Clayton-Matthews predicts short-run economic impact from the Boston Lockdown is similar to a snowstorm
What the Boston Lockdown Might Cost
The manhunt for the remaining Boston Marathon bombing suspect has largely shut down the city and its surrounding areas, as authorities asked residents in Boston and a number of nearby neighborhoods to stay indoors.
Boston Logan International Airport remained open and was operating under “heightened security,” according to the Massachusetts Port Authority, but the Massachusetts Bay Transportation Authority suspended all public transportation, and businesses large and small told employees to stay home. Utility National Grid closed its facilities in the affected communities and told employees to work remotely, a spokeswoman said, but its crews in the area will work with local authorities to respond to any emergency situations. Schools including Boston College, Boston University, Harvard University and the Massachusetts Institute of Technology, where authorities said a campus patrol officer was shot and killed by the bombing suspects last night, all cancelled classes.
Not all business activity was shut down. “At the direction of authorities, select Dunkin’ Donuts restaurants in the Boston area are open to take care of needs of law enforcement and first responders,” Karen Raskopf, chief communications officer of Dunkin’ Brands, said in an emailed statement.
The Boston metropolitan area had a GDP of nearly $326 billion in 2011, according to data from the Bureau of Economic Analysis released in February. That makes the city and its surroundings the ninth largest metro area in the U.S., with an economy larger than those of Greece, Finland, Singapore, Portugal or Ireland.
It’s far too early to get a complete sense of the economic impact of Monday’s bombings and the subsequent manhunt, but a simple – or simplistic – calculation based on that $326 billion figure suggests that shutting down the area for a day could cost the regions’ economy about $1 billion. That doesn’t account for productivity lost nationally as workers tune into to TV news or other outlets to follow the unfolding events.
But today’s economic activity isn’t necessarily lost – it might just be delayed, similar to the effects from the blizzard that hit the area in February, says Alan Clayton-Matthews, a professor at Northeastern University who studies the region’s economy. “People on salary haven’t really lost any income,” he says. Restaurant and retail workers might not be getting paid for shifts affected by the shutdown, but they could make up for that in the near future. “The short-run impact is pretty much like a snowstorm,” says Clayton-Matthews, “which is kind of odd given how horrific and surreal this situation is.”
The most significant long-run economic impact, if there is any, may come from increased security costs, both in Boston and nationally, particularly for open-air events. “More resources will need to be put into making events secure,” Clayton-Matthews says, “and that takes away resources from other uses that might have led to higher growth in the future.”
Clayton-Matthews predicts potential for economic losses at outside summer events due to lingering fear from Boston marathon bombings
Economics? Biggest loss is yet to come, experts say
By Jack Minch and Jennifer Swift New Haven Register
The biggest economic impact to Friday’s lockdown of Greater Boston is yet to come, said Northeastern University economist and professor of public policy Alan Clayton-Matthews.
Dunkin’ Donuts shops were the only businesses with permission to open in Watertown, and residents throughout Greater Boston were urged to stay inside, so the region ground to a near-halt Friday.
In Boston the MBTA shut down and Bruins and Red Sox postponed their games.
Restaurants and universities were closed in response to the search for Boston Marathon bombing suspect Dzhokhar Tsarnaev.
It is difficult to tell the value of the economic loss, said Jon Hurst, president of Retailers Association of Massachusetts.
“Certainly it is hundreds of millions including retail, restaurants and lost office productivity,” he said in an email. “Could exceed a billion.”
Jim Fitzgerald, the owner of Fit-Z’s Bar and Grill on Main Street in Watertown, said Friday afternoon his bar is a place for people to hang out, but he planned to remain closed until told otherwise.
“Friday is the busiest day of the week for us,” Fitzgerald said. “My friends have called, different people have texted to see if we’re open. But I’m friends with cops, and they’ve told us it’s not a good idea to congregate.
“Friday’s are a busy day for us; so is the weekend, but it’s not worth the risk. Just in case.”
Most of the money lost to business in the short term can be made up, said Northeastern University economist and professor of public policy Alan Clayton-Matthews.
It isn’t unprecedented for businesses to close on workdays, economists said.
Blizzards forced similar closures during snowstorms this winter, said Clayton-Matthews and UMass Lowell Economics Department Chairman Professor Michael Carter.
“In terms of the effect on business this is similar, but since the weather is nicer I think the rebound effect will be stronger,” Carter said.
Many of the people who work in Boston have salaried positions, and hourly employees will get the opportunity to make up the lost hours for shoppers who delay their spending, Clayton-Matthews said.
Some businesses such as pushcart vendors or convenience stores won’t make up the business.
