• NASACT Annual Conference

• August 22, 2006

• Ernie Goss Ph.D. Professor of Economics, Creighton University & MacAllister Chairholder

• www.outlook-economic.com

• www.economictrends.blogspot.com

GlobalizatonPr

oduc

tivity T

echnology

Outsourcing, trade, and tax

policies

Drivers of U.S., regional and state economies

Long-Term:

Opportunities & Threats

U.S. Trade, Products vs. Services, 1990-2005

-22.0%

-17.0%

-12.0%

-7.0%

-2.0%

3.0%

Net Trade as % of Domestic-Product

Net Trade as % of Domestic-Services

Example: Internet retail sales as a % of total retail sales, 1999-2005

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

Example: U.S. Apparels

1999-2005 change

Imports from China +193.9%

U.S. apparel jobs -52.9%

U.S. apparel production +19.7%

Average wage/salary in apparel industry

+52.9%

Apparel prices -9.8%

1. Internet

2. Rising productivity

3. Off-shoring

4. Technology

Greater business & individual mobility

State and local tax competition

Reductions in relative tax burdens

Example 2: Convergence in State Taxes as % of Personal Income

$94

$16

$115

$61

$13

$99

$0

$20

$40

$60

$80

$100

$120

1991 2005

Range Std. Dev.Mean

Is off-shoring coming to your locale? (Source: Kroll, UCB)

• Blue-collar jobs• By industry• Driven by wage &

production network• High capital

investment; logistically & structurally complex

• White-collar jobs• Across industries• Driven by wages &

English language • Low capital investment;

logistically & structurally simple

• Information-the major component of product

• Tasks reducible to set of instructions

Manufacturing Services

Industries at highest risk to off-shoring (Source: Kroll, UCB)

• Computer Systems Design –66.4%• Accounting, Tax Preparation, Bookkeeping—63.5%• Software publishers—63.2%• Insurance carriers---59.0%• Data Processing & Hosting—57.6%• Internet Service Providers—55.7%• Agencies, Brokerages, & Other Insurance Related---

45.0% • Nebraska among top 20 states at risk• Iowa among bottom 25 states at risk• Both Omaha & Des Moines among highest in nation in

their population cohort

Outlook-Challenges & Solutions

• Challenges:• 1. Transportable retirement accounts from taxable to non-taxable

locales• 2. Firms continue to press states & locales for more tax breaks (e.g.

Cabela’s)• 3. Increasingly transportable wealth/income will seek tax havens• 4. Government sponsored gambling will be more competitive (see Goss

& Morse, Governing Fortunes: Casinos in America, forthcoming, University of Michigan Press, 2006-07).

• Solutions:• 1. State & local barriers/regulations will prove fruitless (e.g. Chicago’s

& Maryland’s efforts to regulate wages at big-box retailers)• 2. The solution is for government to use technology to become more

competitive• 3. Gambling revenues will be more of a problem than a solution• 4. More specialized training—turn to community colleges, not

universities for solutions• 5. Government must be focused on output not input• a. Collective bargaining must be focused on increasing output per

worker not protecting jobs• b. Resist granting SPECIAL tax benefits to businesses &

individuals• c. Government & education sectors must match the private sector

in reform and productivity enhancements• d. Education cuts/reform MUST be on the table•