Public Finance - Part I - Economic Stimulus
in Clinton County

by Colin Read, October 20, 2010

There has been significant debate across the nation and within our region about the form any economic stimulus should take. The debate is often along ideological lines, with little actual data used to illuminate the discussion. The IDEA, in conjunction with its public forum,  Vision 2040, has been aggregating data and conducting research into fiscal issues in Clinton County. In a series of columns, I will present some of these data.

Government is an appropriate, inevitable, and growing partner in economic development. If we look at the two largest employment and income generating sectors in Clinton County, we quickly see that government is interwoven into our economic fabric. The top ten employment sectors in Clinton County in 2008 are as follows

NAICS Sector	Description	Direct Number of Jobs	Labor Income	Average Salary
438	State and local education payroll	3,650	$228,666,100	$62,648.25
437	State and local government payroll	3,472	$226,627,600	$65,272.93
413	Food services and drinking places	2,280	$40,242,960	$17,650.42
397	Private hospitals	2,010	$118,060,000	$58,736.32
319	Wholesale trade businesses	1,499	$80,567,990	$53,747.83
394	Offices of physicians, dentists, and other health practitioners	1,217	$74,125,090	$60,908.04
329	Retail Stores - General merchandise	1,064	$24,197,100	$22,741.64
324	Retail Stores - Food and beverage	840	$18,396,570	$21,900.68
320	Retail Stores - Motor vehicle and parts	803	$29,024,950	$36,145.64
133	Pharmaceutical preparation manufacturing	786	$71,242,400	$90,639.19
		17,621	$911,150,760	$51,708.23

With a total labor force in 2008 of 40,062, these ten largest sectors represent 43.1% of the labor force. State and local government represented 17.5% of employment, which is a lower rate than in other nearby counties in New York State.

Nonetheless, government is a large and growing sector overall. Salaries tend to be higher than in their private sector counterpart industries. The following graph demonstrates that government spending has been a large, and relatively consistent, share of GDP since 1995:

We can also break down per capita inflation adjusted spending by local government in the education and in other forms for Clinton County from 1995 to 2008 (in 2008 dollars):

We see that while federal and state spending has remained constant, local government spending has been rising, in part as mandates for services are promulgated at higher governmental levels and passed down to local governments to provide and to fund. We also see that the cost of education has been rising in real terms per student.  This is because the cost of the education infrastructure has been rising while, at the same time, the number of enrolled students has been falling in Clinton County. Consequently, the cost per student has been rising:

It is clear that federal, state, and local government spending has emerged as a significant part of the local economy. Nations and regions continue to debate how to best fund this government infrastructure, and how to best leverage such fiscal stimulus to generate jobs over troughs in the business cycle.

We can use IMPLAN to determine how tax policy will affect jobs creation. For instance, we can ask the question "What would happen if we remove income, through taxation, from one household income category, and transfer it to another?"

We see that income transfers, through taxation, can enhance local job creation, but at a relatively small rate. The largest effects on the local economy come from transfers of income to households earning between $35,000 to $50,000. Tax relief of $1,000,000 for these lower income middle class households creates upward of .7 jobs if the tax relief if funded by an equivalent tax increase to other households.

This discussion of transfers in support of economic policies is interesting because the current national debate on tax relief and tax increases often pits proponents of relief for one income category against proponents of relief to others. Without wading into issues of tax fairness, we can see that tax efficiency and local job creation can result with a carefully designed local tax policy. It is hoped that these data will provide objective, rather than subjective, observations of how a well thought out tax policy and private sector job creation can co-exist.

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