Down on the farm
The future for young Americans may increasingly be down on the farm. Farmers have been begging for a new class of laborers to replace illegal immigrants as law enforcement officials enforce new bans on migrants’ employment eligibility. And with the unemployment rate for 16-24 year-olds at 17.5 percent, there are plenty of young, idle hands that could till the nation’s crops.
If only it were that simple. Several reports came out today that American citizens were generally not capable of doing farm labor. The AP reported:
Jerry Spencer had an idea after Alabama’s tough new law against illegal immigration scared Hispanic workers out of the tomato fields northeast of Birmingham: Recruit unemployed U.S. citizens to do the work, give them free transportation and pay them to pick the fruit and clean the fields.
After two weeks, Spencer said Monday, the experiment is a failure. Jobless resident Americans lack the physical stamina and the mental toughness to see the job through, he said, and there’s not much of a chance a new state program to fill the jobs will fare better.
That is a pretty damning condemnation of resident Americans if they really lack the “physical stamina and the mental toughness” to do hard labor. If we keep running off the illegal immigrants who have done this work for years, who will pick the nations fruits and vegetables? It’s possible that wage scales for illegal immigrants are not sustainable for resident Americans.
There is another class of our countrymen, according to the Wall Street Journal, that could potentially make up the next pool of farm laborers — prisoners. From the WSJ:
“This is the first year we’re doing a harvest,” said Steve Little, warden here at the minimum-security St. Anthony Work Camp. Prior to this season, he explained, inmates worked mainly in processing sheds and kitchens, not open fields. But farm labor is so scarce, Mr. Little said, that prisoners now pick as well as pack potatoes.
Despite high unemployment across the U.S., many farmers are struggling to find hands willing to labor in their fields. From Arizona to Alabama, states are cracking down on undocumented migrant labor with legislation that gets tough on employers. One result: some “illegal” farm hands are being replaced by criminal ones.
October 18: Muniland snaps
Good Links
Federal Reserve Bank of Atlanta: Insurance trust revenues create state and local fiscal volatility
Environmental Leader: Privately funded muni bonds for energy efficiency retrofits
LA Times: California offers 5-year municipal bonds at 2.10%, 30-year at 4.87%
Bloomberg: LA City Council, urged by Occupy Wall Street, may pull muni business from big banks
WPRI.com: A good roadmap to Rhode Island pension reform
A drought of municipal bond issuance
All year long, muniland has been dragging its feet on issuing bonds. Budgets have been much too constrained to take advantage of historically low interest rates. At the end of the third quarter of 2011 issuance was 39 percent lower than 2010, according to Thomson Reuters SDC data. Nine-month issuance for 2011 was $160 billion versus $262 billion for the same period last year.
It’s a veritable drought.
October 17: Muniland snaps
FBI: Dig down into crime stats by city (excel file included)
NYT: U.S. postal worker union hires financial advisory firm for advice
SIFMA: Moody’s gives an excellent overview of muniland credit quality
Bloomberg: Sagging state revenues will cause more service cuts
WSJ: Two small rating firms, Morningstar and Kroll, to begin rating municipal bonds
AP: Connecticut gets free future credit ratings as comp for past underrating
Harrisburg has more than incinerator debt
The current bankruptcy drama in Harrisburg, Pennsylvania is just the third act of a long running effort to make the city something more than a corridor for those who commute into the city for work. Most of the current debt problems of Harrisburg stem from failed projects intended to revitalize the city and extremely bad business decisions.
The chart above shows the massive increase in Harrisburg’s population that occurred up to 1950 then starting falling steeply since mid-century. The city’s population was actually smaller in 2010 than it was in 1900. It’s just one of many American cities that has seen its vitality and population fade away.
Almost all the news coverage now is focused on the current players and their attempts to use the law to bend events towards their vision of the future. For example, the mayor, the county and the state are petitioning in bankruptcy court to halt the actions of the city council who filed for Chapter 9 bankruptcy. The bankruptcy judge will sort out these claims in an emergency court hearing on Monday. It’s high drama and makes for great journalism.
We should step back, though, and take a broader view of events and discern some important lessons for municipal governance. For example, current news reporting has focused on the $320 million of debt owed for the unprofitable incinerator plant. But the city has an additional $143 million dollars of debt, which they either issued or guaranteed. Harrisburg is a city of 49,000 with a majority of low income residents who had a median household income of $26,920 in 2010. The city is way over it’s head in debt with municipal debt per household of approximately $23,734. It’s hard to see how this can be serviced.
A Harrisburg scorecard
“Who benefits from all this tap-dancing? Who’s interest is the Commonwealth promoting? Not the public, not the city of Harrisburg. They are promoting the interests of the bond insurers.”
