Morning Must Reads: Bleak Economic Forecasts and State Lawmakers Protect Bond Holders and Gas Drillers

The Philadelphia Inquirer this morning reviews recent economic forecasts and the news is not encouraging. Further evidence of the need for an "American Jobs Act" and a "Pennsylvania Jobs Act." What's that, you ask? What does evidence have to do with public policy?

Forty-five professional economic forecasters surveyed by the Federal Reserve Bank of Philadelphia predicted slower growth and higher unemployment next year and in 2013 than they predicted in August.

A publication by the Federal Reserve Bank of San Francisco said the economic uncertainty spurred by the European debt crisis had increased the odds to more than 50 percent that the United States would fall into recession early next year.

Joseph DiStefano was blunt Monday about who will benefit from a state takeover of Harrisburg: no haircut for bondholders (i.e., write down of incinerator debt as might happen with bankruptcy), but a crew cut for city workers and "other contracts" (e.g., providers of social services). Quick quiz: what will this approach do for job creation in the city? Time for a Harrisburg Jobs Act?

The proposed taxes have been unpopular among the city's largely suburban commuter workforce. To prevent Harrisburg from going into bankruptcy, Gov. Tom Corbett has signed legislation written by suburban lawmakers that would force Harrisburg to follow Philadelphia, Pittsburgh and other big cities in accepting the state's financial oversight. The state's draft plan would sell city parks and other assets and break labor and other contracts to save money without hurting the bondholders or bond advisers.

Thanks to the Pennsylvania Legislature, Christmas for gas drillers may be starting early this year.

My colleague Sharon Ward of the Pennsylvania Budget and Policy Center released the following statement in response to the bill:

We are disappointed by the Senate’s passage of an impact fee that gives drillers an even-better deal than they asked for and comes at the expense of our environment, communities, children and families.

The Senate bill has a lower effective rate, at 2.2 percent over the life of a typical Marcellus Shale well, than an industry proposal last year from the Marcellus Shale Coalition, which had an effective rate of 2.5 percent. Drillers in Pennsylvania would also pay less under the Senate bill than they do in Arkansas, Texas, Wyoming and many other energy-rich states.

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