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Dropping the bomb
SoVaNow.com / January 16, 2013Lots of news to cover this week, precious little of it any good.
The bombshell, of course, is the announcement that International Veneer Company (IVC) is boarding up its manufacturing operations in South Hill. The company will maintain a local presence as a warehousing, sales and administrative center, but cease production of hardwood veneers and ship that part of the business to a sister mill in Pennsylvania. The cost in jobs: about 100. Ouch.
Coming on the heels of the news earlier this month that Home Care Industries also has closed in La Crosse, idling another 100 workers or so, it’s been one crummy start to the New Year. I guess part of it must be companies hanging on through Christmas and waiting until the dark cold recesses of winter (not) to break the bad news. It could always be worse: last year around this time Mecklenburg was coping with the shock of losing Mecklenburg Correctional Center, which Gov. Bob McDonnell ordered shut in December 2011. The prison’s demise, carried out in the first half of 2012, cost the county around 300 jobs.
Not that I can offer much insight on IVC’s plight, but it is worth noting that the economy, while slowly improving, is still pretty slack and there’s not a lot that the powers-that-be seem to be doing about it. IVC is typical of many industries whose fortunes rise and fall with housing and construction: until these sectors fully recover, the broader economy is likely to keep limping along. Unfortunately, Washington is obsessed with pointless debates about budget cliffs, ceilings and bombs (read Robert Hurt’s column if you want a weekly dose of vapidity from the land of DeeCee) and policymakers are doing precious little to address the overhang from the housing and financial industry collapses that sent the economy into a nosedive in the first place. Our current predicament can be summed up in eight words: people ain’t got no money, people ain’t spending.
Until demand picks up, many companies will face the challenge of selling goods and services in a crimped marketplace. In light of this, it would be a huge mistake to tamp down on any part of the economy that boosts demand, including the government (which stimulates economic activity by spending or tax-cutting, not by obsessing over budget deficits). There is a school of thought that holds that balancing the budget will inspire confidence and bring about a boom, but this philosophy has been thoroughly discredited by the experience in Europe, where austerity measures have brought nothing but misery and no fiscal improvements to boot.
Wanna help companies like IVC? Just build stuff. No self-respecting infrastructure package ever lacked a plan for new schools, which surely would bring lots of new orders for wood veneer. These are jobs that could be created in the service of important social advances if not for the brain-dead politics that reign over Washington and at various state capitals. Are you listening, Rep. Hurt?
In Richmond, Gov. McDonnell has put forth an interesting proposal to pull Virginia out of a transportation financing rut that threatens to spike road building statewide in a few short years. McDonnell’s transit package has a lot of moving parts, but the takeaway idea is to get rid of the gas tax and make up for the loss of revenue (and then some) with an increase in the sales tax from 5 percent to 5.8 percent.
It’s been a little difficult for me to get my head around McDonnell’s plan, although the same problem appears to afflict many delegates and senators who will be called on to vote on it. On the one hand, there’s no question that most of the policy changes that McDonnell has chosen to push for are awful on the merits. It makes zero sense, for instance, to sever the link between road building and the gas tax, which essentially functions as a user fee for those who utilize the system. (This includes out-of-state drivers, who would no longer shoulder the burden of paying for Virginia’s roads). On the political side, though, you’ve sorta-kinda got to tip your hat to the governor. Not since Jim Gilmore’s No Car Tax plan has a Virginia governor put forth a more slogan-ready proposal: “Get rid of the gas tax!” Sounds great, even if it is less filling.
There are notable voices on the left that argue, for various reasons, that Democrats should play ball with the governor on a transit bill, perhaps by insisting on some non-earthshaking modifications in exchange for backing the general framework. (Paul Goldman, a longtime Democratic political operative who was to Doug Wilder as Karl Rove was to George W. Bush, has argued this point extensively at a prominent liberal blog, Blue Virginia, found at http://www.bluevirginia.us). The theory, which is hard to dispute, is that the General Assembly will never agree to raise taxes for transportation unless the deal is simultaneously packaged with a tax cut. This is pretty compelling logic, considering the anti-tax contingent that rules the roost in the House of Delegates, but it begs the question: if Virginia takes two steps forward, and one-and-a-half steps back, and still remains 20 yards from the finish line, was all the fuss really worth the trouble?
McDonnell’s plan as presently structured wouldn’t raise any appreciable revenue for several years, parts of it rely on contingent events that may or may not happen (imposition of an Internet sales tax being the most prominent example), and the revenue stream, once it kicks in in full, would amount to only around half the $1 billion that Virginia needs annually to maintain a semi-decent road building program. Southside likely would end up receiving next to nothing as scarce dollars flow to traffic-clogged Northern Virginia and Hampton Roads. Gas prices might be lower, but maybe not: the oil companies might just pocket the difference, or they could calibrate prices at the pump across several states to keep Tarheel drivers, say, from flocking north of the border into Virginia for a fill-up. The Commonwealth’s transportation shortfall would, it is true, likely get no worse under McDonnell’s plan. But his isn’t a solution so much as a stopgap, and no amount of spinning by our governor and would-be 2016 presidential contender changes that fact.
So I dunno. Maybe the General Assembly can come up with some brilliant idea for improving the plan, or maybe members will balk at what is, after all, a package of higher taxes and fees. We live in a political area of can-kicking and responsibility-shirking, so perhaps minimal action is the best we can reasonably expect. Could the same at least hold true for uranium mining?
This week delivered the sad news of the passing of Marty Mobile, owner of Martin Forestry and Realty in Chase City and one of my go-to sources for information out of Chase City. Marty was a straight shooter and a really, really smart guy, and I can’t recall a conversation where he wouldn’t cut right through the buzz and get to the heart of whatever it was we were talking about. His honesty and good humor were endlessly refreshing, and I’m sure I’m not the only person who felt so. Marty will be sorely missed. Our condolences go out to his family and loved ones.