A New Can Of Worms
23 October 2003
Rich Miller Challenges Illinois-STAMP

I'm very grateful for
Rich Miller
commenting on yesterday's first Illinois-STAMP report. I left a message on his answering machine to thank him for noticing. And of course he's not going to like it:

"SURVEY SAYS... (excerpt) The Illinois Policy Institute, a conservative think tank, claims a new study shows the governor's budget will cost the state 3,823 jobs and $110 million in investments. But a similar computer model that was used to generate the Illinois estimates recently came under fire in a study conducted at the University of Arizona.

The Beacon Hill Institute, which prepared the study for the Illinois Policy Institute, has been using its State Tax Analysis Modeling Program (STAMP) to influence tax debates since 1994. In 1997, the Institute used the model to help defeat a proposed increase in Ohio's sales tax. The Institute also used its STAMP model to help defeat a recent tax hike proposal in Alabama. The Institute describes itself as a 'free-market think tank...

"...This month, however, Professor Alberta Charney, who has a Ph.D. in economics and focuses her research on Arizona's economy, presented a paper that picked apart the Institute's recent report on Arizona."

I don't know what the rest of the piece is about. I did read Charney's paper, which by the way hasn't been peer reviewed, yet. And oh, David Tureck at BHI has a Ph.D. in economics as well (as long as we are appealing to authority, Rich) So, I'm sure there will be some give and take as her paper moves to the next level and makes it through the review process.

The Arizona-STAMP was a lot less detailed than the Illinois model, according to Charney's presentation. That's a common critique because the major shortcoming with regional CGE's are a lack of data. Illinois, as a larger state, has more robust data available, which makes the Illinois-STAMP more useful tool -- but that doesn't mean that BHI didn't make some educated guesses -- because they did.

Charney's overall concerns with CGE models are that they haven't been completely accepted by academy yet: "We believe that until there is more development of CGE models and a literature consensus starts forming about the issues outlined by Partridge and Rickman, that the benefits of such a model in estmating revenue feedbacks are substantially out-weighed by the costs." In other words the newness of the models make them a bad investment for states. It's a judgement call that some states have disagreed with -- something she points out in her presentation.

I can live with that. It wasn't until this year that the Congressional CBO began dynamically scoring the Federal Budget, and CBO numbers while better than static scoring, weren't that different from the old way of doing business. Charney's problems with the Arizona-STAMP are limited to the Arizona model which has a very narrow focus of 7 sectors of the economy compared with Illinois-STAMP's 27 sectors.

Charney's concerns about major differences in the factor sectors (capital vs. labor) that didn't emerge when they should have in Arizona do emerge in Illinois. For example, in our analysis of the CTBA proposal we saw increase of capital earnings rise by .71% while labor earnings come in at -0.65%. Those are in line with our expectations. Had these sectors been both positive, for example, then we would have a problem.

Her causality argument regarding the Arizona-STAMP doesn't apply to Illinois either. Look at the affects of the casino taxes have had on that industry in the last two years. That certainly confirms our findings, as surely as does the constant adjustments downward in the revenue flows.

At the press conference yesterday, I tried to point out that the model doesn't predict. It is a "what if" model. I used terms like simulation. I also pointed out that models such of this are going to be at variance with reality, but they definately show the direction we are moving in.

One mistake I may have made, was that I can't remember how clearly I stated that the national economy is still going to have a larger impact on the Illinois economy. My argument is, and I use Illinois-STAMP to support it, is that state policy does impact the local economy -- and that needs to be part of the fiscal discussion.

The STAMP model has been around for ten years and I'm sure the model is constantly being tweaked to improve performance. If we Charney's conclusion about CGE models seriously, then we are going to have to continue to use them.

Finally, let me make a point about BHI making their regression analyses available to academics. They aren't in the academy. They have no obligation of any kind to share their data with anyone. The Academy hates that about think tanks. One of the reasons why think tanks don't always share their work is because of people like Rich Miller. In the whatever goes world of politics, guys like Miller -- and I mean no disrespect -- can make mountains out of molehills or draw conclusions from academic criticisms and misapply them.

Oberweis and G. Ryan

Rick Pearson and Christie Parsons of the Chicago Tribune deal the Oberweis campaign a credibility blow:

"After a meeting with U.S. Senate candidate James D. Oberweis last month, Ryan made telephone calls to local GOP leaders in his home area of Kankakee to urge them to help Oberweis in his bid for the Republican nomination. Ryan said later that he made the calls as a matter of courtesy but was not supporting Oberweis."

If the Republcans are to be successful in this state, then George Ryan must go away. Being associated with George Ryan can't be good for the campaign.

And hey, no one is going to believe Oberweis' campaign downplaying it.
Shades of Clinton

Eric Zorn comments this morning on Hot Rod's unability to "feel our pain:"

"We've seen three high-profile preventable disasters this year, along with an almost comically flagrant abuse of power. And in response--as the above excerpts from Tribune and Sun-Times stories show--the leader of our state has served up modest dollops of rhetorical oatmeal.

