Welcome to The Senate Site

By Lyle Hillyard
Senator, District 25

I was so busy this past week that I did not have time to review any comments on the blogs I had posted. (Here and here and here) Laura printed them for me to review, but I did not have time to reply until the quiet of a Sunday afternoon. So here it is:

My concern that the stock market had not responded favorably to the spending package was probably not expressed clearly. I am not concerned about the Wall Street bankers but about what I feel and hear to be the lack of consumer confidence, those who choose to invest and where. From what I have been reading, there are an abundance of financial advisers who are no longer working. Until people feel that we have the economy under control, they will not invest and the stock market will remain down. I received a better breakdown of where the federal spending money is targeted and I don’t see a lot of stimulus to encourage private enterprise to begin hiring and thus restore confidence.


Next, let me respond to the suggestion that if I don’t like the strings on the federal spending package, I should simply reject the money. That solution would be an easy sell to the majority caucus if there are serious strings attached to this money. The problem is that no one can determine with certainty what strings are in place. My plan is to recommend (and that is all I can do) that we use as much of the federal money as we can in clearly one-time projects like education building and equipment. The more we use in on-going programs, the bigger cliff we build if the economy is still down at the end of FY 2010. We can still have the rainy day fund and the $100.0 M in one-time set asides for FY 2011. We could still balance the budget for this year (down $171.0 M) as per our latest revenue projections two weeks ago.

Because the spending package is one-time money it does not solve the real problem of finding on-going revenue. The Governor wants to take the on-going from the Transportation Fund and bond for the shortfall but that has serious problems too extensive to discuss in this blog. The legislature is waiting for him to recommend some other source of funding. An increase in the tobacco tax would not raise enough money. The Governor does not favor reinstating part of the sales tax on food, increasing the gas tax or working with EnergySolutions. Those will be the points of discussion this week.

2 Comments:

 craig41 said...

"My concern that the stock market had not responded favorably to the spending package was probably not expressed clearly. I am not concerned about the Wall Street bankers but about what I feel and hear to be the lack of consumer confidence, those who choose to invest and where. From what I have been reading, there are an abundance of financial advisers who are no longer working. Until people feel that we have the economy under control, they will not invest and the stock market will remain down. I received a better breakdown of where the federal spending money is targeted and I don’t see a lot of stimulus to encourage private enterprise to begin hiring and thus restore confidence."

That sounds like you're worried about the employment and confidence of financial advisors??? That doesn't really make a lot of sense, but it is kind of the only thing you can use the stock market as an indicator of the economy for.

General consumer confidence, like yours, mine, and the average worker isn't reflected in the stock market, but rather its reflected in consumer spending. Consumer spending has less to do with the feeling that we have the economy under control as it does people having disposable income and a sense of confidence that their source of income is stable (which granted is somewhat realated to having the economy under control). In other words telling people we've got it covered won't get them spending if they don't have money to spend.

According to the BEA personal savings is up to 5% meaning that consumption is also down by a corresponding amount (dollar wise, not percentage). You can't spend what you're saving. Furthermore the stock market is a bad indication of consumer confidence, since the majority of consumers don't directly invest in the stock market (they have 401ks, but the jobless financial advisors handle them). So why look to the stock market as a gauge of consumer confidence over say the consumer confidence index? One seems like a good gauge of consumer confidence, the other is a gauge of financial advisors, day traders, fund managers, and wall street bankers. So instead of looking to the confidence of bankers, which you said you weren't worried about, I'd suggest you look to the consumer confidence index when you’re trying to see how the confidence of consumers is doing.

As far as private enterprise hiring people, well, this money is eventually going to reach the employee level, which will either create or maintain jobs. Some of it does go to things like unemployment benefits, but that puts it right into the hands of those that would spend it. Telling channel 4 news that only 300 million goes to job creation is either a little dishonest or a little naïve, either way it’s not true.

With the on going versus one time spending, you’re really just saying that you want the federal money to cover your own budget short fall while not investing anything in the future of the state (which the on-going portions are designed to do). If the economy is still down and you can’t fund the programs, either cut the programs or find a way to fund them. If you don’t spend the money offered for at least the two years the federal government will be footing the bill you’ll be cheating the taxpayers of the state out of money that they are entitled to in this bill, and will be paying for with their federal taxes. I doubt they want it going to California because you said no, and the governator has already said he’ll take any state’s money who passes on it.

Finally, there’s been a lot of talk of the federal government not allowing states to pick and chose, but rather take all of the money or none. If that’s the case, which will you pick? You can’t really leave the state’s budget in a half billion dollar hole over the next two years, so my guess is you’ll take it all, then keep your conservative street cred by saying you didn’t want to. The things our state legislature does to get reelected . . .

3/02/2009 11:19 PM  

 BobSw said...

Speaking only for myself, one of the very financial advisers the senator worries over, I want to spot on Craig41, and offer two additional points.

One, we would fair much better with whatever strings may be attached than falling victim to the decisions of a senator with such an apparent lack of understanding of the financial markets and the current situation we investment folk find ourselves in in Utah. And Two, a much more broad point:

- With a budget shortfall, there are always only two options. Cut programs/spending or raise taxes. With a budget shortfall AND an economic recession, cutting programs and spending becomes a lesser appealing option from an investing POV, as you must first overcome the recessive economy before you can tackle the shortfall, otherwise you finish with a balanced budget and growing recession that will make it even harder to balance the budget the next year, and the next. Revenue shrinks with consumer spending.

Investor confidence and consumer confidence are intricately linked, but the two are in no way tied to balanced state budgets or looming federal deficits. Consumers aren't spending because they are worried they will not have a job in 30 days, or that the bank holding their money will fold, or that they will be unable to afford the heat/light bill as other costs rise because every private industry is fighting to stay afloat. Investors aren't investing because consumers aren't spending.

Hillyard either doesn't grasp the basic facts of financial markets and economic turmoil, and thus should not be weighing in on a situation he has no understanding of, or he is hoping to fool Utah into a politically convenient misconception. Perhaps Utah taxpaers and the financial advisers he is so concerned about deserve a legislative spokesperson with a better grasp on the pulse of our concerns over future prosperity, rather than eyes only for political showmanship. He and others on the hill either "don't get it" or they are "full of it." Either way, they deserve to be ignored while we actually do something productive about our current economic situation.

3/03/2009 12:09 PM  

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