Category Archives: Economy

Phil Scott Enjoys a Swim in the Covid Cashpile

As expected, Gov. Phil Scott’s budget address (video/text) was a rollicking affair full of new and expanded programs and tax relief that he touts as providing “transformational” change for Vermont. Yep, these budgets are a lot easier when they’re floating on a sea of federal Covid funds, plus vastly inflated state tax revenues thanks to the purchasing power injected by the feds into Vermont.

To his credit, Scott cautioned that we can’t spend willy-nilly. He said this is a once-in-a-lifetime windfall, and thus a once-in-a-lifetime chance to reset and strengthen Vermont’s economy. “The economic future of our state will be defined by what we do today,” he said at the end of his address. And he warned against spending one-time money for ongoing expenses. “These are one-time funds for one-time challenges.”

Do his proposals match his sweeping rhetoric? In part, but not in full.

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State Economists: Smooth Sailing for Now, Storm Clouds on the Distant Horizon

All smiles for another 12-18 months

Thursday marked the semiannual Festival of Numbers that is the consensus economic forecast, prepared as always by Vermont state economists Tom Kavet and Jeffrey Carr. The topline: Happy times will continue for another year and a half or so, but after that there’s tremendous uncertainty and huge downside risk.

Or, to put it in purely political terms, Phil Scott will enjoy smooth financial sailing through fiscal year 2024 (assuming he wins another term, and there’s no reason to think he won’t), but whoever is governor in 2025-26 may have a real mess on their hands.

The very short-term forecast is for even more money to flow into Vermont’s coffers. Carr and Kavet upgraded their revenue forecast for the rest of FY2022 (ends June 30) by $44 million.

The reason: Vermont’s economy and state revenues continue to be buoyed by the flood of federal Covid relief dollars — more than $10 billion in all. “We had a [fiscal] hole and we’re filling it five times over with federal stimulus,” said Kavet. Those dollars will continue to flow for 12-18 more months. Then comes a return to Earth, and a landing that might be soft, or… a splat on the landscape.

“There is no playbook from the last time the feds dropped $10 billion on our economy,” said Carr, meaning that it’s never happened before. When the money dries up, Carr said, “the amount of risk, especially on the downside, escalates… The economy will transition into something new and different.”

And while the short-term outlook is rosy in the aggregate, that doesn’t mean everyone is doing well. “One hand’s in boiling water, one’s in ice water,” said Carr. “On average, you’re okay.”

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Welfare for the Well-Off

Say, have I told you about my can’t-miss economic development plan for Vermont?

It’s called “The Vermont Open Redistribution of Resources Program (VORRP),” a.k.a. throwing money around. All you do is send state vehicles around Vermont, tossing handfuls of cash out the windows.

Just think. It cuts out all the bureaucracy and red tape that bedevil most government programs. It gets money into the hands of Vermonters as quickly as possible. And unlike many such programs, this one is tried and tested. The multiplier effect, a well-established idea in the world of economics, shows that when the government increases spending, it generates far more economic activity than the original investment.

Trust me. It works.

Well, it probably works at least as well as Vermont’s renowned worker grant programs. They reimburse relocation expenses to people who move to Vermont or move to economically distressed areas in Vermont. Their actual effect is completely unproven, as State Auditor Doug Hoffer has repeatedly shown.

And it remains unproven in spite of a relentlessly sunny study of the programs ordered by the Legislature and released on December 15 by the Department of Financial Regulation. VTDigger posted a story yesterday that reports the study’s findings and Hoffer’s criticism of them. (Which is remarkable in itself. Digger has a habit of ignoring Hoffer’s work.) From my point of view, not only is Hoffer right, but I thought he was a little too easy on the report.

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The GlobalFoundries Deal Is Bad, But Maybe Not Quite Terrible

Had a polite conversation (well, it was testy at first) with someone in the Scott administration who’s involved in the talks with GlobalFoundries over its desire to create its own utility exempt from laws and regulations that apply to all other utilities. As a reminder, the Scott administration and GF have signed a Letter of Intent en route to a formal agreement that would allow GF to have its way.