The buck stops over there."

The Buck never got here was the mantra of the Clinton Administration and the Blagojevich crew seems to have figured that much out, they just don't know when to employ it.
22 October 2003
Illinois-STAMP Was Released Today

The Press Release is here. I'll release an adobe version of the 8 page study we did on the budget and the income tax - property tax scheme we modeled.

In responding to one inquiry about the report the governor's OMB spokesman claimed that the study was flawed because the governor raised business and tax fees by $641 million not the $541 million we measured.

Think about that for minute. We just provided some empirical muscle to support kthe idea that higher taxes mean fewer jobs and the spokesperson said we were flawed because we came in low on the amount of taxes.

When asked to respond to this, I pointed out that we measured what we said we measured. That if the governor's office wishes to point out another $100 million in taxes, I'd be more than happy to go over SB 1903 with them and adjust the figures.

When the reporter followed up with OMB spokesperson asking her to identify the $100 million so that he and I could re-score the budget -- and I'm not making this up -- she claimed that she didn't have time to find those numbers, right now.

...And besides, I lean Republican...

Again, I'm not making this up...

More on Quinn...

Quinn wants to double income tax on rich according to Dave McKinney in today's Sun-Times.

Here is a moral question that I have. When you single out a small group of people based on race, creed, sexual orientation, sex, or other identifying for punitive punishment from the state we consider it morally reprehensible -- and for good reason.

In Indonesia the Chinese have been singled out for violence by society for being better off than the native population. Here in Illinois, we have a political figure saying that I want the power of the state to rob Peter directly and give the booty to Paul. How is what Pat Quinn is suggesting, different?

The circumstances may be different, but the logic may be the same.
The Rumsfeld Memo

This leaked memo from Rumsfeld to motivate his staff to re-think our war on terrorism is being described as 'grim.'

Inside his staff, though, they probably call it motivational.
21 October 2003
Other than Joe Lieberman

Can you see any of the other 9 dwarves willing to pull someone aside like this?:

"President Bush personally rebuked Mahathir Mohamad, the Malaysian prime minister, Monday over his remark that 'Jews rule the world.'

Bush pulled him aside at an international economic summit to say the comments were 'wrong and divisive.'

A White House press secretary quoted Bush as telling the Malaysian leader: 'It stands squarely against what I believe in.'"

Unlucky Quinn

Quinn backs income tax hike for wealthy is the headline that leapt out at me this morning:

"Ladies and gentlemen, get ready for a rumble - the rebel in Lt. Gov. Pat Quinn apparently has returned.

Returning to his roots of political maverick, Quinn will be bucking the administration with his push for a constitutional amendment that increases income taxes for the wealthy to help fund education and give homeowners a property-tax rebate.

A spokesman for Quinn said the lieutenant governor will begin a statewide tour within the next two weeks to publicize the proposal outlined in an amendment to Senate Bill 151. Claude Walker said the measure that originated with state Sen. Maggie Crotty, D-Oak Forest, would double the current 3 percent personal income tax on incomes of more than $250,000. The surtax would apply only to the income above $250,000.

The projected $1.15 billion raised would be split among the state's 2.7 million homeowners and its 893 school districts. Every year, homeowners would receive a check of about $208, which would fluctuate around the current 81,300 residents who earn more than a quarter-million dollars. "

Tomorrow I'm rolling out a dynamic scoring model of Illinois. It's a model that has been used all over the country, so it has a strong pedigree. Before now we knew Quinn's proposal would cost jobs, we just couldn't say how many. Now we can. It more than 13,000. A month or two ago we couldn't respond. Now we can.
20 October 2003
What Should the Model Be For Illinois Conservatives?

The answer is right here
It Is Not Just Here

The WSJ (link requires subscription) challenges the conventional wisdom on our manufacturing woes in this country:

"The U.S. manufacturing sector has gone through 38 grueling months of declining employment, but a new report shows that factory-job woes aren't just an American problem. From Brazil to Russia and yes, even to China, manufacturing jobs are disappearing around the globe.

Economists at Alliance Capital Management LP in New York looked at employment trends in 20 large economies and found that from 1995 to 2002, more than 22 million jobs in the manufacturing sector were eliminated, a decline of more than 11%.

Contrary to conventional U.S. beliefs, the research found that American manufacturing workers weren't the biggest losers. The U.S. lost about two million manufacturing jobs in the 1995-2002 period, an 11% drop. But Brazil had a 20% decline. Japan's factory work force shed 16% of its jobs, while China's was down 15%."

There is growing protectionist sentiment both in Congress and around the country right now. All the ire is directed toward China, but the culprit seems to be productivity gains leading to over capacity around the globe -- not one country's emergence into world trade flows.

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