben the sole authority on it.

$600 billion represents a THIRTY PERCENT increase in the base money supply (check the Fed's balance sheet). Commodity prices spiked across the board in response to the QE announcement.

Bernanke's actions will crush the poor most immediately, as they spend the highest percentage of their income on food & energy.

However, the macro effect of QE is to render the entire Treasuries market irrelevant: Instead of the open market moving interest rates and thus providing a brake on deficit spending, the Fed is printing money for the sole purpose of providing (devalued) dollars to the government - monetizing the debt, exactly what Bernanke told Congress he wasn't doing in sworn testimony on June 3, 2009 (http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agmj05AcqWHo).

Bréanainn Séaghdha said...

Both President Bush and President Obama adhere to Keynesian fiscal policy. That is, when the private sector stops investing or deficit spending and the economy goes into a recession the government picks up the slack by investing or deficit spending instead. This is easier to do when the government has a surplus from taxing higher during years of prosperity, because Keynesian policy requires a government to lower taxes at the start of a recession to increase consumer buying power and then deficit spend by dumping money into projects to keep people employed.

Taxes were low in the 1920's and when the recession hit in 1930, the government began deficit spending, but because of years of low taxes, wealth was locked out of the coffers, so in 1932 Herbert Hoover increased taxes, which contracted the money supply, decreased consumer buying power, and turned the recession into a depression.

The only reason we got out of the depression is because WW2 deficit spending increased government deficits to 120% of GDP.

Ben Bernanke's views are based on an established view of macro economics that was popularized by Milton Friedman who theorized that the Great Depression was caused by a contraction of the money supply while demand for money was increasing.

"Monetarism" as an economic theory, is the counter punch to "Keynesian" theory and focuses on maintaining the equilibrium of supply and demand of money. (The cost of money.)

Bernanke, as a disciple of Friedman, has always been a Monetarist, but Keynesian politicians wanted him to adhere to non-monetaristic policies as Fed chairman.

Bernanke did this for a while despite the fact that the Bush fiscal policy of low taxes during times of economic prosperity set the government up to be ineffective when a recession occurs.

Obama tried Keynesian deficit spending but since we were already running huge deficits due to low taxes during economic prosperity, the stimulus was coupled with the inability to lower taxes.

In order for the stimulus to be effective it would have had to have been twice what was spent. (Remember WW2 was marked by a deficit that was 120% of GDP, our current deficit is 54% of GDP).

So, for Bernanke, he could wait and see if Obama could get another stimulus passed which became very unlikely given the recent changes in the political environment, or he could fall back on his Monetarism and increase the the availability of cash.

At this point, if we raise taxes, it will discourage consumer purchasing and no politician is going to vote for another stimulus package. So the only way to grease the economic engine is to increase the amount of cash.

Yes, it devalues the currency, but the important thing is not what the value of the currency is but rather whether or not it is flowing through the pipes. Nobody cares what a dollar is worth if all it does is sit in your pocket because you're afraid to spend it.

Bréanainn Séaghdha said...

Bernanke did this for a while despite the fact that the Bush fiscal policy of low taxes during times of economic prosperity set the government up to be ineffective when a recession occurs.

Obama tried Keynesian deficit spending but since we were already running huge deficits due to low taxes during economic prosperity, the stimulus was coupled with the inability to lower taxes.

In order for the stimulus to be effective it would have had to have been twice what was spent. (Remember WW2 was marked by a deficit that was 120% of GDP, our current deficit is 54% of GDP).

So, for Bernanke, he could wait and see if Obama could get another stimulus passed which became very unlikely given the recent changes in the political environment, or he could fall back on his Monetarism and increase the the availability of cash.

At this point, if we raise taxes, it will discourage consumer purchasing and no politician is going to vote for another stimulus package. So the only way to grease the economic engine is to increase the amount of cash.

Yes, it devalues the currency, but the important thing is not what the value of the currency is but rather whether or not it is flowing through the pipes. Nobody cares what a dollar is worth if all it does is sit in your pocket because you're afraid to spend it.

Jumper said...

The "base money supply" is not the same as the money supply, by the way. There is a huge amount of dollars, much more, about 8 trillion, in the total.

More and more people are riding trains where available. Many don't realize they are offering high-speed broadband: the train becomes a mobile office for anyone with a computer or perhaps even a modern phone.

Off topic but good reading, I found some articles on food and energy. The locavore movement may need re-jigging. The first link leads to the others but I will post them all:
http://www.grist.org/article/food-our-energy-gulping-industrial-food-system-in-eight-bullet-points

http://www.nytimes.com/2010/08/20/opinion/20budiansky.html?_r=1

http://www.ers.usda.gov/AmberWaves/September10/Features/EnergyUse.htm

Stephen said...

The left loves trains. They can better control where and when you go, and further down the road they may be able to control whether you get to go.

Anonymous said...

Sadly without this train, puppies will die and the children of Meck county will contract some breathing disorder due to the overwhelming ozone problem we have in this great city.

it's just the facts... the observer and their puppets say so.

Anonymous said...

Bréanainn,

You state "the value of the currency doesn't matter". This is absurd. Currency devaluations destroy savings, destroy people on fixed incomes, destroy the poor, and stagnate economies (any reported "increase" in GDP is due solely to the new numbers being reported in devalued dollars).

Put down the Keynesian claptrap you've been reading and study up on Weimar Germany.

Bréanainn Séaghdha said...

Thanks for putting quotes around something I never said and saying I stated it.

Saving money in a recession is what sends an economy into a depression. The point of devaluing a currency intentionally is to get people to spend their money instead of save it. If you increase the quantity of available dollars people are more willing to part with the dollars they get. When dollars move they push the wheels of the economic engine.

Weimar Germany fell into what is known by economists as Hyperinflation which is characterized by a cumulative inflation rate over three years that approaches, or exceeds, 100%.

The United States inflation rate has decreased from 2.63% in January to a dangerously low 1.14% in September. The 3 year cumulative is 4.77%. If we hit or get near a 100% rate over the next three years, then you can call us the Weimar Republic.

Otherwise, you are just misquoting and being alarmist.

therestofthestory said...

Actually this is a ploy to divert all effort and monies to do the whole streetcar project to keep the Beatties Ford corridor people dependent on the government. It should be funded by a special tax district in that area and real estate sales tax so those that think they can profit from the development, help pay for it.

rashid1891 said...

Better question for Mary: how many OTHER jobs will be created because we are not appropriating billions dollars from the productive private sector? Hard to measure, because they never post big orange signs next to the dry cleaner who hired two more employees with the profits he got to keep.