JULY 23, 2010 – Everywhere you look these days, there are signs and reports of a South Carolina economy coming back to life, albeit slowly.

The Board of Economic Advisors (BEA), usually the gloom-and-doom crew that puts forward further cuts to the state budget, announced recently that the state had taken in nearly $140 million more in tax revenues compared to this time last year.

Unemployment has dropped for the past five months in a row, according to state and federal statistics. Real estate numbers have flattened, according to Realtors and state data.

And last month, the S.C. Department of Commerce presented a series of numbers and indices in its monthly economic outlook report that, while still largely down across the board historically, show a state economy beginning to more closely mirror national improvements. More.

 

So does that mean it’s time to get out the champagne, and that the party’s back on?

No. No, it doesn’t.

But there is finally cause for optimism, among the economist set in South Carolina. And that’s a welcome change, since that group had been moping about for the past two years -- ever since the prevailing projection was that the national economy would alight here late, have a small impact and then leave early. Oops.

Guardedly pessimistic

State Board of Economic Advisors chair John Rainey’s current mood could best described as guardedly pessimistic.

“I think we’ve seen some good signs, but we need three more months for it truly to be considered a trend,” said Rainey. “What we’ve seen could come to a screeching halt in three months; we won’t know until September.”

Rainey worried the recent signs of recovery may be the “pop” the economy was going to get from the federal stimulus and nothing more.

The black lining in the silver unemployment cloud that Rainey sees is in the workforce numbers. “What you want, ideally, is for unemployment to be coming down and the labor force to be increasing,” he said.

But according to several economists and experts, while the state’s unemployment has dropped to between 10.5 and 10.6 percent in June, the overall labor force has shrunk, too.

That means the number of people in the state who’ve just given up trying to get a job has increased, said Rainey. Additionally, he said, extrapolating the nations U-6 unemployment rate –which takes into account the underemployed and part-timers - the state’s true unemployment is still hovering around 19 percent.

“That’s just under one in five people in South Carolina,” said Rainey. “The good news was that last year, that number was one in four.”

He says the state will struggle to get back to the 7.5 percent unemployment of the 1970s, and that the 5-percent times of the Clinton and Bush years will remain a fond memory for quite some time.

While Rainey doubts South Carolina, or the nation, will see a “double-dip” recession, as has been warned, he does think the state’s economy is still skipping along the bottom with only “a slight upward trajectory.”

Businesses’ bottom lines have been saved by cost-cutting measures, but now what economists are looking for real signs of significant recovery are “top-line” revenues increasing, according to Rainey, who also says banks have plenty of money to lend, but few businesses and individuals approval-worthy.

In recovery zone

Bruce Yandle, an emeritus dean at Clemson’s business school, said he sees the same “signals” that the state economy is in a “recovery zone,” but for how long and how big are different issues.

Yandle described a near-term economic future for the state of periodic fits and starts during which the economy surges, only to be calmed by another obstacle or tipping point.

Yandle, a previous BEA chair and member, likened the relatively positive mood held by many across the state toward the economy to the feeling one gets when exiting a roller coaster. “It’s just level ground, but we’re glad to be off the roller coaster, which scared the hell out of us.”

Yandle said this recession, which he believes officially ended by June has shown the importance of education in the workforce. Digging through the unemployment numbers, he found that roughly 5 percent of those holding bachelor’s degrees were out of work. But those with only high school diplomas, their unemployment rate in South Carolina was 12 percent.

It’s also better to be an employer now than an employee, according to Yandle, who said that small businesses will turn to temp workers before calling back let-go employees. Some of that is economics, in that temps are cheaper; some of that may be more personal concerns, since so many small business owners begin to look on their employees as family.

“And the last thing any business owner wants to do is call somebody back to work and then send them home again in a few months,” said Yandle. “So there’s concern and pessimism.”

Crystal ball: With employees happy just to have a job and willing to work more hours, South Carolina’s unemployment numbers will likely stay put for a few months, as companies work toward growth. But if unemployment, especially the U-6 rate, continues to drop between now and the end of September, then the recovery is on solid footing. But don’t count on a smooth ride.

7/16:  Collections grow at revenue department

7/9:  What's up with the Budget and Control Board?

6/25:  Teaching teachers about abuse

South Carolina got one step closer to revamping its beleaguered tax structure this week. Well, sort of.

Members of the state Taxation Realignment Commission, chaired by former state tax head Burnie Maybank, came out with initial approval of a plan to remove sales tax exemptions on a variety of items and categories of goods and services. In exchange, the overall sales tax rate would be dropped from 6 percent to just under 5 percent. The change could raise as much as $700 million a year.

While that sounds like a lot of money, some have argued that as much as $2.7 billion is left on the table every year via exemptions. While the final report won’t be out until November, probably after the election, there will be two main bones of contention. One, the report will have accompanying legislation. This will freak out the lobbyists, who would likely prefer the force of law not be given to any plan that may increase taxes for an industry they represent. Two, the speed the panel is moving will make it harder for lobbyists to target specific cuts.

