All posts by Michael Thomas

Data and Budgeting for an Effective Economy

Government provided data plays an integral role in decision-making within businesses and government. It is important that the data be obtained and reviewed with a high level of rigor to maintain its integrity. A large quantity of data comes directly from the Federal government thanks in part to agencies such as the Bureau of Labor Statistics (BLS), the Bureau of Economic Analysis (BEA), and most prominently, the Census Bureau. These agencies are all in line to endure cuts from the Trump Administration’s budget.
Supporters of the Census Bureau have raised concerns that the agency isn’t receiving the funds necessary to adequately perform the decennial Census. Government collected data has long been considered the “Gold Standard” of data resources, and for good reason; these agencies are fiercely dedicated to providing accurate, unbiased statistics. Our country depends on these statistics as a kind of lubricant for our economy; the better the information, the more efficient its operation.

We use the Census to determine how our local constituencies are represented. The BEA produces statistics that measure U.S. economic performance, like GDP. The BLS tracks our national unemployment rate, and the demographic statistics that compose the greater national reporting. Cutting funding for these programs could have negative repercussion to our economy and society.

The impact the Administration’s proposed budget has on the Census is particularly concerning. Compared to years past, the proposed funding ramp-up to the decennial Census is far behind, especially considering the new method the Census is interested in testing. The primary function of the Census is to make record of every person residing in our nation, and the Bureau is working to find better ways to execute the most accurate count possible. The Bureau understands that even a successful Census count, like the one 2010, comes with errors, and they are seeking out ways to improve their processes.

Citizens that change residences frequently can be missed, and those with more than one home are sometimes counted multiple times, or do not respond to the standard data collecting methods at all. This has a direct impact on political apportionment, and we should be encouraging the Census to develop new, modern techniques, not battling for funding that barely allows the Bureau to keep valuable programs like the American Community Survey (ACS) afloat. Using new methods to perform such a daunting task undoubtedly comes with uncertainty, but the Bureau of the Census estimate that investing in updates could save over $5 billion when compared to their traditional data collecting methods.

The BLS and BEA both serve to provide policy and business leaders with essential macroeconomic indicators. Monthly unemployment and national GDP statistics are developed by these agencies respectively. Those two statistical programs alone are immensely powerful, and important decisions, including the allocation of government funding and business development resources, are made with this information in mind.

These two programs aside, the Administration’s budget request explicitly states of the BLS that the Bureau “may need to delay or defer spending on…certain data improvement…and research projects…”, a statement that goes without saying considering the FY18 budget request doesn’t even allow the BLS to cover needed budget adjustments resulting from inflation. The National Economic Accounts, which produces the crown jewel of the BEA, annual GDP, faces a sharp 12% reduction in funding which will require the BEA to do away with developing new programs, like the International Trade in Services initiative, completely. In their Congressional budget estimate write-up, the Department of Commerce reports that, “Without these new data, U.S. businesses, trade negotiators, state and local planners, and other policy-makers will lack critical data to guide future economic decisions.”

Quality government provided statistics are an imperative that transcends the political spectrum; Democrats and Republicans alike can understand the important role that the government has in providing accurate data for the Congress. Members of the House and Senate need to know who they are representing if it is incumbent upon them to advocate for their needs. Further, good statistics are needed by both the private and public sectors. Free markets are more productive and efficient when business decisions are informed with reliable data. Good work from the Federal Statistical Agencies raises all the boats in the harbor. This part of our government is too connected to economic activities that result in jobs and wages to not receive the support it needs. The implications of the work done by agencies like the Census Bureau should be considered paramount to the government’s effort in promoting prosperity.

The Census Bureau requires upwards of $1.8B in FY2018 to perform the preparations necessary to conduct a full decennial Census. This upfront investment will ultimately save money and improve the quality of the data. BLS and BEA also have been facing cuts to vital programs due to a lack of funding and staffing and need your support. Contact your representatives to let them know you want them to support Federal data programs. The Census Project, C2ER, LMI Institute, and APDU will keep you up to date as the budget develops.

