Wednesday, April 16, 2014


New WorkForce West Virginia data shows that for the first time since December 2012, West Virginia experienced a year-over-year rise in employment with 751,900 people working in March 2014 as compared to 747,900 in March 2013. West Virginia is still 31,900 below its pre-recession employment high of 783,800 in December 2006.

Despite the rise in employment, the number of unemployed and the state's unemployment increased in March due to workers re-entering the job market.


First it was low-cost natural gas. Is solar next?

Tuesday, April 15, 2014


Today's Charleston Daily Mail editorial resurrects the canard that America's very wealthy pay a disproportionate share of taxes and quotes Dylan Matthews of the Washington Post who wrote a year ago, "America's taxes are the most progressive in the world".

Of course, Matthews said that specifically and only with respect to the federal income tax and followed it up by pointing out that ". . . when you take (income) transfers — that is, stuff like Social Security, Medicare/Medicaid, food stamps, the Earned Income Tax Credit, and other government programs designed to improve people's standards of living — into account, even though the United States has the most progressive tax system in the world, its overall tax and transfer system reduces inequality less than those in peer countries . . ."

The Daily Mail omitted that part. But, the editorial makes an even bigger omission. Like its co-religionists who profess to abhor "class warfare", when the Daily Mail complains about taxes on the wealthy and income redistribution, it carefully confines its remarks to the federal income tax, conveniently forgetting all the other federal, state, and local taxes we pay. The reason it does so is that, if you factor those other taxes into the equation, the notion that government taxation is a machine for the redistribution of income is obliterated.

I made that point two years ago when I responded to syndicated columnist Walter Williams who wrote a column on the occasion of "Tax Day" that made many of the same points as the Daily Mail editorial. At that time I wrote:

"Williams states that 'the top 1 percent of American income earners paid almost 37 percent of federal income taxes. The top 10 percent paid about 70 percent of federal income taxes, and the top 50 percent paid nearly 98 percent. Roughly 47 percent of Americans paid no federal income tax.'

This sounds grotesquely unfair and would be, if federal income taxes were the only taxes we pay. But, when pointing out that it took us 107 days to reach Tax Day, Williams included ALL federal, state, and local taxes. So, when complaining about uneven distribution of taxes, why does he mention only the federal income tax?

Because, had Williams included all federal and state taxes, his claim that the burden is distributed unevenly would have been destroyed.

When all federal and state taxes are included, the top 1 percent of taxpayers, who earn an average of $1.4 million annually, shoulders just 21.6 percent of the burden matching almost exactly their share of the nation’s total income – 21 percent.

Additionally, the top 1 percent’s total combined tax rate of 29 percent is almost the same as that of families making $68,000 per year whose combined rate is 28.3 percent. The only people who pay less than 20 percent of their income in taxes are the lowest earners whose average income is $13,000 per year. They pay 17.4%.

In short, the higher federal income tax rates experienced by the wealthy are almost entirely offset by Social Security and state taxes which exact a much larger share of incomes from middle and lower income earners."

That fact combined with the miserliness of our social safety net programs means that the United States does less to redistribute income than nearly any developed country.


Vox reports that new student loans are about to become much more expensive as interest rates begin a series of annual increases. This should be particularly worrying in West Virginia where we desperately need to have more young people earn college degrees. Already West Virginia has fewer 4-year college graduates than any other state and our students who are trying to earn bachelors degrees have the highest rate of student loan delinquency in the nation, which means we're more sensitive to the rising cost of college education than the residents of any other state and, therefore, more likely to be negatively affected by higher interest rates.

Sunday, April 13, 2014


The narrative of West Virginia's natural gas boom generating an overall economic boom is now nearly a decade old and continues to persist despite the evidence on the ground and reams of statistics which show that the counties that host the bulk of drilling activity were economically downtrodden before the fracking boom and remain so. Instead of prosperity, they have experienced job loss, population loss, and general economic decline during the fracking era.

Still, the zombie-like "economic game-changer" jabber continues coming most recently from West Virginia Attorney General Patrick Morrisey who, in a February 27, 2014 article the The West Virginia Record, skillfully employed snippets of truth without the benefit of context or data to convey an utterly false impression of the fracking boom's effects on local economies.

