By: Dr. Lynn Reaser
As the Russians threaten to send more troops into the Ukraine and the U.S. counters with a pledge of economic and political sanctions, markets have seized up in fear. Does the Russian invasion of Ukraine raise near-term concerns about the impact on the economy, particularly here in San Diego?
The answer is “yes,” even thought the effects may not be large or long-lasting. Any escalation of international tension is cause for concern. Although the U.S. is not at risk of major losses in terms of vital imports or trade in general, financial markets will reflect any fears of a further deterioration in Russian-U.S. relations. Falling stock prices will, in turn, impact consumer confidence and spending. Ukraine, already struggling with a large debt burden, could be forced into default, raising fears about the financial exposure of various banks and other emerging markets.
San Diego’s economy may see little direct impact. However, San Diego’s military community will be on alert and we probably all should be until tensions around the Black Sea hopefully ease.
By Dr. Lynn Reaser
The nation’s business economists have just concluded their annual Policy Conference at the National Association for Business Economics (NABE) in Washington, D.C. Many topics were covered, including employment, demographics, changes in the health care landscape, and immigration. These issues intersect.
The Affordable Care Act will give less incentive to work. Some individuals will cut their working hours in order to stay below the limits required for health insurance subsidies. Others may retire earlier than otherwise since their employer may no longer provide health insurance or because they will not be precluded from insurance because of pre-existing conditions.
Labor force growth could thus be slower than has previously been projected, which will have some negative economic effects. A smaller rise in the work force will dampen economic growth and gains in per capita income. It will make it more difficult to pay for the cost of social security, health care, national security, and other government programs. It also raises the risk that individuals will retire without the necessary savings and assets to last for the remainder of their lives, which are becoming increasingly longer.
Immigration to offset smaller indigenous increases in the labor force will be necessary to sustain faster economic growth, which is another reason why immigration reform is so critical.
By Dr. Lynn Reaser
As much of California faces a water emergency, San Diego, fortunately, is in relatively good shape. Significant conservation, strategic investments, and moves to diversity our sources of supply mean that San Diego will not face the hardships borne by many farmers and others in the Central Valley, Northern California, and other parts of the state.
After facing up to 50% water reductions during the 1991 drought, San Diego has taken important corrective actions. Water purchase agreements with the Imperial Irrigation District and important investments have reduced San Diego’s dependence on the Metropolitan Water District from 95% to less than one-half. Spending on various projects, ranging from lining of the Coachella and All American Canals to raising the San Vicente Dam’s storage capacity, are paying dividends. Consumers are conserving, with per capita water consumption down over 25% from 1991.
Water remains a serious long-term issue in San Diego. More conservation, partly through a more rational pricing structure of water, and a much greater use of recycled water will be essential. For 2014, however, we will be spared from the current crisis.
By Dr. Lynn Reaser
San Diego elected a new mayor on Tuesday night. Now the question is: what can and should he do? The economy remains on the top of many voters’ aspirations and concerns. Media reports continue to emerge that companies are being enticed to leave the area, most notably to Texas.
Is there one thing the new mayor should do to encourage firms to stay rather than leave? The answer — listen to them.
The new mayor needs to have a clear understanding of which City laws, policies, and procedures are the most costly for companies and causing some of them to consider other locations. Businesses constantly complain about the regulatory burden but we need specifics. San Diego should conduct a comprehensive survey of all the businesses located here to determine which particular regulations are the most onerous in terms of cost or delays. These could then be prioritized and analyzed in terms of achieving certain public objectives but at a much lower expense to our economy.
Information is power.
By Lynn Reaser
The Winter Olympic Games will start shortly in Russia and questions have again surfaced as to whether the benefits will come anywhere close to the costs.
Sochi expenses will exceed those of all previous winter Olympics combined since 1924 even after accounting for inflation. Security costs in the disputed Caucasus region, aspirations of extravagance, and corruption have more than quadrupled costs from estimates made in 2007 when Russia was awarded the games.
The current $50 billion estimate will far exceed benefits, which could be either hard dollars such as tourist spending, or an intangible lifting of national prestige. Few travelers are likely to attend both because of security concerns and per person weekly costs of $7,000-$14,000. Visions of a “new Russia” have been supplanted by views of violence and corruption.
Hopefully, the games will go well and will be enjoyed by athletes and observers from around the world. Sadly, for the Russian people, they are likely to be a large economic loss.
By: Dr. Lynn Reaser
President Obama delivered his State of the Union address on Tuesday evening in front of Congress, public officials, invited guests, and Americans tuned in through their TVs, radios, or mobile devices. It contained a wide range of Presidential requests for Congress as well as planned Executive actions. Some of the speech was bipartisan, while other parts, such as discussion of the Affordable Care Act, saw the Democrats clapping while Republicans sat on their hands.
For two minutes, however, the nation stood united as the President pointed to the sacrifices of U.S. Army Ranger Sgt. First Class Cory Remsburg. Sergeant Remsburg was wounded severely in Afghanistan on his tenth tour of duty in various areas of the world. The applause lasted nearly two minutes—by far, the longest of the evening.
Our military men and women continue to make deep sacrifices for our nation—a fact that we only periodically recognize. In San Diego, we have a disproportionate number of these outstanding men and women. Active duty military personnel now number nearly 106,000 in our region, accounting for one out of every 15 working adults in San Diego County. Many of them, like Sergeant Remsburg, have seen multiple deployments.
Perhaps the most important message of Tuesday night’s speech was the strength and resilience of our men and women in uniform. The large presence of these individuals in our region should make all San Diegans especially grateful and deeply proud.
By: Dr. Lynn Reaser
As concerns about income inequality and the failure of many to move ahead mount, various entities at the local, state, and national level are arguing for increases in the minimum wage. California’s minimum hourly wage will rise from the current $8 to $9 on July 1 and to $10 on January 1, 2016.
Should the City of San Diego take another step by setting an even higher minimum? The answer is “no.”
The City’s first priority should be jobs. California’s minimum wage hike could already stifle future hiring or cause layoffs by some firms or organizations. An even higher number in San Diego could push growth beyond City limits. Students, minorities, older individuals, and those with any prior legal records could be the most impacted by a higher minimum wage. These are the people that need the most help rather than further barriers to give them their first or second chance.
San Diego needs to encourage firms to come here, stay, and grow, while it does more to give people the education and skills to earn higher pay.