“That business is just gone,” Clayton-Matthews said.
It will be especially difficult for restaurants that cater to the lunchtime crowd, Carter said.
The bigger impact will be on attendance at outdoor events later this year, where fewer people may go to those events out of fear of the danger posed by being in crowds, Clayton-Matthews said.
“People do seem to want to respond to this by being not afraid and not being afraid to be out, but I still suspect there will be some kind of effect later this summer in public open places,” he said.
Businesses and municipalities are likely to start adding security.
The impact will be worldwide, Clayton-Matthews said.
Runners and spectators at the Virgin London Marathon can expect to see increased security Sunday, he said.
By Brian Ballou | The Boston Globe | February 21, 2013
More than 1,000 high school students from across Massachusetts marched from Faneuil Hall to the State House Thursday, calling for increased funding for youth jobs and asking that more companies create summer positions for teens.
“This is important for me to be here, begging these legislators for more jobs, because we are the future,” said Sheraine Blake, 18, a senior at the Boston Community Leadership Academy, as she stood on the State House steps. “And to save kids from being out on the street and doing things they shouldn’t be doing, why not open up more jobs for us?”
“It will cut down on drugs and all the violence,” she added.
The students, who hailed from at least a dozen cities and towns, chanted “We want jobs” as they wound through downtown on their way to the State House. Once there, they were briefed on how to approach elected officials about their concerns. State Representative Elizabeth A. “Liz” Malia, a Democrat who represents Jamaica Plain, met with the students, as did several other state legislators.
The annual demonstration, organized by the Boston-based Youth Jobs Coalition, began in the summer of 2009, when the Legislature proposed cutting 2010 state funding for youth jobs by 50 percent, because of a lack of federal money.
About 700 youths showed up that year to protest the cut to $4 million, and the Legislature eventually found $4 million in an unused emergency fund to restore total spending — used for the creation of municipal jobs for teens — to $8 million. Spending remained at $8 million in 2011 and last year rose to $9 million, according to officials with the Boston-based Youth Jobs Coalition.
Even with that funding, the coalition says employment of high-school age youth has fallen dramatically, citing a 2012 report by Northeastern University’s Center for Labor Market Studies that put teen employment at a record low of 27 percent, compared with 54 percent in 1999.
A second component of the youth jobs program, subsidies from the state to private companies to hire and train youth, has been slashed, from $7 million to $2.8 million, said Lew Finfer, an adult leader of the Youth Jobs Coalition.
“That has really hurt the effort,” he said.
Finfer said the coalition is seeking summer jobs that pay about $2,500 for up to seven weeks. He said that in Boston, there are 45 companies that have workforces with more than 500 employees that are not hiring young people, and 357 companies that have more than 100 employees that are not hiring teens.
“We are really pushing on those companies to consider creating jobs for youths,” he said.
To pay for state subsidies for those jobs, Finfer said students are urging legislators to accept Governor Deval Patrick’s $1.9 billion tax hike proposal, and the ‘Act to invest in our Communities,’ which was cosponsored by 50 legislators. That act proposes increased income tax and capital gains tax on higher-income residents.
Mayor Thomas M. Menino spoke inside Faneuil Hall before the youth march Thursday, saying that every year of his administration, creating jobs for youth has been at the top of his to-do list.
“It’s a no brainer . . . when you put young people to work, it creates opportunities for you, it’s a learning process, to build up new relationships,” Menino said. “When January starts, my number one priority is getting summer jobs for our young people.”
By Priyanka Dayal McCluskey | Worcester Telegram & Gazette | February 24, 2013
For more than two years starting in early 2010, the Massachusetts unemployment rate fell steadily, indicating that the economy was improving after a severe recession.
But recently, the trend has reversed. After falling to 6 percent in May and June of 2012, the unemployment rate ended the year at 6.7 percent.
In the Worcester metropolitan area, unemployment fell to 6.4 percent in April and May but rose to 7.2 percent by year’s end.
The reversal may be unwelcome, but it’s not entirely surprising, given the slowdown in economic growth during the second half of 2012, according to Northeastern University economist Alan Clayton-Matthews. The Massachusetts economy grew just 1 percent in the last quarter of 2012, Mr. Clayton-Matthews reported in the journal MassBenchmarks.
“There were actually net job losses in the second half of the year, and that was happening at the same time as an increase in the workforce,” he said in an interview.
Robert A. Nakosteen, professor at the Isenberg School of Management at the University of Massachusetts at Amherst, said the unemployment rate can rise when more people become enthusiastic about finding work and decide to join the labor force. State figures show the labor force grew slightly but stayed around 5.3 million last year.
