Republicans are responsible for this jobs report- WSJ

Slowdown in State, Local Investment Dents U.S. Economy
Cities and states slashed spending on infrastructure—from highways to sewage systems to police stations.

Wall Street Journal reports:

America's roads are an embarrassment - President Eisenhower expected more from our maintenance. 

President Eisenhower Friday, 29 June 1956, kicked off the largest road-building program in US history. Of the $33,480,000,000 total cost, a large share of the cost would be met by the federal government, with much smaller matching contributions from the states He signed the Federal-Aid Highway Act of 1956, a bipartisan bill sent to him by Congress three days earlier in the week, which authorized the expenditure.

By ERIC MORATH and BEN LEUBSDORF Oct. 26, 2016 

A sharp pullback in spending by cities and states on infrastructure—from highways to sewage systems to police stations—is weighing down on U.S. economic growth.

Such government austerity is unusual in the eighth year of an economic expansion, and it is acting as a headwind for economic expansion just as the worst effects of the energy-industry bust, a strong dollar and inventory drawdown are fading.

The decline in state and local investment depressed gross domestic product growth this spring and was on track to weigh on economic growth again in the third quarter.

“We’re seeing anemic [government] revenue growth and consistent austerity-oriented budgets,” said Gabe Petek, managing director for state ratings at S&P Global Ratings. States are trimming investments in infrastructure and higher education, “areas of the budget helpful for generating economic growth going forward,” he said.

In​ Kansas (where President Eisenhower was born!), officials this spring delayed 24 road-construction projects to help balance the state budget. The more than $500 million in work had been slated to start by the end of 2018, including expanding U.S. 50 into a four-lane expressway near Dodge City.

Instead, the state will spend money to maintain existing roads. “We want to make sure the roadways we currently have are in the best condition as possible,” said Joel Skelley,director of policy at the Kansas Department of Transportation. ​

Total state and local government spending last year accounted for roughly 11% of U.S. economic output, four times as large as federal nondefense spending, and swings in public investment can have outsize effects on the growth rate. The Commerce Department will release its first estimate for third-quarter GDP on Friday.

Many state governments have yet to fully recover from the recession and associated steep declines in tax revenue. 

Moreover, in late 2015, inflation-adjusted tax revenue was lower in 21 states, compared with the peak before or during the recession, according to Pew Charitable Trusts.

The situation doesn’t seem to be improving. Preliminary data indicate that state tax revenue fell 2.1% in the second quarter from a year earlier after advancing just 1.6% in the first quarter, according to the Rockefeller Institute of Government. The recent drop reflected mixed stock-market returns and slowing growth in sales-tax collection and paycheck withholding.

Revenue declines restrain the ability of state and local governments to borrow money for capital projects. Such a situation prompted Connecticut to cancel or delay selling about $1 billion in bonds earlier this year. By law, the state has a debt limit tied to tax collections, and lawmakers must make cuts when the limit can’t be raised.

As a result of the lost funding, the University of Connecticut is delaying a $150 million renovation of its Gant Science Complex by several months and postponed plans for a $10 million overhaul of the roof at Gampel Pavilion, home of the national-champion Husky basketball teams. Instead, the university will use caulk to fix the leaks.

“We’re trying to balance priorities,” said Scott Jordan, the university’s chief financial officer. The cuts are “forcing us to take a look at what things support our core mission and Connecticut’s economy,” he said.

At the same time tax revenue is falling, costs for Medicaid, public-employee health care and pension obligations are rising, leaving many states with little discretion to deploy tax dollars elsewhere.

Democrats and Republicans disagree on the appropriate size and role of government, but infrastructure spending often enjoys bipartisan support. President Barack Obama and the GOP-led Congress last year enacted a $305 billion, five-year highway bill. Many Republican governors advocate spending to repair crumbling roads and support basic services, though some favor public-private partnerships for infrastructure.

Still, some conservative economists argue the system of tax collection and government funding is inefficient and that long-run economic growth would benefit from fewer public outlays.

For governments faced with tight funding, putting off building projects can be more politically palatable than sharp cutbacks in public safety or school budgets.

Construction spending by state and local governments fell in August to its lowest level since March 2014, according to the most recent data from the Commerce Department.Through this year’s first eight months, such spending was down 1.4% from a year earlier, while federal-government construction outlays were flat and private-sector construction spending was up 7% compared with the same period in 2015.

The government cutbacks could dent U.S. economic growth overall, many economists say.

“It’s going to be a very significant drag in the third quarter,” said Pantheon Macroeconomics chief economist Ian Shepherdson. But he said he expects a rebound in late 2016 or next year because the volatile construction-spending data are undershooting the trend suggested by government revenue numbers.

Construction of public buildings—courthouses, fire stations and other government facilities—should begin to rise in 2017 after years of decline, Dodge Data & Analytics predicted in a recent annual outlook. “This is expected to be the bottom of the cycle for public buildings, as government fiscal conditions have slowly mended,” the report said.

Troubled finances are weighing on state credit ratings, a report card of fiscal health. S&P downgraded its ratings of six states so far this year—the most since 1991.

The downgrades include states where political gridlock has upended the budgeting process, while in others, such as Alaska and North Dakota, a pullback in the energy industry is weighing on tax collections.

Despite the downgrades, state debt remains highly rated, including 15 states with the highest AAA-rating.

Past economic expansions gave states an opportunity to make critical investments and build up rainy day funds and other buffers to protect against recessions. That isn’t happening in several states this time. The median state in fiscal 2016 could run on its reserves for 29.2 days, down 14 days from the level a decade earlier, according to Pew,

Most states are selling bonds to refinance existing debt, not to raise funds for investment in new projects.

“We’re not seeing a push to take advantage of the lower interest rates” to raise new funds, said S&P’s Mr. Petek. “It’s not our forecast, but you can’t rule out a recession in the next two or three years, and several states haven’t put themselves in a good position to weather it.”

(There's no question in my mind that if the issue of tax relief was correlated with economic growth, the entire US economy would be in the stratosphere of being robust right now....hypocritical and greedy Republicans would rather bring down our entire economy than to reinvest income redistribution where it's needed to improve our human condition and quality of life.)