Now, The Rest of The (Illinois) Story
February 7th, 2010Everyone should now be aware of the challenges facing the national economy, but what about Illinois residents? Do they fully understand the depth of the Illinois economic crisis?
Everyone who objectively looks at the nation understands that the economy is stabilizing, with unemployment down to 9.7% in spite of employers cutting another 20,000 jobs in January. Did you know that when President Obama took office he pledged to create 3.5 million jobs with his economic policies, including a massive stimulus plan? The chart below from The Heritage Foundation displays how successful Obama’s policies have worked:
Here’s what Heritage Foundation fellow Brian Reidl says of the Obama budget:
- Permanently expand the federal government by nearly 3 percent of gross domestic product (GDP) over 2007 pre-recession levels;
- Raise taxes on all Americans by more than $2 trillion over the next decade (counting health care reform and cap and trade);
- Raise taxes for 3.2 million small businesses and upper-income taxpayers by an average of $300,000 over the next decade;
- Leave permanent deficits that top $1 trillion in as late as 2020; and
- Double the publicly held national debt to over $18 trillion.
OK, I think everyone realizes the mess at the federal level, and nothing in the budget is encouraging to business that will create jobs. Tax increase anyone?
What about the Illinois economy? In Sunday’s business section of the SJR Tim Landis wrote this:
There was not a lot of cheerfulness coming out of the economics department at the UNIVERSITY OF ILLINOIS last week.An index of the Illinois economy compiled each month by J. Fred Giertz was flat in January, or as the report put it, “the state is still tightly in the grip of recession.”Geoffrey Hewings weighed in with his own forecast, which suggested “Illinois is mired in a deep employment recession that could linger for years unless the state unravels the roots of its nearly decade-long job slump.”
Hewings said the state’s leaders must act quickly to determine long-term employment needs and decide how to train the work force to meet demands. “Is the problem with education, labor skills or the markets they serve, or is it about corporate taxes or the dismal state of the Illinois economy?” said Hewings.
Now ”The Rest Of The (Illinois) Story” which was not reported in the SJR:
Where have all the jobs gone? Dr. Hewings calls the cycle IL is in the “lost decade.” Remember the lost decade Japan was referred to-we are facing that right now in Illinois. No job/economic growth…As we know job growth/job creation/job stability is directly tied to the housing market recovery.
Since the early 1990s, IL growth rate has fallen behind the US and the rest for the Midwest. Current employment in Illinois matches that for April 1997. Through October 2009, Illinois has added jobs at 40% US rate since 1990. Illinois has only experienced three years since 1980 when employment growth rate exceeded the United States and all were before 1990. Even if Illinois’ economy turns around in 2010, it would still take a minimum of 8 years to reclaim 2000 unemployment levels.
Business expansion and investment are critical to improve the job situation and the overall economy. IL has dropped from 4th to 15th in terms of per capita income in the last 15 years. University of IL Regional Economics Applications Laboratory suggests loss of 100-200,000 more jobs in the state over the next 12 months-absent impacts of stimulus and other initiatives. Dr. Hewings forecasts IL will maintain an 11.6% unemployment rate in 2010. IL spends a Gross State Product in excess of $600 billion yet spends virtually nothing on economic research on the economy. In an economy that is not growing jobs or business expansion, fewer people will be changing jobs. People are voting with their feet in Illinois-net migration in IL drains $1.6 billion from the state’s economy each year. Out-migrants enjoy higher per capita income than in-migrants.
This erosion has continued for more than 10 years and contributed to the decline in state’s position in the U. S. Unless the fiscal crisis is addressed in Illinois, there is little prospect that growth rates will match those for the United States,” according to Dr. Hewings.
In the first decade of 2000, the housing market led the economy directly through sales, transactions and construction. Now, the housing market is responding to the economy. END Dr. Hewings.
Hopefully the rest of the story puts into perspective the dire situation in Illinois. The tax increases in the Obama budget will only exacerbate the recession in Illinois. Raising taxes by the state causing more families and business to leave Illinois is not the solution. We need someone who will run the state like a business, force the government to take its medicine (spending cuts), and make Illinois attractive to business once again.
As Winston Churchill said; “A country trying to tax (and spend) their way to prosperity, is like a man standing inside a bucket trying to lift himself up by the handle.”
The opinions expressed here are solely those of Fritz Pfister, or identified sources, and not those of RE/MAX Professionals Springfield, or RE/MAX International.