The text is Patrick Morrisey's. The highlighting and comments are mine. Click on the image to enlarge.

For a more forthright account of the impact of fracking on West Virginia communities, see this recent Ian Hicks piece in the Wheeling Intelligencer about the experience of Wetzel County.

Friday, April 11, 2014


Finally, a major WV news outlet has reported that the fracking boom has been an economic bust for a West Virginia community. In a story titled "Little Impact Felt Locally" Ian Hicks of the Wheeling Intelligencer/News-Register describes conditions in Wetzel County, Ground Zero in WV's Marcellus Shale region, and makes many of the points I and others have been making about the almost complete failure of the boom to contribute to local economies.

-- Negligible or non-existent job growth
-- Continuing population loss
-- Prevalence of out-of-state workers
-- Residential real estate values that initially grew are now in decline
-- Damage to roads from heavy trucking

In fact, the only benefits that Hicks' story attributes to the boom are a rise in property tax receipts and the fact that a spike in crime that some predicted has not materialized.

Hicks' story is based on a study co-authored by Sean O'Leary, the smarter, of the West Virginia Center on Budget and Policy. The study compares conditions in Wetzel County to those of three nearby fracking counties in Ohio and Pennsylvania whose experiences have generally been more positive.

For further background on the myth of the natural gas boom being an economic "game changer" for West Virginia, see my earlier columns:

"Cursed -- West Virginia's Marcellus Shale" (12/19/2011)
"The Emperor Has No Natural Gas Boom" (12/13/2012)
"How We Were Fooled" (1/12/2013)
"The Myth That Ate West Virginia" (6/27/2013)

Thursday, April 10, 2014


French economist Thomas Piketty's new book, "Capital in The Twenty-first Century" is being hailed as an instant classic by many reviewers and economists because it thrusts issues of wealth distribution and inequality into the forefront of the economic debate and because of the depth of quantitative evidence that Piketty brings to bear in support of his assertions. But, for residents of West Virginia, Piketty's book should have even greater resonance because the dynamics of economic growth and prosperity that Piketty describes go a long way toward explaining why West Virginia's economy, both historically and in the present, can achieve strong growth as measured by Gross Domestic Product (GDP) while utterly failing to generate economic prosperity as measured by indicators such as jobs and population growth.

Indeed, the following two charts show the degree to which this is the case. The first chart shows that, while between 2009 and 2013, West Virginia's GDP performance was significantly greater than that of the US economy as a whole, the state not only failed to add jobs as fast as the nation, the number of jobs actually declined slightly. The second chart shows the same pattern is true of population growth. Again, West Virginia outperforms the nation for GDP growth, but while America's population grows steadily, West Virginia's is almost flat . . . and Piketty provides a plausible explanation for how such anomalies can arise.

Piketty points out that, for the global economy as a whole, two of the metrics he studies -- total output (GDP) and total income -- are always equal. That which is created must be consumed. But, when we drill down to national, regional, or state economies, the equivalence may not hold. That's because, while some of the income derived from output flows to labor, the rest flows to the owners of capital and capital ownership isn't equal in all places.

Residents of wealthier regions often own, not only a fair share of the capital in the areas where they live, but also in regions where less wealthy people live. Consequently, if enough of the proceeds generated by growth are allocated to capital and if enough capital is controlled by non-residents, it's possible for the local economy to stagnate or even decline despite overall economic growth.

That is the case with West Virginia. Because so much of West Virginia's natural resources -- especially coal, timber, and natural gas -- and the companies that exploit them are owned by out-of-state interests, most of the income allocated to capital from those enterprises flows to non-resident owners and never enters West Virginia leaving the state's economy stagnant even when the industries prosper.

In that way West Virginia's economy may be described as "colonial" and the need is for policy-makers to recognize that fact and understand that, as a consequence, policy measures whose goal is to drive general economic growth by supporting West Virginia's extractive industries are destined to have little or no effect on the state's economy nor on the well-being of West Virginians. And that will always be the case until West Virginia enacts tax and other policies that assure that more of the wealth created by its extractive industries remains in the state where it can increase incomes for West Virginians and sales for West Virginia's merchants.

This can be accomplished through changes in tax policy at state and local levels, but such changes will not come about until West Virginia's political leaders at long last grasp the underlying dynamics that drive the state's economy.