Where Government Spending May Go and Consumer Spending May Be Going

by S. Randall Weltman, Esq.

Undoubtedly Hillary Clinton and Donald Trump are two very different candidates with two very different agendas.   Oddly enough though it seems clear that both support and encourage a big investment in America’s infrastructure.

Infrastructure refers to the highways, interstates, bridges and tunnels that we drive on, and under, every day.  Infrastructure also includes our nation’s airports, schools, ports and the like.

Both Clinton and Trump favor investment in infrastructure because they know that it will likely jump start the snail like recovery from the 2008 financial crisis, a concern that Americans desperately want addressed.  Spending on infrastructure almost guarantees that every segment of the economy will benefit.

All infrastructure projects start with engineers and architects who must plan the construction and renovation of the structures.  Those plans are not acted on until financing and contracts are arranged by bankers, lawyers and other professionals.

Every infrastructure project requires building materials and construction equipment of all types.  There will be sand, dirt and rocks needed along with bulldozers, trucks and other heavy machinery necessary to produce, haul and construct.

Every material produced or equipment manufactured involves labor; individuals working and earning an income.  Every construction trade is likely to be needed on and around every infrastructure project creating jobs paying wages well in excess of the low paying service jobs that have pushed the unemployment rate down over the last seven years.

A substantial investment in infrastructure may be just what the economy needs, but will it really ever happen?   It did not happen at all during the Obama years because Congress and the President could not ever agree on how to pay for it… because it costs a lot of money.

It takes tax dollars and/or private funding to invest in infrastructure and as we all know the federal government is not awash in money.  Neither are the states and local municipalities who are also responsible for much of the infrastructure within their entities.

Municipalities must provide and maintain a wide range of infrastructure needs.  Street paving/widening, lighting, sewers and even water systems themselves are services that are normally provided by a state’s localities.

None of the foregoing infrastructure needs are inexpensive to provide.  Whether an infrastructure project is contracted out to a private construction company or performed in house by a service department, the expenditures needed for equipment, materials and labor can be enormous.

Because of the need and the cost of infrastructure it is my belief that the OPBA’s jurisdictions will be citing infrastructure as a new reason to hold down wage and benefit increases.  How convenient to be able to deflect demands on growing general fund surpluses with an argument that such surplus should be diverted to mounting infrastructure needs.  Especially since many of these needs and concerns were put off or cancelled during and after the recession.

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I have written that the crash in crude oil and gasoline prices might provide the stimulus that our sputtering economy so badly needs.  Ever since then gasoline prices have remained low but yet the economy is still growing at a subpar level and wages have yet to grow significantly.  Economists who have reviewed this mystery have reasoned that the money consumers are saving at the gasoline pump is being spent on health care and not on goods and services.

Others believe that consumers who have extra money are using it to pay down student loan debt.  Who knows, but SERB’s 2016 Health Care Survey, which addresses increases in health care costs, shows that 2016 has not been that bad of a year for Ohio’s public sector employees.

As could be expected not one single health care economic metric decreased from 2015 to 2016 but the increases were modest in nature, starting with the average family monthly premium which increased 2.3%.  The average annual total cost per employee for medical coverage was only 1.6% greater than in 2015.

Fortunately, the average percent of premium contribution paid by the employee remained relatively flat, with Cleveland area employees still paying between 10% and 11% and Warren/Youngstown employees paying around 8.5%.  The employee’s average Out-of-Pocket Maximums did increase though to a median of $4,000.00.

Spousal restriction policies, where employees whose spouses have available medical coverage are excluded, did increase from 2015 but only “slightly.”  Most of these restrictions are found in state employees’ contracts, with only 28.8% of them found in municipal contracts.

I believe that Ohio’s public employees are weathering the on-going health care crisis relatively well.  I think this can be attributed to our region’s powerful medical providers such as Cleveland Clinic, University Hospitals, and Metrohealth and their need to compete against each other in the marketplace.  For a change, remarkably, this favors you the consumer.