I came away from the chat with a bit more perspective, but my fundamental belief remains: This is a case of government bowing to the demands of an employer that’s too big to deny.

I’m not naming the official because our chat was off the record, and also because this post reflects my own view of the situation and not theirs.

First, a significant correction. I wrote that the Global Warming Solutions Act set a greenhouse gas emission baseline of 1990 while the LOI uses 2005, when emissions were at their peak. In fact, the GWSA also uses 2005 as its baseline for the 2025 target. 1990 applies for other, later targets.

So in the LOI, GF is agreeing to abide by the 2025 emissions target in the Global Warming Solutions Act. But three things are still true: First, GF’s current emissions are only a tick higher than the 2025 target so the company won’t have to do much at all. Second, the letter is riddled with exceptions and exemptions that would allow GF to exceed the target. Third, the LOI would allow GF to exceed its target under a variety of circumstances.

But there is one line in the LOI that leaves the door open for further state action.

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The Well-Off Are Flocking to Vermont

This graph is wonderful news for those who think Vermont’s economy needs to grow. (It is, as I’ve written before, very bad news for our housing supply.) The pandemic has made our state the most desirable in the nation for affluent Americans.

More desirable than our famously low-tax neighbor, New Hampshire. More desirable than the Sun Belt or the tax havens of Texas and Florida. We’re Number One, baby!

It’s too soon to tell if this dramatic shift will continue. But if it does, then it’s time to rethink our policies across the board, from taxation to education to broadband to economic incentives.

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It’s Amazing What You Can Do With a Billion Dollars

In purely political terms, the Covid pandemic is the best thing that’s ever happened to Gov. Phil Scott. He got to be seen as a decisive leader simply by outperforming the likes of Donald Trump. Throughout the 2020 campaign, he enjoyed a twice-weekly platform on live statewide television and radio. He absolutely dominated every news cycle, and walked to victory in something bigger than a landslide.

And now, state government is swimming in federal relief cash — with more likely on the way. Trump’s CARES Act provided the equivalent of 20 percent of Vermont’s GDP. President Biden’s American Rescue Plan Act is pumping in even more. And if Biden gets his infrastructure bill through, Vermont will get a third massive infusion in less than two years’ time.

The CARES Act alone floated Vermont through 2020 “in aggregate,” as state economist Jeffrey Carr put it. There was pain aplenty, to be sure. But there were winners as well, and the impact was greatly softened by the federal government’s ability (and willingness) to deficit spend. The governor is dead set against raising revenue or increasing the size of state government, but he’s perfectly happy to take whatever the feds will give him.

On Tuesday, Scott unveiled his billion-dollar plan to use a big chunk of the federal ARPA money. It includes just about everything on everybody’s wish list, and provides a huge boost to state initiatives that Scott insisted we couldn’t afford on our own. And the money will be spent over the next four years, which will make it extremely difficult to run against Scott in the next two cycles.

So, hooray for the pandemic!

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Three Mulligans and Counting

Lookin’ a little sweaty there, bud.

Submitted for your consideration: Michael Harrington, commissioner of the Department of Labor, and three-time offender against good government.

The latest offense is a massive cockup in printing IRS Forms 1099 for Vermonters who collected unemployment benefits in 2020. Tens of thousands of people received forms that contained other people’s personal information instead of their own, which is a low-tech kind of privacy breach in our age of digital hacking.

This will require a costly fix. DOL will reprint all 180,000 forms and mail them all out, plus it will provide prepaid envelopes to those who got bad 1099s so they can return the faulty forms at no cost. Harrington also said his department has contacted the Attorney General’s office as required by state law, in case there are legal repercussions.

VTDigger reports that this is DOL’s second data breach since the pandemic began. The first, back in March, saw DOL send nearly six thousand Vermonters’ Social Security numbers to employers not connected with their cases.

But while it was the second data breach, it was the third major administrative failure by DOL during the pandemic.

Deets after the jump.

