Economics and Government

A small town article written by Mike Hasten in Baton Rouge made its way to the associated press on December 11, 2006. Mr. Hasten said “we are drowning in our own traffic.” Allowing parish governments to split state automobile sales tax revenue instead of it going into the general fund could finance local road projects without raising taxes, a group of Lafayette lawmakers and Treasurer John Kennedy said. After all the state went through in 2005 this idea looks like a prosperous one, to get roads rebuilt without the tax payers really feeling the pinch. The officials know the people of Louisiana are not going to pass a bill that is going to cost them big time, so this proposal is away around that.

Currently, an average of $273 million from automobiles sold across the state goes into state coffers, Kennedy said, and it could be better used by improving the roads used by the people who pay the taxes.

If the bill is approved, “it would have a real economic impact across the state,” he said. “Let parishes do what they know needs to be done,” instead of having to wait for projects to work their way through the state Department of Transportation and Development priority program.Michot said areas that picked up the most hurricane evacuees: Lafayette, Baton Rouge, Lake Charles and the North Shore area of Lake Pontchartrain are choked by the extra traffic and need additional funding to improve roads. So it’s not only the cities that were catastrophically destroyed by the hurricanes but also the residents of these cities fled somewhere and mostly to other large cities in Louisiana, and these cities are greatly feeling the pinch of all the extra traffic.

I thought this was a great article because there are many implications that tie directly to the class and what we have talked about with taxation, economic development, and just how different markets rely on other markets. I personally think this idea would be efficient if it really passed and got going, but it’s a relief on the tax payers of that region.

Britain’s Infrastructure

The transportation systems in Britain have become overwhelmingly congested. The infrastructure is completely congested; the roads are literally packed bumper to bumper. Policy has put a halt on infrastructure growth, yet the need for improvements keeps getting more severe everyday. In 2000 a fuel tax idea was halted due to public protests. This was a mistake. The policy makers should understand the obvious need for infrastructure improvements. If roads and trains are thought of as a public good, then there is a free rider problem when it comes to who has to pay for them. That’s why the government has to take money from the people and provide the good anyways, even if they do protest. Roads and trains can also be thought of as club goods, or as excludable. If they were privately owned, as the rail roads once were, the people would have to pay for the amount demanded. Obviously the demand and supply of roads and trains in Britain are not even near an equilibrium point. Hopefully the government can provide the public good, if not maybe a private company can. Either way, the people are going to have to pay more to improve the infrastructure.

Minimum wage before the November election was a hot topic and some what still is. Politicians claim that by raising the minimum wage, it’s good for the people, good for local economic development and everyone around it. However, business owners argue that they would have to lay off workers because they can’t afford that extra cost. But is it really the reality?

In an article in the December 4th edition of the Washington Post talks about this issue. Nomey Druskin, manager of a hair designer shop pays her 6 workers $8 per hour, which is well above the above the minimum wage of $5.15. If I pay less, says Nomey, I won’t be able to keep happy and good help; and customers will see that.

Two other employers say the minimum wage is irrelevant to what they would do, and getting rid of employees is just out of the question. Mr. Wordsworth who owns a restaurant says that he would not lay off his workers if the minimum increases, but would not add additional ones either. Mr. Castro who owns a super market on the other hand, says that not only would he not lay off workers; he’d actually increase the pay to be above the new minimum.

So who benefits and who suffers if the minimum wage is increased? For the workers that make the minimum, they surely benefit. Will some employer suffer if they have to lay off good workers, thus decrease the production and quality? The answer is yes. But in the above three examples, it wasn’t the case. Will everyone benefit if the minimum wage is increased? The answer is definite NO. How can people that already have a decent wage benefit? The answer is they won’t. Will the economy benefit? Well, when workers are happy workers, they will work harder and efficiently, the economy sure benefits. But what about the employers that need to lay off highly efficient worker when they truly can’t afford them? All these clearly show that one can argue both side of the fence. There is no wrong answer.

But one group of people that is guaranteed to benefit is the politicians. When the wage is higher, it means they can tax higher. And when there is a higher tax, the fat politicians get to eat even more. And don’t we love that?

The recent numbers on the manufacturing sector show that there has been a decrease in the job market for the first time in four years that the nation has seen this which is calling for a big concern. The manufacturing sector shows that there has been a contraction in the market because by definition any reading under fifty means that the sector has shrunk. In the recent economic reports economic development has plummeted in October and home building has continued on its record setting seventh month in a row. With the stock and dollar value falling the Federal Reserve will either have to keep interest rates level or cut short term rates sooner than economists hade expected. Although last month the sevice sector had outperformed the manufacturing sector the pedictions that economists see is that will not be the long run trend. The rate at which the economic development in which the general public is made better off will see a loss of over 300,000 jobs in the housing related industry on top of the 100,000 jobs already lost in the housing since March. The chair of the ISM's survey committee reports that the reson for the contraction in manufaturing after being above the bench mark of fifty for fourty months is the response to the Federal Reserve raising interest rates. The Commerce Department reported that last months building activity drop was the biggest contraction since the decline in September of 2001 when the terrorists attacks put the economy into a recession. The economy needs to see a vast improvement or it will continue to see a fall in the value of the dollar as well as economic development.