The Silicon Prairie

You don’t need a bay or a bridge to foster economic development within the technology industry.  What you do need are innovative entrepreneurs, savvy venture capitalists, and a talented workforce to put it all together as a service or product. Replacing the fog for storms, and exchanging the bay with expansive fields, there rests a burgeoning tech hub in Lincoln Nebraska.  Lincoln and the greater Great Plains area have been attracting significant investment and talent from the tech industry in recent years.  Specifically, the Omaha-Lincoln Nebraska region has experienced an influx of investment into software-application firms from 2011 onward.  The expense and pressure of starting a technology company in Silicon Valley may be pushing innovators and entrepreneurs elsewhere.  The pressures and dynamics of the valley aside, local municipalities and economic development coalitions have also fanned the flames of growth in Lincoln. The result has been the proliferation of tech start-ups in the region.

A more robust and accessible internet has made it far easier for entrepreneurs to navigate the obstacles that come with founding a tech start-up. Entrepreneurs and technologist workers alike are considering quality of life measurements and personal preferences more and more when it comes to establishing a new firm or finding a place to work and thrive.  This has led regional municipalities to work toward attracting nascent tech firms to their areas.  Austin, Des Moines, and Chicago are all in concert with Lincoln in proclaiming themselves a rising tech hub.  Although not front and center, economic development consortiums and public-private development co-ops are both stakeholders involved in Lincoln’s success in technology industry growth. With cheaper cost of living already built in, Lincoln simply needed to seize the opportunity present and provide the needed support to finalize tech firm migration into the county.

This development has brought plenty of opportunity for technology jobs. There has been over a 500% increase in the number of jobs within the software publishing industry in Lancaster County , the county in which Lincoln resides, over the past 5 years. Moreover, the average earnings per job is over $100 thousand annually (Source: Emsi 2017.2).  Private venture capitalists and publicly sponsored angel investment groups like the Nebraska Angels have nurtured young start-up firms like Hudl, a technology firm that provides video recording and editing software for athletes and coaches, and helped them lay a foundation in Lincoln.  Hudl is unique in that it was founded by Nebraska native, David Graff, who worked in the Athletics Department at the University of Nebraska.  Hudl was convinced to stay in Lincoln and is building a new $32 million headquarters after having secured $72.5 million in additional investments in 2015.  The new facility should add roughly 300 jobs to the area by 2018 and the average total annual compensation for employees at the Hudl headquarters will be roughly $60,000.

This sort of economic development is the result of investors working together with municipalities to finalize a valuable deal.  Although appraised at nearly $70 per square foot a few months prior, the land to be developed by Hudl was sold by Lincoln at half the price to ensure their commitmentMore recently, near Omaha, Facebook announced they will be building their next data center in Papillion, Nebraska after negotiating a deal with the Omaha Public Power District that will provide Facebook with the power they need while using renewable energy sources, which Facebook prefers.  This kind of flexibility by the local government is illustrative of what municipalities can do to attract new jobs and promote development.  Both cases required local entities to work toward the greater benefit of the region.  Paul and Stephanie Jarrett, founders of Bulu Box, the online health company that ships samples of health supplements, fled their 500-square foot apartment and headquarters in San Francisco to grow their business in Lincoln to take advantage of the cheaper capital and different kind of professional environment.  Bulu Box was originally just like the sea of young start-ups that reside in the Bay area.  That was until they received seed investment from the Nebraska Angels and the cleverly named Kansas based VC firm, Flyover Capital.

Silicon Valley could be discovering its own capacity for young technology firms and the willing appetites of economic regions abroad are finding ways to take advantage of this overload. Conventionally popular and expensive tech business incubators like San Francisco, Seattle and New York are leaking talent out to the rest of the country.  Local investors and economic development practitioners may mirror the steps taken by those in Lincoln, who have provided support that is customized to fit the needs of new businesses.  Of course, the most effective way the “Silicon Prairie” and Lincoln can continue to attract technology firms and workers from around the country is to rely on its most distinct advantage; it’s not in Silicon Valley.