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“The Tom and Jeff Show”

Best: Gov. Scott, great lighting, busy but effective background. Worst: Pretty much everybody else.Extra demerits for “Redshift” Cummings and “Tiny” Hooper.

Vermont’s Emergency Board, an obscure but highly influential entity, held its twice-yearly meeting Tuesday afternoon to receive an updated revenue forecast from state economists Tom Kavet and Jeffrey Carr. Or, as the governor dubbed it, “The Tom and Jeff Show.” (The E-Board includes Gov. Phil Scott and the chairs of the Legislature’s four “money commitees” — House and Senate Appropriations, House Ways & Means, and Senate Finance. All of whom are women, it should be noted.)

Their report is posted as a downloadable file on the Legislative Joint Fiscal Office website. It’s recommended reading; it’s full of economic information beyond the basic tax projections. Video of the E-Board meeting available here.

Considering the pandemic and all, the news is astonishingly good. The new outlook for FY2021 predicts a very slight dropoff in total revenue, about $20M in all. That’s peanuts compared to earlier dire predictions. For FY2022, which begins in July, the new forecast predicts $77M in additional revenue. Carr and Kavet also predict a big increase in revenues for FY2023.

(Now, if you’re concerned about the federal deficit, it’s not all good news. Since 2018, deficit spending has gone from 105 percent of GDP to 135 percent. Covid relief is one driver of the increase; the other is the Trump tax cuts of 2017.)

How can this be? One simple explanation: A tsunami of federal recovery funds. And with Democratic control of the presidency and Congress, Carr and Kavet expect at least one more big infusion. (President-elect Biden has proposed a $1.9 trillion relief package.) So far, federal relief funds to Vermont account for a stunning 20 percent of the state’s gross domestic product.

“Without the federal money, I’d be declaring a five-alarm fire on Vermont’s economy,” said Carr. “We’re all Keynesians now. If we throw enough money at a problem, we can mitigate the damage in the aggregate.”

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Ex-Politician Undertakes Research Project; Media Outlet Swoons

Olsen’s treasure trove. (Not Exactly As Illustrated)

Last week, VTDigger posted a curiously lopsided story that trumpeted the intention of former state lawmaker Oliver Olsen to “audit the auditor.”

That would be state auditor Doug Hoffer, who seems to have gotten deeply under Olsen’s skin. The Digger piece went on and on about Olsen’s dim view of Hoffer’s work, cited the views of lawmakers with similar misgivings, and… um… barely quoted Hoffer at all. Nor did it include comments from the many lawmakers who have think highly of Hoffer. It kind of reads like a hit job.

There are two quotations from Hoffer, both apparently taken from emails. In fact, I asked Hoffer if he’d been interviewed by the reporter. “We had no phone conversations at all,” he said. “I had no chance to respond to the allegations [by Olsen].”

Well, that’s Journalism 101, isn’t it? A former editor of mine used to hammer repeatedly on the obligation of reporters to talk to everyone mentioned in a story. That doesn’t seem to be the standard at Digger.

So the article was a little malpractice-y. What about the substance?

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Prepping for Disappointment

Well, the incoming leaders of the House and Senate are pouring buckets of cold water on any hopes of a progressive agenda in the next two years.

In some ways, this makes perfect sense. In others, it’s a continuation of the squishy-soft stylings of the outgoing leadership. And that’s disappointing for anyone who was looking forward to the possibility of change.

My former colleagues Xander Landen and Kit Norton have posted a legislative preview, and it’s chock full of Business As Usual — the kind of Democratic strategerizing that’s helped Phil Scott remain governor. Or, shall we say, done little to nothing to draw a clear contrast between Scott and the Dems.

Now, these are extraordinary times. And I have no quarrel with the idea that coronavirus will be first and foremost on the agenda until we’ve vaccinated our way back to normality. The budget alone could occupy the available time between now and adjournment.

So yeah, when Speaker-In-Waiting Jill Krowinski says her top priority is “to bring people together and create a plan of action to beat the virus and it needs to be a recovery plan that leaves no one behind,” I completely agree. Save for the grammatical tic.

But 2022 ought to be a completely different story.

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