“Things didn’t necessarily get worse,” he said of last year’s unemployment numbers, “they just didn’t get better.”
Still, Mr. Nakosteen said the increasing unemployment rate shows that one of the state’s sources of economic recovery — technology spending — is fading.
“The big spending surge sort of petered out,” he said.
Economists are also concerned about the looming federal budget cuts, known as the sequester, which are scheduled to take effect in March. Those cuts would affect defense contractors, research institutions and others. Sequestration, if it happens, could increase unemployment and slow economic growth.
Defense contractors have already stopped hiring and started “preventive layoffs” in anticipation of the cuts, Mr. Nakosteen said.
While unemployment seems to be increasing, the state’s Executive Office of Labor and Workforce Development said Massachusetts netted at least 52,700 jobs last year, including more than 800 in the Worcester area.
“We remain confident that our investments in education, innovation and infrastructure have led the way for our economic recovery and that the Commonwealth is recovering stronger and faster than the rest of the nation,” Kevin Franck, a spokesman for the office, said by email.
The unemployment rate is calculated from a monthly survey of households. Job estimates are based on a separate monthly survey of employers. Because they’re based on different surveys, the figures don’t always match.
But Andre Mayer, senior vice president for communications and research for the employer group Associated Industries of Massachusetts, is puzzled by the recent numbers.
“This is a different pattern than we’ve seen in past recoveries,” he said. “There’s considerable mystery about what’s happening here. There’s actually been quite a lot of evidence of more people working, but for some reason it’s not showing up consistently in the numbers.”
During 2012, the biggest job gains in Massachusetts occurred in professional, scientific and business services, and trade, transportation and utilities.
But layoffs have not stopped. At least 500 people have been coming through the doors of the Workforce Central Career Center in Worcester each week to apply for or sort out issues relating to unemployment benefits.
Recently, the center has seen many of the workers let go from the Henry Lee Willis Community Center and UMass Memorial Health Care in Worcester, and Ameridose LLC in Westboro.
“We see a constant flow of folks who have been laid off from businesses of a variety of sizes and profiles,” said Donald H. Anderson, director of the career center.
Four views on whether there have been enough reforms to justify Patrick’s proposed tax increase
Globe Correspondents | The Boston Globe | February 17, 2013
Yes: Pair revenue, reform
Since 1998, the Commonwealth has reduced personal and corporate income tax rates, costing the state $2.5 billion a year — leaving little to pay current bills or deal with $80 billion in past unfunded liabilities, let alone make critical education and transportation investments for our future. Yet with the public demanding reform before revenue, the governor and Legislature have been hesitant to increase taxes.
Reform is precisely what the Commonwealth has been doing. Major changes to the public employee health-insurance system and public pensions will save billions of dollars over the next 30 years. Accountability in our K-12 schools will enhance classroom quality. The Turnpike Authority was merged into the Massachusetts Department of Transportation, and the “Fast 14” project has sped up bridge repairs.
Thousands of other efficiencies, big and small, have been implemented, from replacing police officers with civilian flaggers to moving 3 million Registry of Motor Vehicle transactions online. Operating under a new strict statewide performance management system, every executive office has been cutting costs. With this focus on efficiency, state government employment has grown by just 0.3 percent over the past two years, while total non-farm employment has grown by 1.9 percent. State government is shrinking as a share of the state’s economy.
Governor Patrick has put forward a tax package to pay for critical state needs. It can be tweaked to even better meet the criteria of sufficiency, stability, equity, predictability, and transparency. It will not undermine our competitiveness in the short-run. It will be strongly pro-growth over the long-term. Now is the time to pair revenue with reform to ensure a prosperous future for the Commonwealth. — Barry Bluestone
Barry Bluestone is the director of the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University.
No: This isn’t real reform
To date, Governor Patrick’s most significant reform is allowing municipal employees to purchase state health insurance. It’s a big deal, annually saving municipalities over $100 million.
Unfortunately, the governor’s 2014 budget abandons all pretense of authentic reform. Here’s why his argument that reforms during his tenure warrant massive new tax increases fails:
The governor’s reform record is mixed. Passed with promises of $6.5 billion in savings, the 2009 transportation reform law has yielded a tiny fraction of that. Even with a sales tax boost (over $600 million annually) to support transportation reform, we still pay hundreds of employees with borrowed money.
By requiring project labor agreements and so-called “prevailing wages,” even for civilian flaggers, the governor continues to inflate transportation construction costs.
What about public pension reform? The governor’s 2011 pension reforms promised $5 billion in savings over 30 years. Some elements were desirable, including lifting the retirement age for most state workers. But the “reform” also refinanced our pension debt, paying it off by 2040 instead of 2025, costing taxpayers tens of billions of dollars.