TRAC chair Maybank said this week he doesn’t expect any widespread opposition to the eventual final plan, but expects to there pick-and-choose complaints like, “it’s a good plan, overall, but …” laughed Maybank, a two-time former state Department of Revenue director.

S.C. small biz to ‘benefit’ from health care overhaul

According to a recent study, nearly 90 percent of state businesses with less than 25 employees will qualify for federal tax credits for employee health care. According to the S.C. Small Business Chamber of Commerce, more than 53,200 small businesses in South Carolina qualified for the tax credit this year, and nearly 16,000 qualified for max credit. That may spell good news for small businesses, via happier and healthier workers and lower costs. It may also spell good news for hospitals, which may see more patients diverted out of emergency rooms and into cheaper family care clinics.

For South Carolina Democrats, that’s because she’s caught in a media bubble by her campaign handlers in an attempt to bypass serious scrutiny for as long as possible. They cite only two local media interviews over the past month, although one reporter we know said he’d encountered her at least four times and had little trouble with access.

Perhaps after rough-and-tumble primary and runoff campaigns, Haley and company just wanted to lower their profile so they could do what needs to be done at this point in a campaign – raise money for the fall.

Still, that doesn’t mean they’ve been pouring out affection to the local media, compared with the courting of national media like Newsweek and The New York Times. When we called the Haley campaign to ask some questions, Haley campaign spokesman Rob Godfrey sputtered semi-hostile inquiries about what we were writing (which wasn’t clear yet because we hadn’t been able to ask anything other than whether Haley had taken a vacation recently.) He hung up the phone and said he’d call back – without taking a number to call.

So while Haley may not be in a bubble as Democrats allege, they certainly are playing it close to the vest with a kind of four-corners offensive strategy to try to stall the coming political war long enough to try to cruise to a November victory.

Veteran political operative Phil Noble of Charleston, who runs the S.C. New Democrats initiative, said it isn’t that unusual for candidates to put off the media. Just look at how the GOP kept the national press at bay for weeks after former Alaska Gov. Sarah Palin, Haley’s role model, became the 2008 GOP vice presidential candidate.

Noble said Haley’s campaign is trying to do three things by selectively interacting with state media:

1.      Avoid mistakes. The fewer times she talks or is open for question, the less of a chance for a bonehead mistake that can stir up reporters.

2.      Control the message. By relying on staff and surrogates, Haley can stay somewhat in the news without actually having to say anything. Controlling the message helps to keep a perceived front-runner advantage in her corner.

3.      Keep the business community on her side. 

Ultimately, the third reason might be the most important. Why? Because word on the street in the Upstate, Midlands and Lowcountry is that the monied, GOP business community has serious concerns with Haley because she’s a political unknown to them and because she started out as a big supporter of Gov. Mark Sanford, who many see as a failure.

Brad Warthen, former editor of The State newspaper and a well-known South Carolina political blogger, has criticized Haley for meeting business folks in private because he says it allows her to bypass public scrutiny of what she’s saying and promising to different audiences.

“For her to say things that would be persuasive to sensible, pragmatic business people (who are fed up with that ideological firebrand Gov. Sangfroid [Sanford]), it seems to me that she would have to say things that are pretty different from what she says in front of her Tea Party fans,” Warthen wrote earlier this month. “With them, she definitely doesn’t say, ‘No way I’ll be like Mark Sanford.’ But doing it in private allows her to get away with that.”

JULY 23, 2010 -- I needed to see for myself. I’ve heard all the hype, endless coverage of the BP oil spill. Based on what’s been said and shown by the media, I believe this incident will be a cardinal date in American history. If it's true and if the media hasn’t hyped this one with newly-minted words for extremes and selective interviews, this is the big one.

Based on reports, few if any events including hurricanes, earthquakes, even volcanoes, can begin to match the width and breadth of this disaster. And unlike the others, this one is purely man-made. I needed to see for myself.

Last week, my wife and I flew to Apalachicola, Fla., and to Gulfport-Biloxi, Miss. We drove to New Orleans. Along the way, we spoke with officials and ordinary citizens, and flew over the actual Deep Water Horizon site. We immersed ourselves, if you will, in the oil impact zone.

First, it’s obvious. This spill is huge. Tens of thousands of people are working to cap the well, contain and clean up the oil and help devastated families whose livelihood depends on Gulf waters. The size of the effort alone tells me that the media is not hyping the problem. It’s real and will be for years to come.

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Hollings. Congratulations to longtime, now retired U.S. Sen. Fritz Hollings for the naming of a library at the University of South Carolina in his honor. The Ernest F. Hollings Special Collections Library, dedicated by Vice President Biden today, holds the university's political collections, rare books and manuscript collection, and digitalization center.