Letters to the Editor

Laid-off in L.A…

I’ve been out of work from job in IT and looking for employment for the past several months.  I drive past the LA/Long Beach Harbor area on a daily basis and from what I have seen of the traffic on the freeway and can see out in the blue Pacific, the shipping business is absolutely booming.   My comment/question is…are we better or worse off from all of this trade?  It would appear that there must be some jobs in all the hustle and bustle, but I, for one, have not been able to find one…

Bill in Lomita, California

…the long and short of it, Bill, is that while we are recovering as reflected in the traffic  you’ve witnessed in the West Coast ports, whether the economy be in a mild recession, or a strong recovery, restructuring is occurring and you may never get your IT job back…the good news that you are certainly not alone.  Not to lose hope, the recovery is in full swing and “new” jobs are being created as we speak.

Linda in Michigan…

I was surprised to see in your last newsletter that the cost of education had grown so much over the past several years – more significantly, that autos and computers had dropped so much in that same time frame.  It was just shocking to me is all…

To this point in time, a few sectors, including education, professional sports, big oil, etc., have not seen the intense competition experienced by auto and computers…  The education industry would be called a bilateral monopoly in traditional economic literature.  The reason is that roughly 80% of education is public, depending primarily on tax-revenue and not on tuition.  Most of the educators in the public sector are unionized. 

Please note: as the auto industry experienced there are signs of growing limitations to oil, sports and education that competitive factors are beginnning to enter the picture.  

From Paul in MI

You’re right on in pointing out that unemployment is a lagging indicator in our current situation!!!

In days of yore, cyclical unemployment would fall with recovery, moderated by an encouraged worker effect.  That lag of falling unemployment in a recovery is greatly reinforced because so much of the unemployment is now structural.  We can expect in future recoveries from recession that so-called jobless recoveries will be the rule rather than the exception. 

Bob in Oakland

Looking into your crystal ball, how will state and local governments deal with ongoing problems relating to revenue shortfalls?

The Bad News

Our US GDP was approximately $10 Trillion with a growth rate in excess of 5% in 2000.  In the second half of 2000 a precipitous drop in our growth rate occurred, leading to a recession three quarters long in 2001(the recession bottomed at -1.5%). 

Translating in to tax revenue losses

6.5% of $10 Trillion is $650 Billion in lost GDP 

Overall taxes constitute 30% of GDP

30% X $650 Bil = $195 Bil

and of that…

State and Local is about 45% of the total

45% X 195 = $88 Bil

By the way, California constitutes about 12% of our economy…and translates approximately into $10.5 Bil in lost revenues (annually).

Please note that much of the problem is due to budgeted spending linked to a forecasted increase in revenues.

Having laid that groundwork, as the economy recovers (as it currently is), the increase in the tax base generating increased revenues will gradually alleviate the deficits currently experienced by state and local governments. 

…the caveat is that spending must be curtailed.

Click here to return to Main Page

(Opinions expressed on this web page are those of a faculty member or employee and do not necessarily reflect the position of University of Detroit Mercy)