Worse, it forces the state to postpone paying down another huge unfunded liability — our $15.6 billion liability for retired state employees’ health care coverage.
The new spending blueprint is unwise. We cannot build new rail lines with low ridership even as the MBTA confronts an $8.9 billion debt and a $3 billion maintenance backlog. And can we take seriously a $1 billion a year transportation spending plan that doesn’t fund operations, maintenance, and debt service for planned expansions?
A year ago, the governor announced that he had fixed the “structural deficit.” Today, we know that’s not true: 2014 state revenues are a billion dollars shy of programmed spending. That’s the hole any new revenues will fill. Forget the promised transit lines, bike lanes, and education funding.
The well is dry. Between 2005 and 2011, state spending has grown at almost twice the rate of personal income and more than three times faster than GDP. That is the best evidence that Patrick’s record doesn’t justify massive new tax increases. — Jim Stergios
Jim Stergios is executive director of The Pioneer Institute.
Yes: Help people thrive
SEVERE ECONOMIC downturns, such as the one we have experienced since 2008, force human services leaders to make extraordinarily tough choices. While the demand for services increases dramatically, budgets are slashed; inevitably the most needy people get hurt. In Massachusetts, health and human services programs have been cut by $2.5 billion, and 10 percent of the workers delivering care have lost their jobs. Agencies providing critical services to the poor, the elderly, abused and neglected children, and the physically and mentally disabled have been decimated. For example, the Department of Public Health budget is now 36 percent below pre-recession levels, which may in part explain recent management issues in that agency.
The Patrick administration reduced these services reluctantly; the money to fund them had disappeared. But the administration went further than simply reducing budgets. The governor understood that health-care costs were growing at an unacceptable clip, consuming dollars badly needed for infrastructure, education, and human services. He worked closely with the Legislature and the business community to produce Chapter 224, landmark legislation to save billions in health costs over the coming years, while maintaining the state’s commitment to universal health insurance. In social services, the administration’s policy of placing children and adults in community settings, if at all possible, rather than in expensive, outdated institutions, means better outcomes at lower cost.
The reality is that the Patrick administration has led major reforms within state and private human services agencies. Now the governor is challenging us with a crucial decision we must make about our state’s economic future. We must decide either to invest once again in people who are fully capable of becoming independent, self-sufficient, tax-paying members of society or to continue the dismantling of the services designed to help them to thrive in our state.
As we debate Patrick’s revenue proposals, the stakes will be very high for those who rely on human services, often for their very survival. But the stakes are high also for the rest of us, because we all benefit when a family escapes poverty or when a disabled person finds a job. The governor’s plan will permit Massachusetts to move forward with safe roads and bridges, public schools that make us proud — and it will maintain our state’s historic role in providing a helping hand to those who deserve and need it. — Philip W. Johnston
Philip W. Johnston is the former Massachusetts secretary of human services and New England administrator of the US Department of Health and Human Services. He is CEO of Johnston Associates.
No: Get fiscal house in order first
GOVERNOR PATRICK’S budget proposal perfectly illustrates one of the perils of big government; there is no incentive to rein in wasteful spending when you are using other people’s money. You can always demand more from taxpayers in the name of “shared sacrifice” or “fairness.”
There is nothing fair about the sacrifices being imposed on the working class families of Massachusetts. In addition to raising the income tax and myriad other taxes, fares, and fees, struggling families are in danger of losing 45 tax deductions they have counted on and budgeted for.
Families will sacrifice with the elimination of tax credits for their dependents, child care, foster care, and adoptions. Students will suffer when they lose tax credits for tuition, commuter fees, scholarships, and employer-provided education assistance.
We all lose with the elimination of tax credits that incentivize certain behavior, such as lead-paint removal, septic system repair, clean-fuel vehicles, renewable energy, and charitable contributions — all eliminated under this plan.
Health savings accounts allow people to save (tax free) for future health care needs. The governor wants these tax savings eliminated.
Missing in this plan is any meaningful talk of spending cuts or reforms. Apparently, we have learned nothing from the Big Dig, because under the governor’s plan, the Massachusetts Department of Transportation will be rewarded for bad fiscal behavior. The Department of Transitional Assistance lost track of 47,000 families receiving taxpayer-funded benefits and gave nearly $30 million in food stamp money to ineligible recipients. Where are the reforms? And it is safe to say the state health department warrants some reform after the state drug lab scandal.
Governor Patrick, the people of Massachusetts are taxed enough already. It’s time to get you own fiscal house in order. — Christine Morabito
Christine Morabito is president of the Greater Boston Tea Party.