That is a quote from Mark D. Schwartz, the attorney for the city of Harrisburg, Pennsylvania who filed for Chapter 9 bankruptcy on October 11. Harrisburg is the center of a multi-year, multi-player fiasco over an enormous, under-utilized waste incinerator. The city stopped making payments ages ago on the incinerator bonds and is past due on about $85 million of principal and interest.
The missed payments were made up by the county and a bond insurer, Assured Guaranty, both of whom have sued the city. The city filed for bankruptcy, in part, to halt that litigation and work out their debts in an orderly process under the purview of a federal bankruptcy judge. It’s a creditor scrum and further complicated by efforts from some in the state legislature to take over the city and put it in receivership.
The hard facts of the story are these:
- Current city officials did not create the problem, but are simply attempting to clean-up a long festering mess.
- The mayor refuses to support the bankruptcy and uses the city website to promote her views.
- The city’s lawyer appears to have met the federal court’s requirements for filing a Chapter 9 bankruptcy case.
- There is a lot of disagreement in the municipal bond market about the lawfulness of the Chapter 9 filing.
- The city is currently being sued by six parties for non-payment on guaranteed bonds.
- The first bonds for the incinerator were issued in 1998 for $33M.
- The city guaranteed $242 million of incinerator debt/loans.
- State Sen. Jeffrey Piccola, who represents the county, is trying to get the state to take over the city. His attempts are being delayed.
- The city had a $72 million operating budget in 2010 and paid $27M of that in debt service.
- The city is clearly insolvent.
Meanwhile whoever writes the “Lex” column at the Financial Times seems to have had drinks with a representative of the bond insurer, Assured Guaranty, and gives a few lashes to city officials. Lex says:
October 14: Muniland snaps
Reuters Video: Orwellian tax talk
Lumesis: Check out this heat map of muniland distress
Governing: National League of Cities contemplates creating “mutual” bond insurer
Reuters: Bond laddering for dummies
Code for America: America’s brightest to hack for America
Bloomberg: One year ago state attorney generals launched robo-signing investigations
October 13: Muniland Snaps
Good links
California Watch: California is becoming ‘post-industrial hell,’ economist says
AL.com: Jefferson County reduces $312M budget by $94M amid legislative scramble
Bond Buyer: It’s not even clear that Harrisburg, PA has standing to file bankruptcy
WSJ: Legacy of sweetheart muni deals leaves Chicago struggling; mayors attempts reversal
ProJo: When politicians attempt reform they get undermined at next election
GovTech: Rooting out corruption with open data? Cook County gives it a try
An army of corporate lobbyists in the halls of Congress
Now that the Senate failed to pass President Obama’s jobs legislation last night, various pieces of his plan and other pet projects are likely to be introduced separately. It’s unclear whether an extension of the payroll tax reduction or additional unemployment benefits — two key planks of the President’s plan — will get floor time. But corporate interests are getting plenty of attention from members of the Senate. In particular, an army of corporate lobbyists has been vigorously promoting a tax holiday for U.S. multinationals.
Politico says the senior New York US Senator, Democrat Chuck Schumer:
has been quietly courting some Senate Republicans and Democrats to see whether there is any appetite for merging a GOP-backed idea — a tax holiday for corporations to bring home their overseas profits — with a Democratic-supported plan of creating a national infrastructure bank.
There is no evidence that giving multinational corporations a big tax break on profits earned overseas will create jobs or stimulate the economy. But some, like former director of the Congressional Budget Office Douglas Holtz-Eakin, believe that a tax holiday will actually create economic growth. Holtz-Eakin writes in Bloomberg:
Repatriation can be thought of as a private-sector approach to stimulus.
Both the left and the right have poured cold water on this idea. The Heritage Foundation, the conservative think tank, says the proposed holiday would not spur additional U.S. capital investment or jobs because corporations have plenty of profits onshore and there is easy access to financing. J.D. Foster and Curtis Dubay of the Heritage Foundation write (emphasis mine):
Absolutley NOT…this bill is not good enough. Giving the 1% any type of a tax holiday is a reward for destroying our jobs.
If the 1% wants to bring their blood money back into this country after exploiting workers overseas, why reduce their tax from 35% down to only 8%….how about down to 15 to 20%??????? Instead of getting a trillion dollars in taxes out of them at 8%, why not 2 trillion at 15%?
October 12: Muniland snaps
Good Links
Reuters: Senate axes Obama’s jobs bill
Bloomberg: State bonds are muniland’s hot paper
Reuters: Same old muniland bad boys
CUSIP Global Services: 1,255 new muni bond ID numbers assigned in September
Government Tech: Brave workers attempt to modernize state tax collection systems
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